Interchange Plus Pricing

A transparent payment processing pricing model where merchants pay the actual card network interchange rate plus a consistent, clearly disclosed processor markup expressed as basis points and a per-transaction fee.

Interchange-plus pricing (also called "cost-plus" pricing) separates the non-negotiable costs set by card networks (interchange fees and assessment fees) from the processor's negotiable markup. The pricing is typically expressed as "Interchange + X basis points + $Y per transaction," such as "Interchange + 20 basis points + $0.10" or "Interchange + 0.30% + $0.15." This means for every transaction, the merchant pays the actual interchange rate for that specific card type, plus the fixed processor markup. For example, if a transaction qualifies for 1.80% interchange and the processor charges interchange + 0.20% + $0.10, the total percentage-based fee would be 2.00% + $0.10.

The primary advantage of interchange-plus pricing is transparency—merchants can see exactly what portion of their fees goes to card networks and what portion represents processor profit. This allows merchants to identify whether they're paying competitive rates and compare processor proposals apples-to-apples based solely on markup. Interchange-plus also ensures merchants automatically benefit when transactions qualify for lower interchange categories, unlike tiered or flat rate pricing where processor margins may increase when lower-cost cards are used. This pricing model typically offers the lowest total costs for established businesses processing $10,000+ monthly.

Interchange-plus pricing requires merchants to understand that their effective rate will vary based on their card mix, transaction methods, and data capture. A business accepting primarily debit cards will have a much lower effective rate than one accepting premium rewards cards, even with identical processor markups. Merchants should evaluate interchange-plus proposals by comparing the markup components (basis points and per-transaction fees), verifying that interchange and assessments are passed through at actual cost without markup, reviewing monthly and ancillary fees, and calculating projected total costs based on their historical card mix. Competitive interchange-plus markups for standard-risk businesses typically range from 10 to 40 basis points depending on processing volume, industry, and transaction characteristics.

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Related Terms

3D Secure

An authentication protocol for online card transactions that adds an additional verification layer between the cardholder and issuing bank, shifting fraud liability from merchants to card issuers when properly implemented.

ACH Payment

Automated Clearing House payment is an electronic bank-to-bank payment method that transfers funds directly between bank accounts through the ACH network, typically used for direct deposits, bill payments, and recurring transactions.

Acquirer

A financial institution that processes credit card payments on behalf of merchants, maintains merchant accounts, and facilitates the settlement of funds from card-issuing banks to merchant bank accounts.

Address Verification Service (AVS)

A fraud prevention tool that compares the numeric portions of a billing address provided during a transaction against the address registered with the card-issuing bank, returning match result codes to help merchants assess transaction risk.

Aggregator

A payment service provider that enables multiple merchants to process card transactions under a single master merchant account rather than each merchant having their own dedicated merchant account, common with services like Square, Stripe, and PayPal.