Also called: Monthly discounting, Month-end discount
What monthly discount is
Monthly discount is a way your processor collects card-processing fees. Instead of deducting fees from each day's batch, the processor totals the month's charges and takes them in one lump sum at the beginning of the next month.
During the month, your business receives gross deposits from card sales, before processing fees are deducted. The processor covers the interchange paid as transactions settle, then collects your fees later. Monthly discount is a billing schedule, not a discount on your rate.
Monthly discount changes when your processor collects fees, not how much processing costs.
How the billing timing affects cash flow
Gross deposits leave more of your card revenue in your account during the month. The tradeoff is a larger withdrawal after the month closes. For example, if your monthly processing fees were $500, an illustrative figure, that amount would be collected together rather than spread across daily deposits.
The method does not lower interchange, network fees or processor markup. It is separate from your pricing model, so monthly discount can be used with different pricing arrangements. Compare the total fees, not just the size or timing of each bank deposit.
How to read monthly discount on your statement
Your statement covers card activity and processing charges, while the related bank debit can happen at the start of the following month. Match the fee total to the statement period that generated it, rather than assuming the debit date and sales period are the same.
Calculate your effective rate by dividing the processing fees for a statement period by that period's card sales. Review two or three consecutive statements and compare their fee totals with bank debits. Monthly discount does not have one universal statement line name, so use the full fee breakdown and withdrawal amount.
What you can actually change
You cannot reduce processing costs just by switching the billing schedule. You can choose a collection method that fits your cash planning and verify that the processor collects the fees shown for the correct statement period.
- Set aside cash for the full monthly fee debit after the statement period ends.
- Match each bank withdrawal to the processing-fee total for the month that generated it.
- Compare your total fees with card sales across two or three consecutive statements.
- Negotiate the processor's markup separately from the timing of fee collection.
- Map the billing cycle. Note which statement period each monthly bank withdrawal pays for so you do not misread your cash flow.
- Recalculate your rate. Divide the fees for a statement period by its card sales to check the effective rate.
- Separate timing from price. Review the processor markup as a cost to negotiate, apart from the monthly collection schedule.
Frequently asked questions
Does monthly discount lower your processing fees?
No. Monthly discount changes when your processor collects card-processing fees, not the rates or charges themselves. To assess your cost, total the fees for the statement period and compare them with that period's card sales.
When does a processor collect monthly discount fees?
The processor collects the month's processing fees in one lump sum at the beginning of the following month. The exact debit date depends on the processor's billing schedule, so match the withdrawal to the statement period it covers.
What is the difference between monthly and daily discount?
With monthly discount, you receive gross deposits during the month and pay processing fees together afterward. With daily discount, some or all fees come out of batch deposits, leaving net deposits, and other charges can be billed separately.