What is Interchange Plus Pricing?

What is Interchange Plus Pricing?

Interchange Plus Pricing is a transparent and cost-effective pricing model in merchant services. Unlike tiered pricing, where fees are bundled into categories, Interchange Plus separates the actual cost of processing a transaction (known as the interchange fee) from the markup that the processor charges. The "Interchange" part is what’s paid to the card-issuing bank and card brands, while the "Plus" refers to the processor’s fees.

For businesses, Interchange Plus provides a clearer picture of what they’re paying for and can lead to lower costs compared to other pricing models. The processor passes along the exact interchange fee, which varies depending on factors like the type of card used (credit, debit, rewards), how the transaction is processed (in-person vs. online), and the industry.

How to Know if You Have Interchange Plus Pricing

To determine if your current pricing model is Interchange Plus, check your monthly merchant statement. Here are a few indicators:

1. Transparency in Fees: If your statement lists interchange rates and processor fees separately, it’s likely Interchange Plus. These fees might appear broken down by card type or transaction method, making it easier to see the processor's markup.

2. Look for 'Plus': Statements under this pricing model often include terms like "Interchange Plus" or "Cost Plus" on your agreement. The “plus” is typically a small, fixed fee that the processor charges for each transaction (e.g., 0.20% + $0.10 per transaction).

3. Unbundled Fees: Unlike tiered pricing, where you may see general categories like "qualified," "mid-qualified," or "non-qualified," Interchange Plus offers unbundled fees, giving you clarity on where every cent goes.

How to Decipher Interchange Plus Pricing

To understand Interchange Plus Pricing fully, it’s essential to break down the fees into three groups: Card Issuing Fees, Card Brand Fees, and Processor Fees.

1. Card Issuing Fees (Interchange Fees)

These are fees paid directly to the bank that issued the card used in the transaction. Interchange fees vary based on the type of card (credit vs. debit), the risk associated with the transaction, and how the transaction was processed (in-person or online).

• Credit Card Fees: Credit card transactions typically incur higher fees due to the increased risk of chargebacks or fraud. These fees might range from 1.5% to 2.5% of the transaction value.

• Debit Card Fees: Debit cards have lower interchange fees, usually between 0.5% and 1%. This is because they are less risky for card issuers, as funds are pulled directly from the cardholder’s bank account.

• Rewards Cards: These often carry higher fees because the card issuer is passing on the cost of rewards programs to the merchant.

How to Decipher: Look for fees labeled as "interchange" on your statement, and note that these are passed directly to the card issuer. These fees fluctuate depending on the card type and method of payment.

2. Card Brand Fees (Assessment Fees)

Card brand fees are paid to the card networks (Visa, Mastercard, American Express, Discover). These are typically fixed percentages that the card brands charge for processing the transaction through their network.

• Visa & Mastercard Fees: Both Visa and Mastercard charge assessment fees that range between 0.11% and 0.15% of the transaction amount.

• Amex & Discover Fees: American Express and Discover may have slightly different fee structures, with Amex fees usually being higher.

How to Decipher: Card brand fees are usually fixed and easy to identify. Look for terms like "Visa Assessment" or "Mastercard Assessment" on your statement, and these fees are applied consistently to all transactions.

3. Processor Fees (Markup Fees)

Processor fees are the markups that your merchant services provider adds on top of the interchange and card brand fees. These fees are how the processor makes money.

Processor fees often appear on statements under terms like "Discount Rate" or "Authorization Fees."

• Discount Rate: This is typically a percentage that the processor charges for each transaction.

• Authorization Fees: These are fixed fees charged for each transaction authorized, regardless of its amount.

How to Decipher: Processor fees are listed separately from the interchange and card brand fees. Make sure to look for terms like “discount rate” and “authorization fees,” as these reflect the processor’s markup. It can sometimes be tricky to understand how these add up, so if you're unsure, speaking with a merchant services expert can provide clarity.

Need Help Understanding Your Statement?

If you’re still confused about whether you have Interchange Plus Pricing or how to interpret the fees on your statement, you’re not alone. Many businesses struggle to understand these charges. Fortunately, expert help is available. You can connect with a professional to walk you through your statement, ensuring you know exactly what you’re paying for and whether you're getting the best deal.

Feel free to [contact us] to set up a time to review your statement with an expert who can break down your fees and help you understand your pricing structure. Getting clarity could help your business save money and make more informed decisions!