Merchant Discount Rate (MDR)

The MDR bundles three layers of cost: interchange paid to the card issuer, scheme fees paid to the card network, and the acquirer's or PSP's own margin. Under blended or flat-rate pricing all three are rolled into one rate, so a merchant pays the same percentage whether the customer uses an inexpensive domestic debit card or a costly commercial or foreign credit card.

Blended pricing is easy to budget for but can hide how much margin the provider earns, especially when most customers use low-interchange cards. The alternative is interchange++ pricing, where each component is passed through separately. The EU Interchange Fee Regulation, which the UK has retained, requires acquirers to offer and charge merchant service charges itemised by card category and brand unless the merchant asks in writing for blended pricing.

When comparing quotes, work out the effective rate: total fees divided by total card volume over a typical month, including fixed per-transaction fees, refund and chargeback fees, currency conversion and any monthly minimums. In the UK and EU, merchants generally cannot add surcharges to most consumer card payments, so the MDR is a cost that has to be built into prices.