Merchant service charge
Also known as: MSC, Merchant discount rate, MDR
The merchant service charge is the total fee a merchant pays its acquirer for card payments. It is made up of the interchange fee, the scheme fees and the acquirer's own margin, and EU rules require acquirers to itemise it unless the merchant asks for one blended rate.
Last reviewed
Example
Illustrative numbers only. On a €50 debit card sale the acquirer might charge a total of €0.40. Part of that goes to the issuer as interchange, part to the card scheme, and the remainder is the acquirer's margin.
Ask five merchants what they pay to take cards and you will get five answers. Most will quote the headline rate. That is only the start of it.
The Interchange Fee Regulation defines the merchant service charge as "a fee paid by the payee to the acquirer in relation to card-based payment transactions". The European Commission's 2020 review describes what is inside: it is "composed of interchange fees, acquirer scheme fees (collected by schemes), and acquirer margins". In other words, the charge is the interchange fee to the issuer, plus the scheme fee to the card network, plus whatever the acquirer keeps for itself.
On the statement it can appear in different shapes. Under blended pricing it is a handful of headline rates. Under IC++ it is the interchange and the scheme fees at cost, plus a processing fee. The UK regulator's card-acquiring review adds a warning that applies anywhere: the charge is "the total amount the merchant pays the acquirer for card-acquiring services, including any additional fees". In standard contracts it found extra fees triggered mainly by events such as chargebacks, refunds and PCI DSS non-compliance.
Inside the European Union, Article 9 sets the default. Acquirers must offer and charge merchant service charges individually specified by card category and brand, "unless payees request the acquirer, in writing, to charge blended merchant service charges". In the survey behind the Commission's review, about 60% of the merchants who were offered the unblended option chose it.
What merchants get wrong is comparing headline rates. Two offers at the same rate can cost different amounts once your card mix, refunds and chargebacks are counted. Compare the total charge over a real month of sales.
The headline rate is what you are told. The merchant service charge is what you pay.
