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Understanding Your Merchant Processing Rates

Negotiate with your processor more effectively by learning the factors that determine your rates.

Money, credit card, and payment terminals

Knowing what the basis is for you Merchant Discount Rate (MDR) can help a lot in negotiating rates with your processor. There are factors outside of your processor’s control that influence your rates. Understanding them will put you in a better position to both meet your goals and make a profit.

What is the basis for my rates?

Credit and debit cards have different rates based on the interchange rate. For example, Visa credit cards can have a base interchange rate of anywhere from 1.8% to 2.9% while Visa debit cards can be anywhere between 0.05% to 1.65%. In addition to the interchange rate, there is a transaction cost which varies anywhere between 10¢ to 25¢.

You should understand these base costs incurred; your processor should be able to give you the specific costs and breakdowns in your monthly statement. Mastercard has similar rates as Visa, but they tend to have slightly higher rates. Below is a table that you can use as a guideline on these base interchange rates:

Interchange Rate
CPS Retail
1.80% + 10¢
Rewards Traditional
1.95% + 10¢
Rewards Signature
2.70% + 10¢
Rewards Signature
2.30% + 10¢
2.95% + 10¢
2.95% + 20¢
2.95% + 10¢
Interchange Rate
1.89% + 10¢
2.04% + 10¢
2.05% + 10¢
World Elite
2.95% + 10¢
2.65% + 10¢

As you can see in the table above, rates for processing credit cards can reach 3% before the processor adds any overrides for their services and risk. To reduce some of these costs, specify in your agreement rates based on credit cards and debit cards separately.

This is a big difference and is something that can help you save money on your processing. Not all processors will tell you that there is a difference.

Why is my rate higher?

Card Type
Interchange Rate
Visa Debit CPS
0.800 % + 15¢
Visa Debit CPS Regulated
0.050 % + 22¢
Mastercard Debit
1.050 % + 22¢
Mastercard Debit Regulated
0.050 % + 15¢
Visa Credit CPS Retail
1.510 % + 10¢
Mastercard Credit Consumer
1.580 % + 10¢

The rates mentioned above are US cards processed by US banks, so these rates don’t apply to international cards and transactions. This is one of the first issues most of the readers of this article are facing. For instance, see below what Visa has recently announced as additional fees for international processing:

Current Rate
New Rate
Int'l Acq Service Fee
Issuer Currency
CNP Fee Issue
International Acquirer Service Assessment Fee increases for both Canadian currency and Issuer (home) currency transactions, effective April 1, 2020

As you can see, processing internationally affects your base rate. Also notice that the new rates increase by 49% for the International Acquirer Service fee, and 18% for Card Not Present (CNP). This is before any processor fees and risk assessment fees. With credit card rates as high as 3% and international assessment fee of 1.13%, your cost has a built-in rate of around 4%. We still have other costs to consider and apply to your rate before we can come up with your Merchant Discount Rate (MDR).

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