An Interchange Plus Pricing Structure Can Greatly Reduce Your Credit Card Processing And Merchant Account Fees.
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How Interchange Plus Pricing Can Slash Your Credit Card Processing Fees
In the past, small to mid-sized businesses typically relied on a multi-tier pricing model for credit card processing, with categories such as qualified, mid-qualified, and non-qualified. Some savvy business owners even managed to negotiate a fourth tier for qualified offline debit cards. However, with the rise of rewards and corporate cards, this system has become outdated.
Visa and Mastercard offer a variety of interchange categories for different card types. Multi-tier pricing simplifies this complexity by grouping them into three main categories. If a business primarily processes standard credit cards, this system might work well. But as more debit, rewards, and corporate cards are used, business owners may notice a spike in their merchant services bills. This happens because these transactions often fall into the mid or non-qualified categories.
The challenge is that many of these cards aren't significantly more expensive to process than standard credit cards. Yet, the merchant account providers ensure their profit by marking up transactions that aren’t qualified, sometimes charging 2.9% for mid-qualified and 3.5% for non-qualified transactions. In reality, these transactions might only cost an additional quarter of a percent, leading businesses to overpay by 1-2%.
Interchange plus pricing offers a solution. It passes the actual cost of processing each transaction directly to the merchant, ensuring fees are minimized. Business owners then pay a monthly markup based only on transaction volume and sales dollar volume, typically ranging from 0.25-0.50% plus $0.10-$0.15 per transaction.
This system is often more cost-effective than a three-tier model. To determine if it’s right for your business, review your latest credit card processing statement for a high number of mid or non-qualified transactions. If they're prevalent, switching to interchange plus pricing might be a smart move to save your business money.
You can find the original non-AI version of this article here: An Interchange Plus Pricing Structure Can Greatly Reduce Your Credit Card Processing And Merchant Account Fees..
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