The phrase “less discount paid” on a processing statement can be confusing. It actually means the amount that you’ve paid in processing fees already.
“Less Discount Paid” Defined
“Less discount paid” is the term that credit card processing services use to indicate the amount of money that has been in fees throughout a given month. In order to determine the total amount paid in processing fees for a given month, you have to add “less discount paid” to the amount charged at the end of the month.
Follow this link for a detailed breakdown of daily versus monthly discount, including a sample merchant statement that uses daily discount.
There are several counter-intuitive terms in the processing industry that contribute to the confusion surrounding rates and fees. “Discount” is one such term that means the opposite of what you would expect.
In the credit card processing world, the word discount refers to the rate that a processor charges. So, when a processor puts “less discount paid” on a processing statement, what they really mean is “less charges paid,” or more clearly, “how much in fees you have already paid.”
Processors bill their clients for credit card processing fees on a daily or monthly basis.
Daily discount is when a processor deducts their qualified rate prior to depositing funds into a merchant’s checking account. Then, the processor bills transaction fees, mid and non-qualified rates, and other miscellaneous fees in a lump sum at the end of the month.
Daily discount hinders your business’s cash flow because credit card processing sales are received as net deposits instead of gross. Additionally, daily discounting is often coupled with tiered pricing instead of interchange plus making for very expensive rates and fees. Luckily, both daily discounting and tiered pricing can be easily avoided by using CardFellow to find the best credit card processor.
Monthly discount is when a processor charges all of their fees in one lump sum at the end of the month. Monthly billing is generally easier to track than daily billing, and it results in more positive cash flow.