What is Interchange-Plus Pricing for Credit Card Processing?

December 30, 2021

Interchange-plus pricing is a type of credit card processing pricing that helps small business owners understand the costs of processing credit cards. Having a clear understanding of costs from all credit card associations and your credit card processor helps business owners avoid paying unnecessary fees or processing more than they need. 

But interchange-plus pricing isn’t the only pricing model, and it may not be right for you. There is no one-size-fits-all model when choosing a credit card processing pricing structure. The best option for your business will depend on several factors, such as the average ticket amount, processing volume, and interchange rates. It will also depend on the pricing structure offered by the merchant account provider and your processor.  

This article looks at the interchange-plus pricing model and its differences from other common pricing models. The good news is, no matter which option you choose, all models work for all types of credit cards, from basic credit cards to business cards/corporate cards, rewards cards, and even debit cards. 

What Is Interchange-Plus Pricing For Credit Card Processing?

Interchange-plus pricing is a credit card processing price structure that separates the components of processing expenses, allowing for transparent reporting and interchange optimization, which frequently results in cheaper costs than alternative pricing structures, such as tiered or bundled.  

When a business is billed via interchange-plus pricing, they are charged for the actual interchange cost incurred on each credit card transaction based on the card type, a per-transaction fee from the credit card processor, and an annual fee. Business owners get a clear picture of the percentage markup for interchange fees (bank card association fees) from all card networks and detailed information, such as the charges for each type of card presence (in-store or card-not-present transactions)—even membership pricing.  

This pricing is favorable to other types of pricing models because it eliminates ambiguity about credit card processing fees. You can do a full card processing cost analysis with a clear view into an often murky and expensive aspect of business. 

In addition, interchange-plus pricing is beneficial for businesses that process a high number of credit card transactions because it allows business owners to negotiate better rates with their payment processor. 

By understanding interchange-plus pricing, you can make more informed decisions about processing payments for your business. Still, it is crucial to understand other credit card processing pricing structures. Again, your needs may require a different option.  

Is There an Alternative to Interchange-Plus Pricing?

There are two pricing models to choose from: flat-rate pricing and tiered pricing.  

Interchange-Plus Pricing vs. Flat Rate or Blended Pricing

With flat-rate pricing, merchants pay a flat monthly fee for every aspect of credit card processing, including transaction fees and equipment costs. This pricing is beneficial because it offers a clear understanding of the credit card processing cost for each transaction you run. 

For a business with a low to medium volume of credit card transactions and debit card transactions, flat pricing may be the best option thanks to lower monthly fees than interchange-plus. They still provide some transparency into the cost of each transaction processed. 

However, for businesses with a high volume of credit card transactionsinterchange-plus earns more significant savings because the processor markup (the amount charged on top of interchange and assessment fees) tends to be lower for larger processors. Businesses that process a high number of transactions have more leverage when negotiating rates with their payment processor. A payment processor knows if it doesn’t offer a competitive rate, a business will go elsewhere. 

Interchange-Plus vs. Tiered Pricing

Interchange-plus is similar to tiered pricing, but it’s a separate pricing structure. Interchange-plus looks at the different interchange rates for all credit cards based on merchant category code (MCC) and creates categories of its own before adding additional fees. 

A tiered card processing pricing model is different in that it typically consists of three tiers—qualified, mid-qualified and non-qualified. Transactions that fall into a qualified interchange category will have the lowest processing charge, while those that fall into the non-qualified tier will have the highest. 

To ensure this option financially works for your business, carefully review the tiered pricing models. Scrutinize hidden costs at each card level because this pricing model is one of the more popular card schemes for collecting higher fees. 

Interchange-plus pricing is a much more transparent way of looking at credit card processing rates, as it’s easy to see where each transaction falls within the pricing structure. It usually results in more predictable credit card processing costs for merchants.  

As a New Business, Fees, Credit Cards and Debit Cards are As Important As Your Business Cards

When first starting your business, achieving profit as soon as possible is the name of the game, and the fee option you choose for credit cards is one of the first decisions to tackle. Each payment model has its benefits and drawbacks, so it’s essential to understand what each entails before making a decision.  

In summary, here are the benefits of each option:  

Advantages of Interchange Pricing 

  • Clear understandings of each charge for improved budget planning 
  • Added discounts for businesses with high volume sales 

Advantages of Flat Rate Pricing  

  • A flat fee provides a predictable cost per transaction 
  • It’s a strong option for low to medium sales  

Advantages of Blended Tiered Pricing  

  • Added savings if your base card type fits in a low tier. 

BNG Payments

As a small business owner, every decision you make to achieve profits is integral, including the type of card payment you’ll accept and pricing structure. BNG Payments has extensive experience helping small and medium-sized businesses and merchants accept credit card and debit card sales. We can help you settle on an effective rate and processing strategy. 

We know the credit card processing industry and can provide you with a competitive rate and excellent customer service.  

Contact BNG Payments to get started.

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