It’s the most-commonly rejected card. It has high fees without the clout of Amex. Amex customers are typically pretty wealthy and places will accept them because of their high-roller status. But Discover doesn’t have that going for them, so there’s less reason to accept the card.
Where you’ll find it rejected most often is small shops and government agencies.
For instance, my career has been in government, and no organization I’ve worked for has ever accepted Discover. We aren’t allowed to “profit” from our fees, so we have to include credit card processing in the adopted fee schedule. But since we can’t profit, we have to set the fee at whatever Visa and Mastercard charge. That extra 1 or 2 percent Discover charges can be millions for a large government (large city, statewide agency, etc). So, agencies simply don’t take Discover (and frequently AmEx, though they’ll sometimes negotiate).
Large retailers are able to negotiate better deals with Amex and Discover, but for smaller shops it just isn’t gonna happen. And that 1-2% (of the total charge) extra taken by the card processor is huge when your margins are small.
Heck - even the Visa and Mastercard fees are a huge deal. When I worked in retail management, those fees were secretly the big reason we pushed our store-brand credit cards. It wasn’t the 80 dollar commission for the account the store got - it was that if someone used our card in our store, we didn’t pay the processing fee.
We’d give 2% in points back for using the card in the store, which was a great deal for us since we didn’t have to pay the 3-4% fee to the processor.
It is definitely not true that Discover interchange rates are significantly higher than Visa or Mastercard.
I’ve put below a list of the actual interchange rates for various personal Visa, Mastercard, and Discover cards types.
Debit:
Visa Debit Regulated: 0.05% + 22¢
Discover Debit Regulated: 0.05% + 22¢
Mastercard Debit Regulated: 0.05% + 22¢
Visa Debit: 0.8% + 15¢
Mastercard Debit: 1.05% + 15¢
Discover Debit: 1.1% + 16¢
Visa Debit Prepaid: 1.15% + 15¢
Mastercard Debit Prepaid: 1.15% + 15¢
Base credit tiers:
Visa CPS Retail: 1.51% + 10¢
Discover Consumer: 1.56% +10¢
Mastercard Consumer: 1.65% + 10¢
Mastercard Enhanced: 1.8% + 10¢
Rewards cards:
Visa Rewards Traditional: 1.65% + 10¢
Visa Rewards Signature: 1.65% + 10¢
Discover Rewards: 1.71% + 10¢
Discover Rewards Premium: 1.71% + 10¢
Mastercard World: 1.9% + 10¢
Premium cards:
Visa Rewards Signature Preferred: 2.1% + 10¢
Discover Rewards Premium Plus: 2.15% + 10¢
Mastercard World Elite: 2.3% + 10¢
You can plainly see that Discover tends to be more expensive than Visa but is cheaper than Mastercard. The only reason I could see that someone might refuse Discover is because Discover cards are all rewards credit cards that go into the higher tiers, whereas many Visa and Mastercard cards are debit cards which go into the lowest tier.
A card which is subject to central bank regulations regarding the interchange fees which they are allowed to charge. According to the Dodd-Frank Wall Street Reform & Consumer Protection Act 2011, the Federal Reserve has the power to limit debit card interchange fees for debit cards issued by large banks with over $10 billion in assets. A “regulated debit card” issued by a bank subject to the regulation is therefore tariffed at the maximum rate allowed by the regulation, which is 0.05% plus 22 cents.
It’s the most-commonly rejected card. It has high fees without the clout of Amex. Amex customers are typically pretty wealthy and places will accept them because of their high-roller status. But Discover doesn’t have that going for them, so there’s less reason to accept the card.
Where you’ll find it rejected most often is small shops and government agencies.
For instance, my career has been in government, and no organization I’ve worked for has ever accepted Discover. We aren’t allowed to “profit” from our fees, so we have to include credit card processing in the adopted fee schedule. But since we can’t profit, we have to set the fee at whatever Visa and Mastercard charge. That extra 1 or 2 percent Discover charges can be millions for a large government (large city, statewide agency, etc). So, agencies simply don’t take Discover (and frequently AmEx, though they’ll sometimes negotiate).
Large retailers are able to negotiate better deals with Amex and Discover, but for smaller shops it just isn’t gonna happen. And that 1-2% (of the total charge) extra taken by the card processor is huge when your margins are small.
Heck - even the Visa and Mastercard fees are a huge deal. When I worked in retail management, those fees were secretly the big reason we pushed our store-brand credit cards. It wasn’t the 80 dollar commission for the account the store got - it was that if someone used our card in our store, we didn’t pay the processing fee.
We’d give 2% in points back for using the card in the store, which was a great deal for us since we didn’t have to pay the 3-4% fee to the processor.
It is definitely not true that Discover interchange rates are significantly higher than Visa or Mastercard.
I’ve put below a list of the actual interchange rates for various personal Visa, Mastercard, and Discover cards types.
Debit:
Base credit tiers:
Rewards cards:
Premium cards:
You can plainly see that Discover tends to be more expensive than Visa but is cheaper than Mastercard. The only reason I could see that someone might refuse Discover is because Discover cards are all rewards credit cards that go into the higher tiers, whereas many Visa and Mastercard cards are debit cards which go into the lowest tier.
What is a regulated debit card?
A card which is subject to central bank regulations regarding the interchange fees which they are allowed to charge. According to the Dodd-Frank Wall Street Reform & Consumer Protection Act 2011, the Federal Reserve has the power to limit debit card interchange fees for debit cards issued by large banks with over $10 billion in assets. A “regulated debit card” issued by a bank subject to the regulation is therefore tariffed at the maximum rate allowed by the regulation, which is 0.05% plus 22 cents.
Thanks, curious about this too.