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What is Interchange Plus?

If your business processes credit or debit cards, you’ve probably seen the word “interchange” before.  These are fees that are typically paid by the business and can make up most of your monthly processing bill.  Ultimately, interchange is a fancy word for the fees that the card brands (Visa, Amex, Mastercard, Discover) charge to process their credit or debit cards.  

Each card brand has different interchange fees and each card WITHIN that card brand has different interchange fees.  For example, the interchange fees for a Visa Business Rewards Credit Card are higher than the interchange fees for a Visa Regulated Debit Card.  

Unfortunately, there is no way to lower these fees unless your business primarily sells to other businesses or governments.

However, there are still ways for you to get competitive payment processing rates.  Your best bet is understanding the pricing model that works for you so you can be prepared when shopping for new rates.  

Let’s go over the most common pricing model, which also is the simplest for you to understand what you’ll pay.

Interchange Plus, or interchange passthrough, is the most common processing model for all industries.  With Interchange Plus, you will pay interchange fees PLUS a small markup by the processor.  

This may sound scary, but the markup normally does not go over 1% unless you’re selling high-risk products.  Processors will mark up the price to cover additional costs of handling your payments by adding a Discount Rate, Transaction Fee, Authorization Fee, or other additional fees.

The Interchange Plus model makes it easy for you to understand what you will be paying after the ‘cost of the card.’  This is because Interchange Plus is itemized so you know what fees you are paying and how much they total.  

When discussing your rates with a salesperson, be sure to ask about the Discount Rate, Transaction Fee, Authorization Fee, or other additional fees such as:

  • Chargeback Fees
  • Monthly Statement Fees
  • PCI Compliance Fees

This pricing model is great for businesses that take a majority of their payments in-person.  It also makes the most sense for businesses that take a lot of debit cards, as the average interchange rate for them is 0.3%.

For more information on current interchange rates, please visit the various card brand websites below:

Visa: https://usa.visa.com/support/small-business/regulations-fees.html

Mastercard: https://www.mastercard.us/en-us/business/overview/support/merchant-interchange-rates.html

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