Could Interchange Plus Pricing Reduce Your Merchant Services Fees?

Businesses must offer customers the option to pay with a credit or debit card or risk losing customers. Taking credit and debit card payments is expensive for business owners, but customers know that the great majority of American businesses will happily process their non-cash payments.

For business owners, maintaining a merchant services setup that allows them to take every card every time while managing the associated fees can get complicated. Budgeting for the costs of merchant services is nearly impossible. Processors charge different rates and fees and processing rates (affected by a large number of variables) also fluctuate.

Interchange plus pricing offers a transparent and low-cost way to offer credit and debit card payments to customers. In general, interchange-plus pricing costs less than tiered rates, depending on the volume of credit card transactions.

What Is Interchange Plus Pricing?
Interchange plus pricing allows credit card processors to determine a per-transaction cost to charge merchants. There are three parts to interchange plus pricing:

1. Interchange fee set by the card networks
2. Assessment fees also known as Card Brand Fees
3. A markup set by the processor

Interchange plus pricing is a transparent pricing scheme costing business owners across all industries an average of 2.2% + $0.22 per transaction.
The interchange fee varies, depending on which card your customer chooses when they pay their bill. In general, premium cards charge a higher interchange fee. Here are some examples from popular credit card types:

Mastercard Credit Retail World Elite: 2.300% + 10¢
Mastercard Debit Retail Swipe: 1.050% + 15¢
Mastercard Credit Retail Consumer: 1.580% + 10¢
Visa Credit Retail Rewards Traditional: 1.650% + 10¢
Visa Credit Retail Rewards Traditional: 1.650% + 10¢
Visa Debit Retail CPS: 0.800% + 15¢

The card processor also sets assessment fees that may be passed on to businesses accepting credit and debit cards. For example, American Express charges 0.15% per transaction.

The markup set by the credit card processor varies according to the type of business. High-risk companies may pay a higher markup than low-risk companies. In general, markups on interchange-plus plans are 0.1% to 0.5%.

Who May Benefit From Interchange Plus Pricing?
Interchange plus pricing may be beneficial for merchants processing a large volume of credit card transactions and those with large ticket sizes. It’s cheaper than fixed pricing for companies that accept debit card payments since interchange and assessment fees are lower on debit cards.

How Does Interchange Plus Pricing Save Business Owners Money?
Square is less expensive than interchange plus pricing for merchants that have small ticket sizes and low credit card sales volumes. However, a store with $10,000 per month in revenue and an average ticket price of $50 with a Square Retail Plus plan pays $270.00 per month. Square’s transaction costs average $0.10 per TXN for swiped transactions. With 200 transactions per month, the business pays a total of $290.00 per month in processing fees through Square.

As businesses grow, so do their transaction volumes and ticket sizes. Payment processors like Square just can’t compete with interchange plus pricing for higher-volume companies with large ticket sizes.

Successful small businesses quickly outgrow the merchant services solutions that served them in the beginning. As ticket sizes and volume increase, switching to interchange plus pricing makes sense.

Interchange plus pricing may reduce the amount of money you pay for access to crucial merchant services. Spike Financial customers get rates as low as 1%, depending on their merchant services needs. Not sure if interchange plus pricing is right for your company?
We’ll analyze your merchant services statement at no cost to you. Contact us today to learn how we help businesses process their customers’ payments for less.