WordsMerchant discount rate
MDR
Short for merchant discount rate: what a shop’s bank keeps from each card payment before paying the shop the rest. It’s shared with the card network and the bank that issued the card, and on a credit card part of it pays for your interest-free days; RBI’s 2022 paper on payment charges says RBI hasn’t set this rate for credit cards.
Some shops add a surcharge for paying by card and cite the MDR, and the same paper notes the surcharge can differ from what the shop actually pays. RBI has told banks to make sure shops don’t pass MDR on to customers paying by debit card; the paper says the same wasn’t required for credit cards.
Where this comes from
- RBI, Discussion Paper on Charges in Payment Systems17 August 2022, paragraphs 6.3, 9.3.2 and 12.2
- RBI, Rationalisation of Merchant Discount Rate (MDR) for Debit Card Transactions6 December 2017, paragraph 6
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