What is a Merchant Discount Rate?

Discount rates are traditionally stated as a percentage of each purchase transaction processed. Often these rates are based on the type of business the transactions are being processed for, the types of credit cards used by consumers (business and rewards cards often cost more), and the size of the average transaction (also known as average ticket, or average sale amount). Usually, the largest component of the discount rate are the fees charged by the payment system itself, which is often called interchange.