Why Business Owners Love the Interchange Plus Pricing Model

Why Business Owners Love the Interchange Plus Pricing Model

One of the most reasonable pricing models available in the market is interchange plus pricing. If you run a business, you know that accepting debit and credit cards is important, since liquid cash has literally gone out of equation these days. This doesn’t come for free, as the overall business cost goes higher with merchant account and processing fees. Even after taking these into account, it is compulsory to have such payment options, in order to stay competitive.  Let us take a look at the breakdown of fees that you pay every time when processing a debit or credit card transaction.

  • Issuer: Depending upon the card type, industry and sale amount, the issuer takes a certain percentage of the sale.
  • Associations: Credit and debit card companies such as Visa and Mastercard also get a percentage.
  • Refund: A percent of transaction is also taken, in case the buyer requests for a refund.
  • Processor: The company processing the transaction also takes a portion of the meal.

Each one of these is factored into the price, before you are given a single rate. This is called flat fee pricing policy, and is generally costlier than other pricing models. You can lose a huge chunk of profit with this approach, as you are not aware of the exact charges.

What Is Interchange Plus Pricing?

Interchange fee is issued by the card issuer at the time, when the customer pays with a credit or debit card. Credit card associations such as Visa or Mastercard, also add to the fee. With interchange plus pricing model, these two elements are lumped together, breaking down the charge going to the issuing bank or credit card association. One can easily see the markup that they are being charged by the associations and processors for processing the transaction. It’s a transparent pricing model and the rates are lower than flat and tier pricing.

How Does Interchange Plus Pricing Save Money?

With tiered pricing model, the biggest drawback is little to no transparency in interchange costs. The processing companies can charge you a larger markup, in fact, the highest rate that they can possibly charge. This implies you are paying high rates for each individual transaction, and you won’t be able to get the breakdown.

With interchange plus pricing, you can see the actual costs involved, and therefore, the processors are motivated to set lower markups. With transparency in processing costs, there’s a sense of competition among the processors, and your business can benefit from this factor.

Is The Model Available With All Processors?

Given low rates and transparency, interchange plus pricing model has the potential to save you a lot of money in the long run. These days, even small businesses can benefit from this approach. Some of the best processors in the industry today are offering this viable option. Before you choose to avail one of these, make sure to carry out thorough research about the payment processing company’s background. This will help you in getting the best deal, when it comes to payment solutions.