Merchant discount rate (MDR)

What the MDR contains

The merchant discount rate is the all-in fee a merchant pays to accept a card payment, usually expressed as a percentage of the transaction value. Inside it sit three layers: interchange, paid onwards to the customer's issuing bank; card scheme fees, paid to Visa, Mastercard or the relevant network; and the margin retained by the acquirer and payment provider - the only layer that is actually negotiable. Suppose a merchant's agreed MDR were 2.5%: a R1,000.00 sale would settle as R975.00, with the R25.00 divided among issuer, scheme and acquirer.

Why MDRs differ between merchants

Two businesses selling similar things can pay noticeably different rates, because the MDR prices risk and mix. Card mix matters - credit cards typically carry higher interchange than debit, and international cards more than local. Channel matters - card-present transactions are cheaper than online ones. Sector risk, chargeback history and monthly volume all move the negotiable margin. A quoted headline rate means little without knowing which card types and channels it covers.

Blended versus interchange-plus pricing

Blended pricing charges one rate for everything: simple to read, but it hides where the money goes and quietly averages cheap debit transactions against expensive credit ones. Interchange-plus passes the actual interchange and scheme fees through and adds a disclosed margin: transparent, though the monthly invoice varies with card mix. When comparing providers, insist on comparing the same structure. LekkaPay itemises fees in its transaction reporting so merchants can see precisely what each payment cost and why.