Interchange Plus Pricing

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What is Interchange?

Interchange fees are set by the credit card associations of Visa and MasterCard, and are by far the largest component of the various fees that merchant account providers deduct from merchants’ credit card sales, representing 70% to 90% of the total. Interchange fees have a complex pricing structure, which is based on the type of credit or debit card, the products sold, size of the accepting merchant, and whether a transaction is e-commerce, bricks and mortar, or mail order/phone order.

Further complicating the rate schedules, interchange fees typically include a flat transaction fee (dues) plus a percentage of the total purchase price. Twice a year (in April and October), Visa and MasterCard decide whether or not to modify the existing “Interchange Rate Structure.” All credit card processors reserve the right to pass any rate increases on to their clients. Unfortunately, many credit card processing companies take advantage of opportunities like this to increase rates across the board instead of just maintaining their original markup on their clients’ merchant accounts.

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Whether you call it interchange plus pricing, true pricing, cost plus, or pass-through pricing, it is widely considered the most transparent and merchant-friendly credit card processing pricing structure.

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Our Rate Lock Guarantee

We guarantee that our Cost+ (%) margin will never increase for the life of your account. While we cannot guarantee the Visa and MasterCard Interchange, merchants can rest assured that our margin will remain the same. Just one of our commitments that helps build long-term relationships with our merchant, without the need for cancelation fees.

Interchange Plus vs. Tiered Pricing. You need to know the difference.

Interchange-plus sounds like something that would be confusing and hard to understand, but it’s actually an important concept to know if you accept credit cards in your business.

Interchange-plus pricing is the most transparent way to charge for a merchant account because merchants know exactly what Visa, MasterCard, Discover, and AMEX are charging (which is not negotiable) and what their ISO/processor/acquirer is charging as their mark-up.

When merchants work with their merchant account provider to set up interchange-plus billing, both parties agree on an acceptable markup over cost.

How does Interchange Plus Pricing Work?

How Does Interchange Plus Pricing Work

The costs involved in interchange plus include a fixed markup applied directly to the interchange fees published by Visa, MasterCard and Discover. Therefore, the “plus” is the processor’s markup that’s applied to each credit card transaction.

The processor’s markup is usually expressed as basis points. This is a unit of measurement that equals to 1/100 of one percent, expressed as .01%.

Various factors can be considered when a processor gives you a quote with a basis point markup, including the business type, processing method, and business owner credit worthiness.

So, a complete description of interchange plus would be base credit card processing rates that include a fixed markup consisting of basis points and an authorization fee.

How Does Tiered Pricing Work?

How Does Tiered Pricing Work

Tiered Pricing allows processors to hide their mark-up from you.

Tiered pricing is the most common rate plan, so — if you’re not sure what plan you’re on — there’s a good chance you’re on this one. Another way to know is if you’ve ever seen “Non-Qual” on your merchant statements.

With Tiered pricing, transactions are lumped into three categories: Qualified, Mid-Qualified and Non-Qualified. Transactions with low risk or low reward usually earn a Qualified rate, the lowest rate charged. Examples of this include in-person transactions when an EMV card is inserted using an EMV-ready terminal. With higher risk or greater reward (for instance, a keyed-in credit card transaction or business rewards card) the transaction downgrades to a higher-rate tier (to Mid-Qualified or Non-Qualified).

Tiered pricing isn’t regulated, so there isn’t a set threshold that triggers a different rate tier. Therefore, some providers that offer Tiered pricing are incentivized to let downgrades occur to boost their profits. So, processors that use Tiered pricing are free to make up their own rules as they go and because they are not regulated, they can make the statements so overly confusing that most people can't read them.

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