Interchange-Plus Pricing Definition

Merchant Account Interchange-plus Explained

What is Interchange-plus Pricing? Interchange-plus, also called “cost-plus” or “pass-thru” pricing, is the most transparent pricing structure available to merchants. “Interchange” refers to the fees assessed by card networks like Visa and MasterCard for the service of routing electronic payments. “Plus” refers to an additional, fixed markup added by a merchant account provider. In nearly all cases, Interchange-plus pricing is preferable to tiered pricing because it allows a merchant to see exactly how his or her transaction fees are calculated.

In a tiered pricing structure (which is the industry standard), a provider gathers certain card types into tiers, or “buckets,” and charges all cards in a given bucket at the rate of the most expensive card in the bucket. With Interchange-plus pricing, all cards are processed at their exact assigned interchange rate but with an additional, clearly disclosed provider markup on each card. For instance, if a provider offers a merchant a transaction rate of “Interchange + $0.18,” the merchant knows that the only cost being added by the provider is $0.18. Interchange fees themselves are non-negotiable and passed down to the providers, so the only way for providers to earn a profit is to add a markup of some kind. Interchange-plus makes it possible for merchants to make an apples-to-apples comparison in terms of the markups they are being charged.

Interchange-plus pricing was previously reserved for high-volume retailers only, but it is now available to all merchant sizes. To learn how to negotiate for Interchange-plus pricing and avoid hidden fees, see “Fee Sweep: How to Get the Merchant Services You Need Without Getting Scammed” (now available for free download).

Tiered vs. Interchange-Plus Video Explanation

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Phillip Parker is a former merchant services sales agent who believes the industry has been overrun by people who engage in fraud and deception in order to steal from hard working business owners. He created this website to help you avoid the bad players, save money on fees, and to get peace of mind with your merchant account. If you would like to help support his work, learn more about our cost reduction service. We can evaluate your statement, tell you exactly how much you're overpaying, and then help you dramatically reduce your fees with your current credit card processor. Looking to switch instead? See our list of the best merchant account providers.

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