UPSC Previous Year Question | Prelims GS | 2018

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

  1. The incentive given by a bank to a merchant for accepting payments through debit cards pertaining to that bank.
  2. The amount paid back by banks to their customers when they use debit cards for financial transactions for purchasing goods or services.
  3. The charge to a merchant by a bank for accepting payments from his customers through the bank's debit cards.
  4. 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

Correct Answer

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

Explanation

MDR is the fee a merchant pays to the bank (acquirer) for accepting card-based payments, generally expressed as a percentage of the transaction value. It is a charge on the merchant, not an incentive or cashback.

Topics: banking and finance, digital payments, economy, merchant discount rate (mdr)