Glossary · Finance & Payments

MDR (Merchant Discount Rate)

MDR is the fee a merchant pays its acquirer on each digital payment, usually a percentage of the sale, covering interchange, network and processing costs.

Updated October 6, 2026

MDR (Merchant Discount Rate) is the charge a merchant pays to its bank or payment provider for accepting a digital payment, usually expressed as a percentage of the transaction value. The term is common in India and several other markets.

Why it matters

MDR directly reduces what a merchant keeps from each sale, so it influences which payment methods a business encourages. It normally bundles several costs: the interchange paid to the issuer, fees to the card network and the acquirer's or gateway's own margin. Regulators can set limits. In India, MDR on certain UPI and RuPay debit transactions has been regulated to zero, while other methods carry charges, and the rules have been revised over time, so current policy should be checked at source. Providers may also add GST on the fee.

Example

Sale:        2,000
MDR 1.8%:      36
GST on fee*:   (applicable tax, if any)
Net settled: 1,964 before tax on fee

The 1.8 percent figure is invented for illustration. Actual rates depend on card type, merchant category, volume and the contract.

Common mistakes

  • Comparing MDR between providers without also comparing settlement time and fixed fees.
  • Assuming MDR is identical for every payment method.
  • Forgetting that a refund may not return the fee already charged.

Rules vary by country; this entry is a definition only.

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