Why Don’t Some Places Take Discover?

Not all businesses accept Discover cards, despite its widespread use. While Discover has expanded its reach significantly over the years, there are specific, logical reasons why some merchants opt not to process transactions through this network. These decisions are often rooted in a combination of financial considerations, existing technological infrastructure, and strategic business choices.

Understanding Merchant Costs

Merchants incur various costs when accepting credit card payments, including interchange fees, assessment fees, and processing fees. Interchange fees are paid to the card-issuing bank and represent the largest portion of transaction costs, generally ranging from 1.55% to 2.5% for Discover credit cards, 1.6% to 2.6% for Visa, and 1.6% to 2.5% for Mastercard. These rates can fluctuate based on factors such as the type of card, transaction environment (card-present vs. card-not-present), and the merchant’s industry.

Assessment fees, also known as network fees, are smaller charges paid directly to the card networks like Discover, Visa, and Mastercard. These fees help cover the costs of maintaining the payment network infrastructure. Visa and Mastercard assessment fees typically range from 0.11% to 0.15% of the transaction amount, while Discover’s assessment fees can be slightly higher, around 0.13% plus a per-transaction fee, depending on the card type. These assessment fees are generally non-negotiable for merchants, as they are set by the card networks themselves.

Payment processing fees are paid to the payment processor, which facilitates transactions between the merchant, card network, and banks. These fees vary based on the processor and the pricing model used, such as tiered pricing, flat-rate pricing, or interchange-plus pricing. While some processors might offer a blended rate, making it harder to discern individual fee components, an interchange-plus model separates the network fees from the processor’s markup, offering more transparency. Total transaction fees for merchants typically range from 1.5% to 3% but can be higher or lower depending on various factors.

Discover operates uniquely in that it is both a card network and an issuer, unlike Visa and Mastercard which primarily function as networks and rely on third-party banks to issue cards. For some merchants, the overall cost structure for accepting Discover, when combined with assessment and processing fees, may be perceived as an additional financial burden or less favorable compared to the more dominant networks, influencing their acceptance decisions.

Network Acceptance and Infrastructure

Historically, Visa and Mastercard have held a dominant market share in the credit card industry, which has significantly shaped payment infrastructure across the United States. Visa and Mastercard hold a dominant market share in the U.S., significantly larger than Discover’s. This long-standing dominance meant that many older point-of-sale (POS) systems and payment terminals were initially configured primarily to support Visa and Mastercard transactions due to their widespread usage.

Many businesses, especially smaller establishments or those with established operations, continue to utilize legacy POS systems. These systems often rely on on-premises hardware and may have limited functionalities compared to modern cloud-based solutions. Upgrading or reconfiguring these older systems to integrate additional payment networks like Discover can involve technical hurdles, software updates, and potentially significant setup costs. Some legacy terminals may not even support newer payment technologies without costly overhauls, making it impractical for some merchants to expand their acceptance options.

While Discover has made considerable efforts to expand its acceptance, its global reach through its Global Network and alliances still differs from the near-universal acceptance of Visa and Mastercard. The range of acceptance for Discover can vary significantly by country. In many international regions, Discover users may need to rely on partner networks, which might not be as widely available as Visa or Mastercard. Businesses serving a substantial international clientele may prioritize networks with the broadest global acceptance to accommodate their diverse customer base.

Business Decisions and Customer Base

Merchants often make strategic decisions about payment acceptance that extend beyond direct costs or technical infrastructure considerations. A primary factor is analyzing their typical customer base and the types of cards they predominantly use. Given Discover’s smaller market share in the United States, a business might conclude that very few of its customers use Discover cards. If a business rarely encounters customers attempting to pay with Discover, the perceived benefit of accepting it might not outweigh the associated fees or the operational complexities involved.

Some small businesses may choose to simplify their operations by limiting the number of payment networks they manage. Each additional network can mean more administrative tasks, such as reconciling statements, training staff, and managing reporting. While the incremental effort for adding one more network might seem minimal, for a small business with limited resources, reducing such complexities can contribute to overall efficiency. This pragmatic choice helps them focus on their core operations rather than dedicating additional time and effort to payment processing for a low volume of transactions.

The decision to accept a particular card network is often a calculated business choice, balancing potential customer demand with operational efficiency and cost management. If the expected volume of Discover transactions is low, the additional fees can accumulate over time without a corresponding increase in sales or customer convenience that justifies the expense. Businesses weigh the perceived value of accommodating every possible payment method against the practical implications for their financial health and day-to-day management.