Interchange-Plus Pricing: What You Need To Know

Interchange-plus is a pricing model used by credit card processors to determine the per-transaction cost paid by merchants. The model consists of two components — the interchange fee determined by the card networks and a markup set by the credit card processor itself. Interchange-plus pricing is one of the most fair and balanced pricing schemes used in the payment processing industry, largely due to how transparent it is. On average, interchange-plus pricing will cost business owners somewhere around 2.2% + $0.22.

Interchange-Plus Pricing Explained

Business owners who subscribe to processing plans with interchange-plus pricing will see their costs vary depending on the types of cards their customers use. This is because the first half of the interchange-plus equation is based on the interchange fee, which varies from card to card. For example, a swiped Visa debit card will typically have an interchange fee of around 0.8% + $0.15. A Mastercard World Elite credit card, on the other hand, will cost your business 2.3% + $0.10 per transaction — an increase of over 186%. Generally, the more premium a card is, the more it expensive its interchange fee will be. Here are a few interchange fees from some of the most popular credit card types. You can learn more about interchange fees in our guide here.

Typically, when you sign up for interchange-plus pricing part of the cost also involves paying so-called assessment fees. These fees are passed onto to the card networks themselves, including Visa, Mastercard, American Express and Discover. Note that not all of these fees will apply. Some only kick-in at special circumstances.

American Express and Discover have far fewer assessment fees. With American Express, you are charged 0.15% for each transaction, and a 0.30% surcharge for all card-not-present transactions. There is also a 0.40% fee that applies to any cards accepted from outside of the United States. Discover charges 0.13% + $0.0185 per transaction as an assessment fee, a $0.025 network authorization fee, and a 0.95% international fee.

The above is just the first half of an interchange-plus transaction price — the other being the processor markup. As noted above, credit card processors that use interchange pricing usually display their prices as ‘Interchange + X’, where X is what’s commonly referred to as the markup. This is the part part of the transaction that allows you to compare between different processors using interchange-plus pricing, since it is where they will show the most variation. The markup is usually determined for each business separately. For example, if you run a high-risk company, the processor’s markup may be higher than it would otherwise be. We’ve seen markups on interchange-plus plans vary from 0.1% to 0.5%.

How Does Interchange-Plus Pricing Compare To Other Fees?

Small business owners shopping for credit card processing will usually be presented with three options when it comes to how transactions are priced — interchange-plus, tiered, or fixed pricing. In this section we develop a framework for how you should go about deciding which works best for your firm.

Interchange-Plus vs Tiered Pricing

For most business owners, tiered pricing will be much worse than interchange-plus pricing. This is because, unlike a pricing schedule based on interchange fees, tiered pricing is significantly less transparent to the merchant. This method used to be the industry standard and the way all processors priced their services.

Tiered pricing gets its name from the way it operates. Your processing fees are broken out into one of three tiers — qualified, mid-qualified, and non-qualified. These can range from as low as 1.4% to 4%+. It can sometimes be difficult to discern between a tiered price and a fixed price, which we discuss in greater detail below. Processors using tiered pricing will typically display the qualified transaction fee in a big font, and include a disclaimer somewhere on that same page that this refers to qualified purchases only. This tactic is a bait and switch, since business owners are usually lured in with the seemingly low rates, but may in reality have most of their purchases fall into the costlier mid-qualified and non-qualified tiers.

CDGcommerce is one example of a processor with tiered pricing. They charge 1.95% + $0.30 per qualified swiped transaction, and 2.95% + $0.30 for each non-qualified transaction.

Interchange-Plus vs Fixed Pricing

Fixed pricing is one of the simplest to understand. Deciding whether this or interchange-plus pricing is better for your business is tricky. As its name suggests, fixed pricing charges one single fee for all your transactions, no matter whether your customers use debit, credit or premium rewards cards. Square is arguably one of the most well-know credit card processors to use fixed pricing, making it a great example. It charges businesses 2.75% for all swiped, dipped or tapped payments. While fixed pricing doesn't discriminate between card types, it can charge different fees based on the way a payment is accepted. In the case of Square, we noted that the 2.75% fee applies to swiped transactions only. If you were to key-in a payment, the fee goes up to 3.5% + $0.15. Note that this is a similar trend among interchange-plus pricing as well, since the interchange rates on keyed-in transactions are much higher than those on swiped ones.

Interchange-plus pricing is generally cheaper to accept than fixed pricing, especially for companies whose customers predominantly use debit card payments. Because the interchange and assessment fees are so much lower on debit cards, fixed pricing typically overcharges for these transactions. One advantage of fixed-pricing plans is that they make it easier to accurately forecast your transaction costs each month.