Costs to merchants

Merchants are charged many fees for the privilege of accepting credit cards. The merchant may be charged a discount rate of 1%-3%+ of each transaction obtained through a credit card. Usually, the merchant will also pay a variable charge, called an interchange rate, for each transaction. Thus in some instances of very low value transactions, use of credit cards may actually cause the merchant to lose money on the transaction. Merchants must accept these transactions as part of their costs to retain the privilege of accepting credit card transactions. Merchants with very low average transaction prices or very high average transaction prices are more averse to accepting credit cards. But rates are often reduced in an attempt to include more of these types of merchants.