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Faizan
In the credit card processing world there are two main pricing structures that are charged to businesses that accept credit cards as a form of payment. They are known as Interchange Plus and Tiered. The structure that is right for your business will have to be determined by taking the pros and cons of each structure into consideration.
Interchange Plus
Interchange plus pricing allows a merchant to pay the interchange rate directly to the merchant bank plus a "bump" or surcharge. The bump / surcharge is the fee paid to the processing bank for their services and is usually classified in Basis Points where 100 basis points is equal to 1.00%.
Interchange is the cost that is passed through to the merchant bank directly from the card brand. The most common of which are Visa, Mastercard, and Discover. Interchange fees are incurred on every transaction and rates vary depending on the card type and method that the card is processed. For example a Debit card may have an interchange rate of 0.95% and.10 cents per transaction when swiped through a credit card terminal and a 1.49% and.10 cents per transaction when keyed into the same terminal, also known as a "Card Not Present" transaction. There are literally hundreds of interchange tables associated with the major card brands that can range anywhere from less than 1.00% to over 4.00%.
Pros of Interchange Plus Pricing:
Transparency of fees paid to processing bank for their services
Higher understanding of industry pricing
Usually (Not Always) results in lowest processing rates
Cons of Interchange Plus Pricing
Huge learning curve
Fluctuating pricing (No standard rate)
Account Balancing (Linking transaction to associated fee)
Interchange Plus
Interchange plus pricing allows a merchant to pay the interchange rate directly to the merchant bank plus a "bump" or surcharge. The bump / surcharge is the fee paid to the processing bank for their services and is usually classified in Basis Points where 100 basis points is equal to 1.00%.
Interchange is the cost that is passed through to the merchant bank directly from the card brand. The most common of which are Visa, Mastercard, and Discover. Interchange fees are incurred on every transaction and rates vary depending on the card type and method that the card is processed. For example a Debit card may have an interchange rate of 0.95% and.10 cents per transaction when swiped through a credit card terminal and a 1.49% and.10 cents per transaction when keyed into the same terminal, also known as a "Card Not Present" transaction. There are literally hundreds of interchange tables associated with the major card brands that can range anywhere from less than 1.00% to over 4.00%.
Pros of Interchange Plus Pricing:
Transparency of fees paid to processing bank for their services
Higher understanding of industry pricing
Usually (Not Always) results in lowest processing rates
Cons of Interchange Plus Pricing
Huge learning curve
Fluctuating pricing (No standard rate)
Account Balancing (Linking transaction to associated fee)
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