Merchant Bankcard Discount 101: What You Need to Know

Merchant bankcard discount is a complex topic, but don't worry, it's easier to grasp than you think.

The merchant bankcard discount is essentially the difference between what a business is charged for processing a credit card transaction and the wholesale rate they pay for that transaction.

This discount can range from 0.5% to 2% of the transaction amount, depending on the type of business and the bankcard company they use.

It's a significant cost savings for businesses that accept credit card payments, and it's a big reason why many merchants choose to accept credit cards in the first place.

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Calculating bankcard discounts can be a complex task, but it's essential to understand how much you're paying to process card payments. The calculation varies depending on your merchant agreement, but most fall into two categories: flat-rate MDR and interchange plus.

The flat-rate structure is simple: whatever rate you've agreed to is the rate you pay. For example, if you've agreed to a 3% rate, that's the rate you pay.

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To calculate your merchant discount rate for interchange plus structures, you'll need to consider the interchange fees imposed by the card networks. These fees can vary drastically, even for the same card network.

Rather than going through each transaction one at a time, it's easier to calculate your merchant discount rate on a monthly basis. This gives you a more holistic and accurate view of what you're paying.

To calculate your monthly discount rate, simply take the total amount of fees deducted for processing and divide that by your total monthly sales. Multiply that by 100, and you've got your discount rate.

For example, if you've paid $11,612.95 in fees during a month where your total net card sales amounted to $231,724.19, your discount rate would be 5.012%.

Here's a breakdown of the calculation:

If your discount rate is higher than 3%, you may be overpaying for processing, and there's room for improvement.

Some merchants pay a per-transaction fee, which can add up quickly. For example, a merchant in Cincinnati, Ohio pays a $0.30 per transaction fee, in addition to a discount merchant account rate that fluctuates based on sales.

Other merchants pay a monthly statement fee, such as the $9.95 fee mentioned by a sales representative in North Kansas City, Missouri. This fee can add up over time, especially if you have high monthly sales.

Here's a summary of some common bankcard discount structures:

By understanding your bankcard discount structure and calculating your discount rate, you can make informed decisions about your merchant agreement and potentially save money on processing fees.

Merchant Bankcard Discount Fees are not actually discounted, but rather a marketing ploy to make businesses think they're getting a deal. This fee is a percentage of each transaction, typically ranging from 1.5% to 3%.

You can find the breakdown of your BANKCARD MTOT DISC fees on your merchant account statement or merchant portal. Make sure to review all charges, including monthly statements, terminal setup, and customer support fees, before selecting a vendor.

A sampling of actual low-cost merchant account prices shows that some vendors offer free credit card terminals and setup for high-volume merchants. Be aware that "MOTO" transactions, which include online charges, are considered riskier and may carry a premium fee.

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Bankcard Disc Fees are a type of fee charged by payment processors to merchants for monthly services. You can find a breakdown of these fees on your merchant account statement.

MTOT Disc is a compounded abbreviation that stands for “merchant total” and “discount.” BANKCARD is the indication that this is a payment processing charge. You may see variations of this descriptor on your bank statement.

To get a breakdown of your BANKCARD MTOT Disc fees, pull up your merchant account statement for the month. You can also try to pull your statement from your merchant portal with your payment processor.

The largest chunk of your fees will come from your payment processing activity throughout the month. You'll see discount rate-based fees, so percentage-based charges on your payment processing volume.

Here are some common Bankcard Disc fees:

Discount rates can vary depending on your payment processor and the type of transactions you process. For example, keyed transactions may have a different discount rate than MOTO transactions.

You can reduce your Bankcard Disc fees by speaking to your payment processor, reducing double authorizations, and implementing interchange optimization tactics. However, you cannot eliminate MTOT fees unless you quit accepting payment through credit cards.

Your effective rate can be calculated by dividing your total BANKCARD MTOT Disc fees by your total processed volume for the month. On average, this should total between 2% and 4%.

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Equipment pricing can vary greatly depending on the type of business and equipment needed.

The Hypercom T7Plus, for example, costs $239 with a 1.69% discount rate and a $0.25 transaction fee.

Some businesses, like the Home decorations supplier in Bronx, New York, may opt for a Nurit 8320 with an additional keypad for $550.

A Screen painter in Beaverton, Oregon, paid $99 for setup and $10 per month for a flat fee, plus 2.25% plus $0.30 per transaction.

Hardware costs can range from $300 to $2,200, as seen in the Business Service Provider in Delmar, Maryland, and the Gift card retailer in Geneva, Illinois.

Here's a breakdown of the equipment costs mentioned in the article:

It's worth noting that some businesses may also need to pay for additional features, such as gift card capabilities or online banking.

The merchant bankcard discount is a complex topic, and one of the most important things to understand is who sets the interest rates. The payment processor or merchant services provider sets the discount rate.

Interchange fees, which make up the majority of the merchant discount rate, are non-negotiable and can vary based on your business type, MCC code, industry, card type, and total processing volume. They hover around 1.50% to 2.50%.

Your processor can still make a lot of money by charging just an extra 0.20% above interchange. This can end up costing your business tens of thousands of dollars every year in fees that could otherwise be negotiated to a lower number.

The processor markup portion of the discount rate is 100% negotiable, and some merchant service providers are greedier than others and charge far more than they need to.

For another approach, see: Payment Card Interchange Fee and Merchant Discount Antitrust Litigation

American Express cardholders can benefit from various offers that typically require you to spend a certain amount of money by a set date to receive savings credited to your account.

To give you a better idea, a current offer for Boxed states that if you spend $75 or more, you'll get $20 back. This offer is valid through October 31, 2019, and you can spend $75 in one or more transactions online.

You can expect to see savings within 90 days after you meet the offer requirements.

Some American Express cards are eligible for Amex Offers, including the American Express Gold Card, Amex EveryDay Credit Card, and Blue Cash Preferred Card.

The bonus points offers can give you +1 Membership Rewards point for each eligible dollar spent at Saks.com, up to a certain limit.

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Annual fees can be a hidden cost, so it's essential to review your statements carefully. Some PIN debit networks, like STAR, PULSE, and NYCE, charge an annual fee of around $10.

Payment processors may also charge an annual fee for their services, which can add up over time. If you're unsure about your annual fees, contact your processor for clarification.

It's worth checking recent statements to verify that any annual fees are indeed annual fees and not some other type of charge.

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In the end, a merchant bankcard discount can make a significant difference in a business's bottom line, saving up to 1.5% on every transaction.

The key to maximizing these savings is understanding the different types of discounts available, such as the interchange fee discount, which can range from 0.5% to 1.5% of the transaction amount.

A well-structured merchant account can also help businesses qualify for better rates, as seen in the example of the company that saved 0.5% on their transactions by switching to a new processor.

Businesses should also be aware of the potential risks of overspending, which can negate the benefits of a merchant bankcard discount, as highlighted in the example of the company that spent 20% more than their average monthly revenue on card processing fees.

It's essential to regularly review and adjust your business's card processing strategy to ensure you're getting the best possible rates and avoiding unnecessary fees.

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