What is Interchange Plus Pricing in Credit Card Processing?

Posted: November 19, 2019 | Updated: March 9, 2022

To increase transparency in the pricing of credit card processing, credit card processors offer interchange plus pricing, which is often compared to a wholesale processing fee. Under the interchange plus pricing format, businesses pay interchange fees and processing costs separately. Visa, MasterCard, and Discover charge the interchange fee, and a business’s credit card processor charges the processing cost. This model is unlike tiered pricing, which rolls all costs into one large payment leaving a business at risk of overpaying via hidden costs and surcharges.

Tiered Pricing Versus Interchange Plus Pricing

Tiered pricing, which was once the most common credit card processing service, groups interchange fees into rate tiers. Also known as bundled pricing, tiered pricing involves qualified, mid-qualified, and non-qualified rate tiers, giving the model its name. Credit card transactions are categorized according to card type, card category, transaction method, and more, which impact the tier level in which the transaction is placed when processed.

merchant services refund policyRather than pay interchange fees directly, businesses pay credit card processors according to these tiered rates. The processors then pay the interchange fees on behalf of the businesses. Instead of listing the actual interchange fees, credit card processors list only the qualified, mid-qualified, and non-qualified rates under tiered pricing. 

Rather than revealing the actual cost, credit card processors can place transactions in the more expensive non-qualified category, thereby increasing business costs while simultaneously keeping the same rates. An alternative to tiered pricing, interchange plus pricing bills interchange fees directly to businesses. Then, businesses pay the credit card processor a fixed percentage separate from the interchange fees. The fixed percentage markup and the interchange fees combine to form lower costs to businesses.

Interchange Plus Pricing Benefits

In addition to the lower costs presented by interchange plus pricing, the model also offers transparency to businesses. Credit card processing is easier to reconcile under the model. Eliminating surcharges and hidden costs, interchange plus pricing’s “interchange pass through” leads to optimized interchange costs, which is often compared to a wholesale model. The markup is equivalent to a membership fee in exchange for wholesale interchange prices.

Interchange +

The simplicity of interchange plus is in the name itself: “Interchange Plus.” A business pays the interchange rates, which are set by the major credit card companies. The “plus” is the markup charged by a business’s credit card processor. Within the simplicity of interchange plus pricing, businesses can further minimize costs by choosing a processor that offers a low markup.

Host Merchant Services

Before taking our first customer, Host Merchant Services studied the numbers and decided Interchange Plus pricing is the most cost-effective pricing model for businesses, not to mention the most transparent. We educate our customers to ensure they fully understand the pricing model. Knowing the details prevents businesses from overpaying with us or with any credit card processor. Host Merchant Services even explains where our profit lies in the pricing structure to be fully transparent in all directions. Pricing fairness and transparency is our strategy in helping our customers find success with their businesses.

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