What is a Merchant Bank?

Sometimes referred to as Acquirer or Acquiring Bank, a Merchant Bank is the bank that stands in for all the Issuing Banks. It puts up the funds to be deposited in the Merchant’s account prior to it being transferred via interchange from the various Issuing Banks.  Merchant Banks provide these funds for a Discount Rate, a fee charged for the use of the money.  It’s called a Discount Rate because it is usually taken away from the credit card funds as they are deposited.  They also share in the Interchange Fee charged by the Card Associations.  A Merchant Banks’ worth is in its portfolio of Merchants.