Everyone who uses a credit card agrees and swears by the convenience they provide. These plastic cards have made life so much easier. You do not have to worry about carrying cash and forgetting to carry enough cash. No worries about your cash getting stolen as well. But have you ever wondered about how it must feel to be on the other side of this convenience? I am speaking about the merchants who accept your credit cards when you pay for your purchases done from their shops.
Does it cost to accept credit cards?
We, as consumers of credit cards have no charges applied for each individual use of the credit card when we shop. We have to pay an annual fee towards maintenance but not for every transaction that is performed against the credit card. But merchants are supposed to pay a fee each time that they use your credit card to pay for the purchases.
This cost is called as the credit card discount rate and is denoted as a percentage. This includes a certain fixed percentage for each dollar that is processed during transactions and also an additional fixed transaction fee.
Varying credit card discount rate for different transactions
The credit card discount rate can vary widely with different kinds of transactions done to process the payment from the credit card.
For example there are different ways in which a payment could be processed by using a credit card:
1) Swiping it through the terminal or credit card reader;
2) Manual keying in of credit card number with billing address and lastly;
3) Manual keying of credit card number without billing address. Here authorization key is provided manually by forced authorization.
Who receives the credit card discount fees?
The credit card discount fees that are charged to the merchant are divided amongst the processor of the transaction, the bank to which the transaction is processed, the merchant service provider and the card associations involved in the process. The actual or effective credit card discount rate that is charged to the merchant varies with each transaction according to type of transaction and also according to downgrades, assessments and per item charges.
Credit card discount rate is applied to the merchants for providing consumers with a convenience of conducting cashless purchases.
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