Interchange Plus Explained

Have you heard of Interchange Plus for merchant accounts? What used to be the exclusive price model for larger businesses is now being offered to companies of all sizes. So what is Interchange Plus?

First lets start by defining Interchange. Interchange is the set price from Visa and MasterCard for various types of businesses and credit card transactions. These rates represent the cost of the service a merchant account provider has and that cost is the same all providers. Click the links below to see what these rates look like:

Visa Interchange Rates

MasterCard Interchange Rates

Interchange Plus Defined

Simply put, Interchange Plus is the Interchange rates plus a margin for the merchant account provider. The margin will be expressed as either a discount rate, such as .35%, and/or a transaction fee, such as $.15 a transaction

What Are the Advantages of Interchange Plus?

Simplified Pricing - Lose "mid-qual" and "non-qual"

The first reason is that it strips away the ability for your merchant account provider to hide fees in the “mid-qual” and “non-qual” categories. This allows you to shop around and compare “apples to apples” rates. So if you were to call three merchant account providers you could say, “I want Interchange Plus pricing, what is your margin?” The answer you would receive will depend on your volume but would go something like this, “.40% and $.05 per transaction.” If the next company you call tells you they will give you .30% and no transaction fee, you would clearly know who had the better pricing.

Rebates on Credits

The second reason to go with this model is to receive a refund on all credits your business issues. With a normal merchant account you are charged on the gross amount of credit card transactions. If you have $10,000 in credits you still pay the full discount rate on those credits. With interchange Plus you are charged on your net amount of sales. In other words, when you issue a credit you receive a rebate for close to the full discount amount you paid when the transaction originally went through.

A good example of how this benefits a business is with a hotel client of mine. Often their clients would reserve a room with one credit card and then pay with another. As a result they were issuing over 50 credits equaling over $10,000 a month. When I set them up with Interchange plus they saved $263.80 a month just by receiving rebates on all the credits they issued.

WARNING!!

I come across many businesses that were sold on Interchange Plus but when I review their monthly statements they do not not have it. They are not receiving the full rebate on check cards and even have the interchange rates padded.

So what should you do to ensure you are working with a good company? I suggest, once a year, having another merchant account provider review one of your statements. There is just no way for you to be able to do this yourself; the statements are just too complex. If this is something you want done on your current account go here.

This post turned out to way to wordy and complex! So if you have any questions about this topic feel free to comment below or contact me with any time.

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