Definition
In payment processing, the 'discount rate' is the percentage component of the fee a card processor or gateway charges on each transaction. It is called a discount because the merchant receives the transaction amount minus this percentage — historically the bank 'discounted' the receivable.
The discount rate varies by card type (debit usually cheaper than credit), brand (Amex and premium cards more expensive than basic Visa or Mastercard), and channel (in-person card-present is cheaper than online card-not-present). Headline rates advertised by processors usually refer to the cheapest tier.
Why it matters
Most merchants compare processors on the headline discount rate alone. The effective rate — what you actually pay across your full transaction mix — is usually higher because of premium card upcharges, international cards, and chargebacks. Always compare on effective rate, not headline rate.
Where this appears in your tools
The Payment Gateway Optimizer compares effective rates across providers using your actual transaction mix.