WHAT IS OUR INTERCHANGE COST PLUS PRICING ?
Interchange Cost Plus Pricing is also known “Wholesale Pricing” to many people….It is a credit card processing program that simply passes through the actual cost of processing (known as “Interchange”) directly to your business.
Every credit card transaction is passed at its current interchange rate, and only a small fixed markup is added on top. Interchange are the base processing rates which are set by Visa, MasterCard and Discover for every type of credit and debit card. The word “Plus” refers to the processor’s markup that is added to every transaction. This markup is typically referred to as “basis points”.
Your business can save thousands of dollars in processing costs annually when you get setup with Interchange Plus Merchant Account. Call us for more information on how to get Interchange Plus Credit Card Processing for your business.
Interchange Cost-Plus Pricing is the best merchant account pricing model. It can reduce your credit card processing fees by up to 40% or 80% every month. The benefits of Interchange Plus Pricing (also known as interchange pass through) is that it is totally transparent to and extremely cost-effective for the merchant. An Interchange Plus Merchant Account will lower costs when compared to bundled or tiered pricing models. That explains why it is the most common and favored pricing model nowadays by merchants and why it is used by most of the Fortune 500 companies, large franchises, publicly traded companies and nationwide wholesale distributors. These large companies are offered lower payment processing rates as a result of the tremendous volume they process. Until several years ago, Cost-Plus Pricing was only available to the mega corporations. But due to increased competition within the credit card payments industry, we have made this pricing model available to all businesses regardless of their sales volume or company size.
The good news, is that now you don’t have to be a “Fortune 500 Company” to take advantage of the large credit card processing discounts. We now offer the opportunity to qualify for Interchange Plus Payment Processing with our merchant processing company. We can make Interchange Pass Through available to smaller companies.
Unfortunately, most small businesses today still rely on the traditional three-tier merchant account rate plans which are comprised of several fee schedules. Each of these credit card charges are classified into 3 levels. These 3 levels represent the fees the merchant will pay. They are called: Qualified, mid-qualified, and non-qualified . But why pay higher fees on certain cards when you can simply pay a low flat rate such as “Interchange Pass Through” also known as “Interchange Plus”. Currently, this is the best merchant processing rate plan available for retail businesses.
Without a doubt, pass through pricing allows a business to get the best credit card processing fees.
Components of Credit Card Processing Cost
To best explain pass through pricing you need to understand the main components of credit card processing cost. They are interchange fees, assessments and the processors markup.
Interchange Fees
Interchange fees are set by Visa and MasterCard (the banks). They do not change regardless of the business. The Interchange fees are paid by your processor’s bank to the issuing bank of your clients credit card. Interchange fees are like wholesale processing rates because they’re the lowest credit card processing rates and fees attainable.
There are several hundred interchange fees from Visa and MasterCard. But you do not need to learn much about most of them because many of them will not even apply to your type of business.
Assessments
The Visa, MasterCard and Discover Card brands do not make any profit from the interchange fees collected. They make profit by charging merchants with various “assessment fees” every time merchants process credit or debit cards that display their card brand. Some assessment fees will apply only to specific transaction types and some will apply to all.
Processor’s Markup
The credit card processing markup are the fees charged on top of the base costs of interchange and assessments. In terms of cost comparison, this is the only difference between one processor and another. The discount rate and transaction fees are the most important areas of a processor’s markup and will contribute to 90% of the merchants monthly processing expenses. However, the rates are not the most important aspects to look at. More important than the actual rates or transactional fees is the pricing model which the rates are based on.
With Interchange Cost Plus pricing, a processor’s rate and transaction fee will be separated from the interchange and assessment fees. Therefore, regardless of the actual transaction cost, the processors’ rates will always remain consistent.
Are you familiar with tiered rates classified as: qualified, mid-qualified and non-qualified rates ? With these tiered pricing structures and other similar pricing models, the processor’s rate is grouped up with the interchange and assessments fees…The actual costs are therefore hidden, which may result in merchants being overcharged on their monthly credit card processing fees.
Now that you understand the main components of the processing cost, and understand the different pricing models and benefits of Interchange Plus Pricing, let’s review everything further.
Interchange and assessments are the same for any processor and any business. The sum of all Interchange Plus Costs represents the lowest credit card processing fee available for a merchants credit card transaction. Think of it as wholesale pricing.
Here is an Example of Interchange Plus Pricing below:
Lets imagine that a merchant sold a product to a customer and processed a $100 credit card transaction for the sale. So that you can understand how this all works, we will use a “Visa Rewards Card”, wich is a common card type accepted by most retailers. (But keep in mind, that specific industries may be subject to different rates). Here is a quick brief of the pricing components we mentioned before regarding interchange-plus pricing:
- Interchange: Fees that are paid back to your clients issuing bank
- Card Association Fees: Fees that are paid to Visa, MasterCard , Discover and American Express
- Paymentix Margins: Fees that are paid to Paymentix
- Total Rate: The final, rate you pay at the end for every card transaction
Let’s imagine you made a $100 sale.
- Interchange Fees: 1.65% + $0.10
- Card Association / Assessment Fees: 0.13% + $0.02
- Paymentix Fees: 0.25% + $0.10
- Total Fees: $2.25
On this credit card sale of $100.00, you would have paid a total of $2.25
Here is an explanation of where that money is going
Detail of Credit Card Processing fees charged :
- 75% of the processing fees was paid to the card-issuing bank
- 7% of the processing fees was paid to the card-associations
- 18% of the processing fees were paid to Paymentix
As you may have noticed, the majority of the credit card fees described above are going back to the card-issuing banks, and to the card associations. With this interchange plus rate program, Paymentix is providing risk management, POS terminal integration, customer assistance and much more for less than 20% of your total fees paid.