Credit Card Processing Rates


Understanding the Discount Rate

The Federal Reserve Bank’s lending facility is called the discount window. The Federal Reserve Board defines the discount rate (DR) as the interest charged to commercial banks and other depository institutions on the loans they receive from their regional discount window. Three discount window programs are offered by the Federal Reserve Bank to depository institutions: primary, secondary, and seasonal (for businesses with intra-year fluctuations, such as agriculture or seasonal resorts). The DR is set above the level short-term market interest rates and is also often used by the Federal Reserve as the primary rate. The secondary program’s DR is set higher than the primary.

Credit card processing companies apply the DR to each credit card processing transaction, like a commission they can collect on each sale as the issuer of the credit card account. Typically, it’s integrated into the processing fee structure of your merchant account. Some credit card processing companies offer a base DR for their merchant accounts and then increase the percentage based on a number of factors, including business type and sales figures, to determine the appropriate credit card processing rate. Because merchant account services usually come with several types of processing fees, it’s important to shop around and look for a deal that best suits your business needs. Ultimately, you may be able to reduce your internal operating costs by selecting the right merchant account package.

What Affects the Discount Rate?

Credit card processing companies typically look at many factors related to your industry and finances to determine the DR for your business account transactions. The type of business or industry, as well as sales figures, may influence the way your provider calculates your rate. A typical DR ranges from 1 to 5%. Factors taken into consideration when calculating your DR may include

  • Type and age of business
  • Amount of time business owner or account holder has been with the business or in the industry
  • Credit rating of the business and business owner or account holder
  • Total number of sales per month
  • Average amount of each sales transaction
  • Average number of sales transactions made via phone or Internet each month (online and card-not-present transactions may increase your DR)


Other Potential Fees

There are several aspects of credit card processing that can result in additional fees being charged to your merchant account. Understanding the full fee structure of the account can help you choose which credit card service package is best for your business. Some packages may include free features or reduced fees. It is also important to note any credit or processing limits that may be imposed on the merchant account, and under what circumstances those limits could be deemed necessary. Potential fees in addition to the DR that you may incur with your services provider include:

  • application and/or setup fees
  • individual transaction fees (on top of the DR)
  • monthly account minimums
  • voice-verification charges
  • address-verification fees
  • monthly statement fees
  • annual account fees
  • chargeback fees for product returns
  • cancellation fees

When shopping for your merchant account and credit card services provider, you should also consider the cost of scanning and processing equipment. Some providers lease equipment or offer equipment as part of an account package. Be sure to ask whether there is a replacement cost for broken or damaged equipment. You may also need to check with your provider to ensure that your shopping cart software for online credit card orders is compatible with your provider’s gateway system.


Find out how you can get the lowest credit card processing rates and the best service from one provider: North American Bancard. Read these articles to learn more: