Best POS Machines

What is MDR and what does the RBI cap it at?

The merchant discount rate is the fee the acquiring bank keeps from each card sale. You never see it as a bill. It is deducted before the money reaches your account.

The RBI capped it for debit cards in a circular titled “Rationalisation of Merchant Discount Rate (MDR) for Debit Card Transactions”, dated 6 December 2017. The caps depend on your turnover and on how the card is accepted.

Two points matter here. These are ceilings, so a competitive acquirer can quote less. And the circular covers debit cards only. Credit card MDR is set commercially between you and the acquirer, and it is materially higher.

Why does your effective MDR differ from the rate you were quoted?

Because your customers decide it, not your contract. A single quoted rate almost never applies to every transaction. Acquirer tariff sheets carry a grid.

Ask the sales representative for the full grid before signing, not the headline. Then estimate your own mix. A shop where most sales are premium credit cards pays far more than a chemist taking mostly debit.

What does a POS machine cost to run every month?

Three things, and only one of them is the rental. First, the rental or one-time device cost, with 18% GST on top. Second, MDR on your sales. Third, connectivity, if the device uses its own SIM.

Do the arithmetic on your own numbers. Take your monthly card turnover and multiply it by the blended MDR you expect. Compare that to the rental. For most merchants above a few lakh a month, MDR is many times the rental, so a “free machine” offer with a higher MDR is the expensive one.

The rental is also the part the salesperson will negotiate first, because it costs the acquirer least. Push on MDR instead. And ask whether the quoted MDR is guaranteed for a fixed period or revisable at the acquirer’s discretion.

How fast does the money reach your bank account?

Settlement timing is set in your merchant agreement, not by a public rule. Providers commonly advertise next working day settlement, and some sell faster settlement as a paid add-on.

Read three clauses before you sign. When does the settlement clock start — at the swipe, or at end of day batch close? Are weekends and bank holidays counted? And what triggers a hold on your funds?

That last clause is the one that hurts. Acquirers can withhold settlement where they suspect a chargeback risk or unusual activity. For a business running on daily cash flow, a week-long hold is worse than a slightly higher MDR. Our bank holidays list is worth checking against the settlement clause.

Which POS machine should a small business choose?

Choose the cheapest acceptance method that your customers will actually use. For a small shop, a QR code costs nothing to deploy and carries the lowest debit ceiling of the lot. Add a card machine only when customers ask for one.

For a business already above ₹20 lakh in turnover, the higher debit band applies, so the MDR negotiation matters more. Get quotes from your existing bank and from at least one payment aggregator. Your bank sees your account and can price on it; an aggregator competes on onboarding speed.

Avoid long lock-in contracts on a first device. Twelve months is common and rarely in your favour. If the acquirer will not put the MDR grid, the settlement cycle and the exit terms in writing, that is your answer. Keep a credit line available for the gap between the sale and the settlement, and make sure your GST registration details on the merchant account match your returns.