COMMONLY ASKED QUESTIONS ABOUT VAULT'S MERCHANT DISCOUNT FEES (MDF)
There are more ways to pay bills and make purchases than ever before. Despite the array of options, the most common method by far for students and parents to pay dues and rent with Vault/MyOmegaFi is credit or debit cards.
What is a Merchant Discount Fee?
The merchant discount fee (“MDF”) is paid by a merchant (businesses, fraternity and sorority chapters, any entity that receives payments from buyers) to their processor to cover costs incurred to move money between accounts. Vault currently accepts all major credit cards: VISA, Mastercard, Discover and American Express.
Why does the MDF change?
Over time, the cost of moving money from one account to another adds up and impacts the bottom line. MDF rates have increased, in part, because of the growing popularity of rewards cards. The credit card company sponsoring the rewards program needs money to fund its cash-back incentives, points and/or airline miles programs given to customers each time they swipe. Credit card companies fund their rewards programs via MDF.
Will the fees continue to increase?
As credit cards compete for your business by offering more rewards programs, fees will likely increase. Merchants and merchant groups negotiate with credit card companies to try and keep rates low. Congressional action or other federal government regulations could help prevent MDF increases; however, rewards cards are incredibly popular and most consumers don’t see MDF fees when they make a purchase. As a result, they aren’t motivated to change purchasing behavior.
Do all cards cost the same?
No. VISA, Discover, Mastercard and American Express each set their own individual rates.
Why can’t we “turn off” credit cards?
For 30 years, OmegaFi has offered our customers convenient payment methods, which benefits our clients’ operations. Our data shows that we receive more than 75% of all online payments by credit card. By turning off credit cards, we’d be creating an inconvenience for our customers.
Can we pass on the fee to our members?
No, the fee cannot be passed on to members because it’s illegal in many states and forbidden by the card companies for certain types of cards. These laws often grant exemption to government entities (like your college) but not to your organization. Additionally, requiring a member to pay for the MDF creates a negative relationship and experience. Merchants who pass along the MDF to their customer often get frustrated when they are charged more for using their preferred payment method.
How can we budget for this expense?
In Vault, you can easily view the breakdown of payments between cards, checks, e-checks and cash. Simply take the payment volume of your cards and compare that to the MDF rate to determine a budget line item to cover this expense. If you aren’t able to determine the breakdown, you can use the Vault average of 75%.
Is this happening to other companies?
Absolutely. If you use peer-to-peer apps, such as Venmo or PayPal to buy a product from a business, that business will pay a fee. You can expect to see more fees like this as the card brands increase their rates.