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Interchange Plus Pricing

Interchange-plus pricing works by adding a fixed margin on top of Interchange fees, which are set by the card networks, Visa, MasterCard, Discover and American Express. Interchange-plus pricing models can be setup with two components, with a percentage fee and per-transaction fee above interchange.

Interchange plus pricing is the most transparent rate schedule when setting up a merchant account. It charges the Interchange cost plus a flat markup on each transaction. Interchange-pricing shows merchants exactly what is paid to the card-issuing banks, the card associations and to the payment processor.

Here are the parties involved in a credit card transaction:

Issuing Bank – this is the organization that issues a credit card to a customer. Examples: Chase, Wells Fargo and Bank of America.

Credit Card Networks – These companies work with issuing banks to distribute their credit cards. Visa, Mastercard,      American Express Discover.

The Acquirer – Also known as the “Processor” communicates with the issuing bank to approve or decline a credit card transaction. There are also merchant service providers or Independent Sales Organizations.

Why a merchant would choose Interchange-plus pricing over Flat rate pricing.

Lack of Transparency – The simplicity of flat rate pricing comes at a cost. The processor doesn’t disclose the interchange rate or the markup. This makes it impossible for you to see what you’re paying for. It’s also tough to compare the rates with other pricing schedules from other processors.

More Expensive –There are many different types of transactions and each has a different interchange rate. Some cost more and some cost less. When all transactions are lumped into the same pricing schedule, you don’t receive any of the cost savings for the transactions that are less expensive.