What is Interchange plus Pricing for Merchants?
Interchange plus pricing is a transparent and cost-effective payment processing model where merchants pay the base interchange rate set by card networks (such as Visa and Mastercard) plus a fixed markup from the processor. This model is often referred to as a cost-plus payment model because it itemizes every component of the transaction fee, allowing business owners to see exactly what they are paying for.
The fee structure consists of three main parts:
- Interchange Fees: These are set by card networks to cover the issuing bank’s risks and rewards. They vary based on card type (credit vs. debit) and transaction method (chip vs. keyed-in).
- Processor Markup: A fixed rate added by the processor, typically ranging from 0.3% to 0.5% plus a small per-transaction fee (e.g., $0.10).
- Assessments: Pass-through fees charged by the card brands.
This model is highly recommended for high-volume businesses, such as restaurants and retail stores, because it provides wholesale rates and greater cost predictability compared to tiered or blended pricing models. It also allows merchants to benefit from lower regulated rates on debit transactions and avoid hidden surcharges associated with bundled categories.
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