Interchange-Plus Pricing Definition

By Phillip Parker

Last Updated: December 24, 2013

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

Use of this video does not constitute an endorsement of any kind by CardPaymentOptions.com.

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

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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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