How Can I Have The Lowest Discount Rate and The Worst Deal?

Credit card processors know that merchants look at two numbers: the discount rate and the transaction fee.

So those are the two numbers they compete on. Which is how a merchant ends up holding the lowest discount rate any processor in the market will quote, and one of the worst deals on the street, at the same time. Those two things are not in conflict. On an unregulated statement, they are close to inevitable.

Why this is possible at all

Because these fees are unregulated. Not lightly regulated. Unregulated.

The dictionary definition is “not controlled or supervised by regulations or laws.” My working definition, after twenty years of reading these statements, is simpler: nobody is looking, and nobody is required to care.

That was fifteen years ago, and the system he was describing is the one your statement was generated by this month. What follows are three of the most common places the money goes when the rate you were quoted stays impressively low.

One: inflated interchange

Interchange is meant to be a pass-through. The card networks set the rate, the issuing bank receives it, and your processor forwards it at cost. That is the theory.

Inflating it, sometimes called enhanced billing, means a transaction carries a published interchange rate of, say, 2.00%, and the processor bills you anything above 2.00%. The difference is theirs. It never appears as profit anywhere on the statement, because it is hidden inside a line item you assume is a fixed cost.

The average inflation we find is around 0.65%. Two of the world’s largest processors reached a $52 million out-of-court settlement over allegations of over-inflating interchange, reported by The Capital Forum. It is fair to ask why anyone settles for $52 million if no rule was broken.

This is extremely hard to spot. Most sales representatives working for processors would miss it, and that is not a dig at them. Catching it means matching every transaction against the networks’ published interchange tables, line by line, and doing the arithmetic on each one. Even a small merchant can take hours. That labour is precisely why the method is so widely used.

Two: inflated dues and assessments

The same technique, applied to card brand dues and assessments, and aimed particularly at American Express. Amex programs carry an extra layer of complexity, which makes those fees harder to validate, which makes them a better hiding place.

We have seen these inflated by as much as 0.83%. Apply that to the same merchant holding a 0.05% disclosed rate and their true American Express discount rate is 0.88%, roughly eighteen times what they believe they are paying.

Three: the network access fee that grew a word

There is a genuine network access fee. Then some processors renamed theirs the “Network and Processor Access Fee.”

One word added, easy to read straight past, and technically it is a disclosure. They did tell you, in the sense that the word is sitting right there. What they did not tell you is that the fee now roughly doubles, which on a small merchant runs from a few hundred to a few thousand dollars a month.

That is the whole game in one line item. Not a lie. A word.

The only number that cannot be moved

Every technique above works by relocating cost away from the number you are watching. There is one number that defeats all of them at once, because it counts everything.

Your effective rate. Take every fee on the statement, all of it, and divide by your total card volume for the month. That is what accepting cards actually costs you, and no amount of moving line items around can change it.

For context on what you are aiming at: a well-priced merchant should be paying their processor a margin of roughly 5 basis points, which is 0.05%. If your disclosed rate is 0.05% but your effective rate says otherwise, the gap between those two numbers is the answer to the question in the title of this page.

Find out if your processor is overbilling you

Send us your statements and we will tell you whether the rate you were sold is the rate you are paying, and where the difference went. In a few days you get your findings. No risk, no obligation, no strings, no credit card.

It is our free gift, in the same spirit as the big box grocer handing out the free cookie in the hope you will want the whole bag once you taste it. If you do not like it, you are free to keep walking.

Frequently asked questions

General information based on statements we have reviewed, not legal or financial advice. Inflation percentages are averages and maximums observed in our own audits and will vary by processor and agreement. Senator Durbin’s remarks are from the public Congressional record. The $52 million settlement was reported by The Capital Forum. Current as of August 2026.