April 7, 2021
by David Goodale
Related Topics
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David talks about the most important things for small businesses to keep in mind when setting up credit card processing. This includes staying away from long term contracts, avoiding cancellation fees, putting your best foot forward for approval, getting lower rates, having automatic rate reductions built into your agreement, and addressing technical concerns so everything works smoothly upon launch.
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What is a discount rate?
Learn what the discount rate is, and why it's the most important and significant cost when processing credit card transactions.
(Slightly edited from video transcript for greater readability)
Key Takeaways
1
What is a discount rate?
It's a percentage based fee (for example, like 3%) that a credit card processor charges to the business each time a credit card payment is processed.
2
Factors affecting discount rates
Discount rates are influenced by factors such as business type (what you sell) and your monthly trading volume.
3
Negotiation of rates
Merchants can negotiate lower discount rates by trading strong volumes, having a reputable and well established business, and demonstrating a track record of low chargebacks.
Need help with this topic? Or a rate quote?
Whether its questions about this article, or you want to see how we can lower your costs. Don't hesitate to contact us.
Hello, David here at Merchant-Accounts.ca. Today I'm going to tackle a simple question: what is a discount rate?
A discount rate it's definitely not a discount, it's actually the most important and expensive aspect of processing credit card transactions. It is a percentage-based fee that you pay every time you clear a transaction. How much that fee is depends on the quote that you get for your business and that will depend on how much money you process. If you're processing a hundred million dollars a month in sales you'll pay a much lower rate than a business processing a thousand dollars per month in sales. I guess that's obvious when I say that out loud.
As far as rates go, it also matters whether you have a high-risk product or a service. For example, if you are running an online casino you're going to get a lot more chargebacks and potential fraud compared to someone you know with a local organic salad shop selling kale sandwiches. This is all relevant to figuring out the discount rate that you will pay for your business.
The discount rate is a percentage based fee that all merchants pay each time a transaction is processed.How much should the discount rate be for my business?
What you need to know is the discount rate is a percentage-based fee, and that fee should generally not be over 3% if you're selling to customers located in your own country. If you sell across borders the fee will be a little bit higher because Visa and Mastercard assess cross-border fees, which are actually beyond the scope of what I'm intending to get into today.
Summary
You should be paying a percentage-based fee every time you process a credit card transaction. That fee should be based on your transaction volume. If you have any questions and if you want to view our rates, or to get a quote for your business then contact us as we'd love to hear from you.
I hope this was helpful, and that it demystified it the discount rate a little bit. Have a good day.
Related Topics
January 06, 2023
David talks about the most important things for small businesses to keep in mind when setting up credit card processing. This includes staying away from long term contracts, avoiding cancellation fees, putting your best foot forward for approval, getting lower rates, having automatic rate reductions built into your agreement, and addressing technical concerns so everything works smoothly upon launch.
July 11, 2019
In the latest episode of our merchant education series we tackle the seemingly simple topic of costs. In addition to exploring the discount rate and interchange costs, we outline and provide some metrics for the actual rate you should be willing to pay for your business.
March 29, 2023
Why do some businesses get lower credit card processing costs than others? In this video David explores the criteria that cause some businesses to get lower rates than others and techniques that you can use to reduce your processing costs.
May 31, 2021
If you've ever been confused by the difference between a merchant account, a payment gateway and processor you are not alone. In this discussion we break down the role each of those elements play, and how they affect your overall processing costs.
March 29, 2023
In order to accept credit card payments a business needs a merchant account. In this article we explain what a merchant account is, how to get one for your business, and the costs involved.
July 07, 2023
Making the wrong choice can be costly when choosing a payment processor. David explores 3 of the most common mistakes so you can avoid them when choosing your credit card processor.
August 04, 2023
The debit system in Canada is called Interac. It's totally different from Visa or MasterCard so it works in its own unique way when it comes to making purchases online.
September 04, 2023
If you've not accepted credit cards previously you may wonder how long it takes to get your money. In this video David explores the most popular funding schedules for e-commerce and brick-and-mortar merchants.
June 07, 2024
How to pick a good credit card processor for your business. David gives advice so you can ask the right questions, avoid mistakes, and figure out which payment processors have the potential to be a good solution for your business.
June 17, 2024
When you work with a payment processor it becomes a long-term partnership. It requires a deep integration if you're doing e-commerce payments, and will have a long-term cost impact on your business. Outages are problems along the way can cause a major issue. In this video David explains when and how to look for references when searching for a payment processor for your business.
June 28, 2024
An original credit transaction is where a merchant sends money (gives money) to a cardholder. It's a unique service, but merchants should be very careful when using it.
September 23, 2024
MCC stands for Merchant Classification Category. Every type of business that accepts Visa or Mastercard has a MCC code associated with their business. David explains why the MCC code used for your business can impact the approval rate for your transactions (the wrong MCC code can result in more declined transactions), as well as the costs that you pay when opening your merchant account.
September 30, 2024
Certain types of businesses are more difficult to administrate from a payment processing perspective than others. In this video David explains what Visa HBR and Mastercard BRAM fees are, how much they cost, and why they apply to some businesses but not others.
March 13, 2025
Most credit card processors will ask for a copy of the most recent balance sheet and profit and loss statement when you apply to get a merchant account. David explains why payment processors care about company financials, how it can impact your application, and what you can do if the financials for your company are not as good as you'd like.
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My name is David Goodale, CEO at Merchant Accounts.ca. I launched our business in 2001 and have over 20 years of expertise in the field of online payments. If you have a payments related question or project, and especially if it relates to multi-currency or international e-commerce don't hesitate to contact me. I'm always happy to help with an honest opinion, and enjoy chatting with folks from interesting businesses.
Toll free: 888-414-7111 ext. 5
Direct: (905) 901-2254
david.goodale@merchant-accounts.ca