Interchange-Plus vs. Tiered Pricing

By Phillip Parker

Last Updated: February 27, 2015

The following text has been adapted from Fee Sweep. Download your copy of Fee Sweep here.

I’m Open! Pass it! Meet “Interchange-Plus”

Signpost pointing to Better Price and Best Price

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.

The preceding text has been adapted from Fee Sweep. Download your copy of Fee Sweep here.

About The Author

Phillip Parker

Phillip Parker is an independent card payment expert specializing U.S. and Canadian point-of-sale, e-commerce, and mobile payment acceptance. He has nearly two decades of experience in credit card processing as a journalist and consultant. Phillip is the creator of this website and has written over 1,500 articles covering numerous payment acceptance topics. He has also published critical reviews about most merchant services providers currently in operation.

Expert Guidance

Phillip has consulted businesses of all sizes from mom-and-pop shops processing $10K per month to enterprise level organizations processing in excess of $300MM annually. His specialties include:

– Merchant Account Statement Auditing
– Rate & Fee Negotiation
– Processor & POS Selection
– Software Integrations
– Risk Assessment
– Fraud Prevention
– General Processing Advice

Schedule a Consultation Here

Phillip’s Top Picks

Phillip has researched and reviewed over 1,000 merchant services providers over the last 15 years. He also owns multiple businesses that accept credit card payments. If you are looking for an ethical credit card processor that doesn’t hide fees or lock you into expensive contracts, see Phillip’s merchant account picks here.

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In addition his contributions on CPO, Phillip has also been quoted in several major publications such as The Los Angeles Times, INC Magazine, Miami Herald, Computer World, and numerous others. If you would like to interview Phillip for your story or podcast, please reach out here.

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