Interchange plus pricing is a pricing model for credit card processing fees that provides transparency and flexibility for merchants. Under this model, merchants pay a fixed percentage markup over the actual interchange fees charged by the card networks, such as Visa and Mastercard.

Here’s a closer look at how interchange plus pricing works:

Interchange fees: Interchange fees are the fees charged by the card networks to process credit and debit card transactions. These fees vary based on the type of card used, the transaction amount, and other factors.

Markup percentage: With interchange plus pricing, the payment processor charges a fixed percentage markup over the actual interchange fees charged by the card networks. For example, if the interchange fee for a transaction is 2.5%, and the markup percentage is 0.5%, the total fee paid by the merchant would be 3%.

Monthly fees: In addition to the interchange fees and markup percentage, payment processors may also charge monthly fees for their services. These fees can include account maintenance fees, gateway fees, and other charges.

Here are some of the advantages of interchange plus pricing for merchants:

Transparency: Interchange plus pricing provides transparency into the actual interchange fees charged by the card networks, as well as the markup percentage charged by the payment processor. This allows merchants to see exactly what they are paying for credit card processing and to compare pricing across different payment processors.

Flexibility: Interchange plus pricing allows for greater flexibility and customization in pricing. Merchants can negotiate the markup percentage with their payment processor, and can also adjust their pricing strategy based on the types of cards they accept and the transaction amounts.

Cost savings: In some cases, interchange plus pricing can result in lower fees for merchants than other pricing models, such as flat rate pricing. This is especially true for high-volume merchants or for transactions with high ticket values.

In conclusion, interchange plus pricing is a transparent and flexible pricing model for credit card processing fees. By providing visibility into the actual interchange fees charged by the card networks and offering greater flexibility in pricing, interchange plus pricing can help merchants save money and optimize their pricing strategies.