Interchange-plus
Also known as: Interchange++, Cost-plus pricing
A transparent pricing model: true interchange cost plus a fixed processor markup.
Interchange-plus pricing itemises your cost as the network's interchange fee plus a fixed markup (for example, interchange + 0.30% + $0.10). Because the two parts are separated, it's the most transparent model and usually the cheapest once you have steady volume. Compare it with flat-rate and tiered pricing.
How it works
Two contract shapes get sold as interchange-plus without behaving like it. Bill-back plans charge a low base rate when the sale happens, then add the real interchange difference on a later statement, so no single month can be read on its own. Others quote a markup over interchange but leave assessments and network fees outside the quote. Neither is the real thing. Check that the interchange lines on your statement match the tables Visa and Mastercard publish on their own sites.
On a genuine interchange-plus statement the two halves are printed separately. The pass-through half lists interchange by category and the network assessment fees, and it should carry no processor margin. The markup half is the deal you agreed, a percentage of volume plus a fixed amount per transaction, applied to every sale alike. Only the pass-through half moves, which is why two months with identical volume but a different card mix produce different totals while your markup stays put.
The markup is the only part you are negotiating, and that makes competing quotes directly comparable. On the same volume, 0.20% + $0.10 beats 0.40% + $0.10 every time. Weigh the two halves of the markup against your average ticket, because the per-item fee dominates on small sales. Ask for the monthly charges in the same breath: interchange-plus plans more often carry separate gateway, PCI, and statement fees that flat-rate providers fold into their rate.
Worked example
You process $40,000 across 800 sales, an average ticket of $50. Interchange and assessments come to $760, which is 1.90% of volume, and none of that is negotiable. Your markup of 0.25% + $0.10 adds $100 on volume plus $80 on transactions, so $180. Fees total $940, an effective rate of 2.35%. That same month on a 2.9% + $0.30 flat rate would have cost $1,400.
Frequently asked questions
- Is interchange-plus always cheaper than flat-rate pricing?
- Not always. Above roughly $10,000 a month in card volume it usually wins, though the crossover depends on your average ticket and card mix. Below that, the monthly account, gateway, and PCI fees attached to these plans can outweigh the saving on the rate. Work out your effective rate under both quotes using last month's real volume and transaction count before you switch.
- What is a good interchange-plus markup?
- 0.15% to 0.50% plus around $0.05 to $0.15 per transaction is competitive for a small business with steady volume. Smaller merchants are usually quoted at the top of that range or above it. If a quote lands well above it, take the same volume and transaction count to another provider and compare the two markups side by side.
- Can a new business get interchange-plus pricing?
- The best markups usually go to merchants who can show several months of processing statements, but a new business can still get the model. Without that history you will be quoted on projected volume, and the markup is often renegotiable once you have real numbers behind you. Ask at signing whether the rate is reviewed, how often, and whether a review can move it up as well as down.