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Question

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

(a) The incentive given by a bank to a merchant for accepting payments through debit cards pertaining to that bank.
(b) The amount paid back by banks to their customers when they use debit cards for financial transactions for purchasing goods or services.
(c) The charge to a merchant by a bank for accepting payments from his customers through the bank's debit cards.
(d) 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:

C

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Explanation:

Merchant Discount Rate (MDR) refers to the fee or charge that a merchant has to pay to the bank for accepting payments from customers through debit cards. When a customer uses a debit card for a transaction, the merchant receives the payment from the bank, but a certain percentage or fixed amount of that transaction is deducted by the bank as the MDR. It is essentially the cost borne by the merchant for availing the convenience and security of accepting digital payments through debit cards.

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