Which one of the following best describes the term "Merchant Discount Rate" sometimes seen in news?

Which one of the following best describes the term "Merchant Discount…

The incentive given by a bank to a merchant for accepting payments through debit cards pertaining to that bank.
The amount paid back by banks to their customers when they use debit cards for financial transactions for purchasing goods or services.
The charge to a merchant by a bank for accepting payments from his customers through the bank's debit cards.
The incentive given by the Government to merchants for promoting digital payments by their customers through Point of Sale (PoS) machines and debit cards.

Answer

The charge to a merchant by a bank for accepting payments from his customers through the bank's debit cards.

(a) Incorrect. Merchant Discount Rate (MDR) is not an incentive paid by a bank to the merchant; it is a fee charged on card-based transactions.
(b) Incorrect. MDR is not cashback or any amount returned to customers for using debit cards.
(c) Correct. MDR is the charge/fee paid by a merchant to the bank/payment service provider for accepting payments through debit/credit cards and related digital payment infrastructure.
(d) Incorrect. It is not a government incentive scheme; it is a transaction charge in the digital payments ecosystem.

The charge to a merchant by a bank for accepting payments from his customers through the bank's debit cards.

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