How does Interchange Plus Pricing work?
The costs involved in interchange plus include a fixed markup applied directly to the interchange fees published by Visa, MasterCard and Discover. Therefore, the “plus” is the processor’s markup that’s applied to each credit card transaction.
The processor’s markup is usually expressed as basis points. This is a unit of measurement that equals to 1/100 of one percent, expressed as .01%.
Various factors can be considered when a processor gives you a quote with a basis point markup, including the business type, processing method, and business owner credit worthiness.
So, a complete description of interchange plus would be base credit card processing rates that include a fixed markup consisting of basis points and an authorization fee.
Interchange Plus Pricing
Interchange-plus sounds like something that would be confusing and hard to understand, but it’s actually an important concept to know if you accept credit cards in your business.
Interchange-plus pricing is the most transparent way to charge for a merchant account because merchants know exactly what Visa, MasterCard, Discover, and AMEX are charging (which is not negotiable) and what their ISO/processor/acquirer is charging as their mark-up.
When merchants work with their merchant account provider to set up interchange-plus billing, both parties agree on an acceptable markup over cost.
Compare the two main styles of pricing for credit card processing:
Tiered Pricing >
In the simplest of terms, a tiered plan lumps the processor’s profit and the interchange into one rate per tier. Unfortunately, most of your transactions will fall into the higher, more expensive tiers and you won’t be able to tell what the True Cost of processing is.
< Interchange Plus
The benefit of interchange plus is that it is straightforward and clear. It’s parsed out in a way that you can see exactly what rates you are paying andis the most transparent of the two pricing formats.
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