I’m Open! Pass it! Meet “Interchange-Plus”
Now that you understand merchant account rates better than 99% of all other business owners, allow me to introduce you to a new friend called “Interchange-plus.” Recent regulation has opened up this pricing tier to businesses of all sizes. Merchant account providers are now required to give small mom-and-pop shops access to same rate structure they have been giving to huge companies like McDonald’s and Wal-Mart for decades. Interchange-plus is sometimes also referred to as “Wholesale Pricing,” “Cost-plus,” “Interchange Pass-through,” and “True Pricing” among other possible pseudonyms.
Interchange-plus does something great: It gets rid of those darn buckets! With Interchange-plus you are charged the specific Interchange fee of the card type, plus a flat Provider Markup. Interchange-plus quotes usually look something like this: “Interchange + 0.30% and $0.20 per transaction.”
The quote above means that the merchant account provider will add a 0.30% markup on top of the Interchange rate, plus charge a flat 20 cents per transaction. This means that if you run a card that has an Interchange rate of 1.8% + $0.10, the total fee would be 2.1% and $0.30 after adding the Provider Markup (VISA or MasterCard’s “Dues & Assessment” fee would also be charged as a separate line item).
Interchange-plus makes “apples-to-apples” cost comparisons possible because the only fee you need to compare is the Provider Markup over Interchange. On average, most merchants with good credit should expect to get a markup quote of 0.30% to 0.50% plus 10 to 20 cents per transaction. The higher your processing volume, the lower the rate can be negotiated. I’ve seen very high volume businesses get Interchange-plus pricing as low as Interchange + 0% + $0.05 per transaction.
Keep in mind that if you operate a business that has been deemed as “high-risk” by the industry, you may not qualify for Interchange-plus or your Provider’s Markup may be much higher than standard risk businesses. See this page to learn more about “high-risk” business types.