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What is interchange-plus pricing?

Interchange+ (also known as cost+ pricing) is the pricing method used by Host Merchant Services to give our merchants the lowest cost and the most transparency. Interchange is the rate charged by the card brands (Visa, MasterCard, Discover, AMEX) for use of their card. We pass the interchange cost directly on to you with an added set fee for our services (for example 0.15%). 

Example: You run a transaction with a “Visa CPS Retail” credit card. The interchange rate for that card is 1.51%. We pass the interchange directly through to you plus our set fee of 0.15%. For this transaction, the rate you pay is 1.66% (interchange + HMS = rate). 

Interchange plus is the best pricing for credit card processing

When you break down all of the different pricing methods used by different payment processing companies, you’ll find that interchange-plus (cost-plus) pricing is the least expensive for merchants. Ironically it’s also the least profitable for payment processors which is why so many still use old, confusing pricing methods to make a higher profit. At Host Merchant Services, we only use the lowest cost to the merchant, which is why we always use interchange plus pricing. 

Not only is interchange-plus pricing the least costly but it’s also the most transparent! You will see on your statement that you are paying the raw interchange rate for each transaction. Instead of adding our fee to every transaction, we add it to the total processing volume at the end of the month. This pricing/billing method is so transparent that you will know exactly what we made for the cost of our services.

Understanding different credit card processing pricing models

There are many pricing models for payment processing. We’ll take the top 3 and break them down with graphics to help you to visualize how each works. The differences in cost are instantly recognizable.

Interchange Rates Chart

Base Interchange Rates

The interchange fees are fees required by the card brand who issued the card being used for the transaction – Visa, MasterCard, American Express, or Discover. These rates differ from card to card but are industry set – everyone pays the same interchange rate. Interchange rates are the base of every pricing model.

Interchange plus pricing chart

Interchange Plus Pricing

This is the pricing model Host Merchant Services uses. Interchange Plus Pricing takes the same interchange rates and adds a tiny processor set fee to the transaction. As you can see from the chart to the left, the processor fee is always the same no matter what card is being used. This is by far the least costly pricing model for the business.

flat rate pricing chart for merchant services

Flat Rate Pricing

While flat rate pricing is easy to understand, it is extremely expensive for the merchant. In fact, it’s the most expensive pricing. Flat rate pricing, as it’s name implies, charges the merchant the same rate for all cards no matter what the interchange rate is. The chart on the left shows a flat rate of 2.9% which is a common rate with the biggest flat rate processors. In this example, when a debit transaction is run, the processor is making 2x more profit than Visa!!!

Tiered pricing chart for merchant services

Tiered Pricing

This is one of the most confusing pricing models. Tiered pricing has multiple rate tiers of pricing commonly referred to as “qualified”, “mid-qualified”, and “non-qualified”. Each tier applies to a group of cards and has it’s own processing fee. This pricing model looks good when looking at “qualified” transactions. Unfortunately, the majority of transactions will end up in the more expensive “mid-qualified” and “non-qualified” tiers. Sales persons can easily trick merchants into an expensive account using this pricing model.