Credit Card Processing

Interchange-Plus Pricing: Everything You Need to Know

Read Time: 5 min

a customer entering their pin number while a merchant holds the terminal that will charge an interchange plus rate

Credit card processing today opens a range of doors to business owners that want to accept different payment methods other than cash. However, as the payment processing industry advances, the backend of accepting payments can be challenging to navigate for entrepreneurs. There is now a host of different pricing models offered by merchant account providers in the United States.

While the fees associated with accepting credit card payments seem marginal, they add up quickly when you process large volumes of transactions. Keeping track of your business expenses is essential in guiding your enterprise on the correct financial track.

Interchange plus pricing is one of the leading types of credit card transaction pricing offered by merchant account providers. This guide will take an in-depth look at interchange plus pricing, how it impacts your business, and alternatives available. Let’s get started!

What Is Interchange-Plus Pricing?

Interchange plus pricing is a credit card processing pricing model in which a payment processor adds a markup to the interchange price. The interchange fee is the amount that credit card brands and issuing banks charge for payment processing.

How Does Interchange-Plus Pricing Work?

In the case of interchange plus pricing, the credit card brands and issuing banks set the interchange price, and the credit card processor adds a markup to cover its costs. This allows for a clear understanding of who receives the processing fees. Due to the transparent nature of interchange plus pricing, it can often save businesses money.

Interchange-Plus Rates

In most cases, if you receive a quote from a payment processor, the ‘plus’ portion of the fee will be displayed in basis points. A basis point is 1/100th of 1%. This means that if a payment processor quotes you a ‘plus’ pricing of 120 basis points, it’s equal to 1.2%.

While rates may vary, asking for interchange plus can be the best deal to save you on credit card processing fees.

What is a good interchange-plus rate?

It depends on the industry, business experience, business credit score, and a host of other details.

For example, if you work in a high-risk industry, your interchange plus pricing might be higher than a business working in a more secure niche. Working with a high-risk merchant account provider can help you lower your payment processing rates since they are competitive with pricing within the high-risk industry.

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How Does Interchange-Plus Pricing Compare to Other Pricing Structures?

With various pricing models available, you might be wondering: How does interchange plus pricing stack up against the other top options? Let’s take a look at tiered pricing and flat-rate pricing below!

Interchange-plus vs. tiered

Tiered pricing is the most common transaction pricing in the payment processing industry. Unfortunately, this is because it is the most lucrative for credit card processing companies.

With tiered pricing, processors typically offer three tiers of pricing: qualified, mid-qualified, and non-qualified. However, some processors allow for up to five tiers.[1]NACHA. “Understanding the Cost of Processing Card Payments“. Accessed on May 29, 2022. Each tier has its own price, with qualified payments offering the cheapest rate out of the 3. Payment processors will have a range of standards for a transaction to meet qualified status, some outside your control. Processing companies enjoy advertising their qualified pricing to make their overall services appear cheap. In reality, you will often pay the higher rates, as processors can be very vague about how transactions can meet ‘qualified’ standards.

On the other hand, interchange plus pricing outlines clear pricing that won’t vary depending on confusing qualification standards.

Interchange-plus vs. flat-rate

Flat-rate pricing offers the same pricing for all card payments, although there will be different charges for card-present and card-not-present (CNP). This is effectively tiered pricing without the tiers. You won’t have full transparency on what your business pays to issuers, card brands, and your processor.

However, with flat-rate pricing, you know what you pay overall, and you don’t have to ‘qualify’ payments to take advantage of better rates. This pricing model is simple for those who want to know what their exact credit card processing expenses are.

This is a popular pricing model for many newcomers to the payments industry. For example, Square, which boasts over two million merchants, now uses flat-rate pricing.[2]DMR. “Square (Block) Statistics, User Counts, Facts & News (2022)“. Accessed May 29, 2022.

While this makes it easier to understand than interchange plus pricing, it also means you will likely pay more for transactions that already have low-cost processing fees.

Benefits of Using Interchange-Plus

There are many reasons that interchange plus pricing is popular with modern business owners. Let’s explore some of the top advantages of this pricing structure:

  • Transparent pricing: Interchange plus shows you what card brands, issuing banks, and credit card processors are charging when processing a payment. This prevents merchant account providers from adding sneaky fees or inflating the cost of your processing.
  • Easy quote comparison: This pricing is easy to understand so when comparing quotes against other providers, you’ll only have to compare the fixed margins. You won’t need to worry about any surprises when you choose interchange plus pricing models.
  • Low-cost: Another benefit of the interchange plus transparency is that it’s often cheaper. As processors can’t hide fees or markups with interchange plus pricing, it tends to be a better value for merchants. You will also not be overpaying on transactions that have lower processing fees like you would with flat-rate pricing.

Is Interchange-Plus the Best Option for Your Business?

While tiered pricing reigned supreme in the payment industry for years, it’s clear that interchange plus and flat-rate pricing are the better options. Not only are they more affordable, but they also make it easier to plan financially. You can better predict your payment costs when you understand the makeup of your processing fees.

If you want a full understanding of what card brands, issuing banks, and payment processors are charging your business, then interchange plus is the best option available. If you’re looking for a simple, predictable rate for all your payments, you may prefer flat-rate pricing.

With flat-rate pricing, you have to accept that you will likely pay more but your payment costs will be predictable in the short term. Additionally, payment service providers like Square, which offer flat-rate pricing, are also known for sudden pricing changes.[3]Bloomberg. “Square’s Pricing Shift Raises Costs for Smaller Transactions“. Accessed on May 26, 2022.

Interchange plus pricing rates are best for businesses that want to benefit from low-cost rates and full control over their processing fees. You can cut costs down even more with interchange optimization if you are a business-to-business company.

a customer about to swipe their credit card on a terminal after the merchant found out what is interchange plus pricing

How to Get Interchange-Plus Credit Card Processing

If you want to benefit from interchange plus credit card processing, you must request a quote from a reputable merchant service provider.

Your processing history, business credit score, revenue, and other factors will all dictate what price you receive. You can compare these rates against other merchant service providers to determine which markup is most affordable for your business.

Final Thoughts on Interchange-Plus Pricing

Now that you understand interchange plus pricing, it’s time to decide if this pricing structure is most suitable for your company’s needs. With various payment processing options available to modern businesses, there’s never been a better time to be a merchant that can accept credit cards in-store or online!

Article Sources

  1. NACHA. “Understanding the Cost of Processing Card Payments“. Accessed on May 29, 2022.
  2. DMR. “Square (Block) Statistics, User Counts, Facts & News (2022)“. Accessed May 29, 2022.
  3. Bloomberg. “Square’s Pricing Shift Raises Costs for Smaller Transactions“. Accessed on May 26, 2022.


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