What are Discount Rates, Authorizations, Credits, and Deposits?

Merchant discount rates. A discount rate is a percentage of the sale assessed as a payment processing fee. Discount rates vary based on the amount of risk involved in the transaction.

The lowest discount rates will always be the ones where the customer is present and the card is swiped with a receipt generated and given to the customer.. The credit card companies view face-to-face transactions as having relatively lower incidents of fraudulent transactions.

Internet transactions and transactions where orders are taken by phone or mail are considered higher risk since the customer is not present and the card is not physically available.. The chances for fraudulent transactions are greater in “card not present” situations.

Authorization is required in order to complete a sale transaction. A credit card authorization is a transaction used to:

Deposits are the submission of authorized transactions for payment. A deposit completes the process of charging a cardholders and remitting payment to the merchants.. Merchants can automate deposits.

Sales drafts are a receipt of acknowledgement that the credit card customer signs upon completion of the transaction. A sales draft is automatically generated and signed by the customer during most face-to-face credit card transactions. The draft is a legal and binding contract between the merchant and the customer. For internet sales, receipts confirming purchases are emailed to the customer.

Credits are refunds issued by the merchant to a customer due to a return, cancellation of a sale or entry error. A credit is required when a customer returns merchandise or cancels a sale and requests a refund on the amount of the return.