Interchange-Plus Pricing
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While the numbers can get complex, interchange-plus pricing is simple. The pricing model consists of two parts: an “interchange” and a “plus.”
“Interchange” is the percentage of the transaction that must be paid to both the issuing bank and the credit card association. Because your credit card processor has to pay this charge, they’ll pass it on to you as the merchant.
“Plus” is the amount over and above the interchange costs that you’ll have to pay to your processor. It’s your processor’s markup for processing your transaction, and it’s designed to cover their costs of doing business – and also to generate a profit.
Interchange-plus pricing is referred to by other names, such as interchange pass-through pricing or cost-plus pricing.
Interchange-plus pricing rates are expressed as the interchange rate plus a markup, which can be a percentage, a flat, per-transaction fee, or both.
So…how much will the interchange cost your firm?
The credit card associations set these fees, and the fee structure can get complicated. There are different rates for debit and credit cards, for example, as well as different rates for different types of credit cards. Card-present and card-not-present transactions have different rates, as they reflect the level of risk the issuing bank is taking in extending credit for a given transaction.
How this interchange-plus pricing works in real world
You own your dental practice and have a merchant account with your credit card processor firm. Your patient comes in and pays for a service, for $1000.00. He pays with a MasterCard Consumer credit card. The interchange cost is 1.580% + $0.10, or $16.80. Your processor passes this cost to your practice, plus they charge a markup of 0.18% + $0.08, or $1.88. Your net credit card processing fee (for dental practice) for collecting payment with the credit card is $18.68, or 1.868%.