Payment processors charge a type of fee called a discount rate, for each transaction processed. Using an Interchange Plus pricing model, the discount rate is considered the ‘Plus’ part and is a small percentage of the total transaction. The discount rate is paid to the processor while the rest of the Interchange goes to the card associations. Host Merchant Services tailors it’s discount rate depending on the size and transaction volume of each particular merchant. The discount rate is measured in basis points, or one one-hundredth of one percent. Host Merchant Services typically uses 30 basis point discount rate (0.30%) as a base line for measuring merchants’ potential savings.
The great thing about Interchange Plus pricing is that you always know exactly what you are paying to your processor for services. Think of Interchange, and all the associated fees, as an unavoidable cost. No matter who you process with, you have to pay these fees. They may be labeled differently, or wrapped up in a confusing pricing tier, but one way or the other, you are paying Interchange fees. By understanding the markup you pay over Interchange, you know exactly what you pay to your processor and exactly what is going to the card associations. That allows you to make a decision on whether or not the markup seems reasonable for the service you get and choose your processing partner accordingly.
Host Merchant Services adds the discount rate to Visa, MasterCard and Discover Interchange rates, however, no discount rate is added on top of American Express cards, as they are a separate processing entity.