About Merchant Discount Rate:
- It is a fee that merchants and other businesses must pay to a payment processing company for accepting payments from customers via digital modes like credit cards, debit cards, UPI, etc.
- MDR compensates the bank issuing the card, the bank which installs the PoS (Point of Sale) terminal and network providers, and payment gateways for their services.
- The MDR sums up all the charges and taxes that electronic or digital payments entail.
- The MDR typically comes in the form of a percentage of the transaction amount. It is typically between 1% and 3%.
- The rates are dependent on the level of business transactions being processed, the types of cards (debit or credit) used by customers, and the value of the average transaction (also known as average tickets or average sales).
- Before accepting debit and credit cards, merchants must set up this service and agree to the rate.
- Merchants must consider these fees as part of managing their business costs and setting their prices.
- MDR charges are automatically deducted from the merchant’s account at the time of settling the transaction batch.
- Under the rules laid down by RBI, business owners cannot pass on the MDR charges to their customers.
