Interchange plus is a clear, inexpensive form of merchant account pricing. That's why it's offered by our processing partners as a solution here at CardFellow.
What is interchange plus?
Interchange plus is the term used to describe a merchant account pricing structure where a fixed markup is applied directly to interchange fees published by Visa®, MasterCard® and Discover®.
Our article on interchange fees covers the topic in greater detail, but for the sake of understanding interchange plus pricing, think of interchange fees as base credit card processing rates.
You can view the current interchange fees by following the links below to Visa and MasterCard's Web sites:
Visa interchange rates
MasterCard interchange rates
Interchange = Credit card processing rates set by the association.
The word "Plus" refers to the markup charged on each credit card transaction. The markup is expressed as basis points with an authorization fee. These two fees cover additional processing costs as well as a portion of the service provider's profit.
Basis Points
A basis point is 1/100th of a percentage point.
For example:
1% = 100 basis points
2 basis points= 0.02%
Authorization Fee
An authorization fee is technically referred to as an authorization request fee and it's charged each time a merchant sends a transaction to a customer's issuing bank to be authorized.
Plus = A fixed markup consisting of basis points and an authorization fee.
Combining the previous two explanations leaves us with the following definition of this merchant account pricing model.
Interchange plus = Base credit card processing rates with a fixed markup consisting of basis points and an authorization fee.
As a side note, interchange plus is sometimes referred to as "pass through pricing."
How does the interchange plus pricing work?
Interchange plus pricing works much like the name implies - by applying a fixed markup to Visa, MasterCard or Discover's interchange fee on a per-transaction basis.
The markup applied to a transaction has two components, expressed as basis points and an authorization fee.
The type of card being used (debit, credit, personal, business, etc.), the way a card is processed (online, swiped through a machine, etc.) and other variables combine to determine which interchange category a transaction qualifies to, and ultimately the amount of the final charge.
The markup that's assessed to a transaction is the same regardless of which interchange category a transaction qualifies to. The interchange charges and markup combine to yield the merchant discount fee, which is the merchant's cost to process the transaction.
What are the advantages of interchange plus?
Interchange plus is a transparent pricing model that has the potential to be less expensive than other forms of pricing. Exactly which price structure is the least expensive for your business will depend on your business's needs. Sign up for free here at CardFellow to have a dedicated representative show you the various cost-saving options available through our processing partners.
By passing interchange fees directly to merchants with a fixed markup surcharges and hidden costs are generally eliminated.
The cost of interchange plus processing will depend on the markup. However, generally speaking, interchange plus will yield a substantial savings over the same processing volume when compared to other pricing models such as tiered or enhanced recover reduce (ERR).
Is interchange plus the best merchant account pricing?
Flat fee and interchange plus are the two in expensive, transparent types of merchant account pricing. That's why our processing partners offer these two pricing models at CardFellow.
Where can I get interchange plus pricing?
Sign up free at CardFellow to receive a comprehensive credit card processing analysis.
Where can I view interchange fees?
Check out our article about interchange fees for the most recent rate information.
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