Interchange-Plus Pricing — Payment Processing Glossary | Payment Gods

Interchange-plus pricing, often abbreviated as IC+, is a highly transparent and generally preferred pricing model within the payment processing industry. It breaks down the cost of accepting credit card payments into two main components: the interchange fee and the "plus" or markup added by the payment processor. The interchange fee is a non-negotiable charge set by card-issuing banks (like Chase or Wells Fargo) and the card networks (Visa, Mastercard, Discover, American Express) for each transaction. This fee covers the cost of fraud prevention, bad debt, and other risks associated with credit card transactions. It varies based on factors such as card type (rewards, debit, corporate), transaction type (card-present, card-not-present), and merchant category code (MCC).

Merchants benefit from interchange-plus pricing because it offers a clear view of how much profit their payment processor is making on each transaction. Unlike tiered pricing, where transactions are lumped into ambiguous categories (qualified, mid-qualified, non-qualified) with varying rates, interchange-plus pricing uses the actual interchange rate for each transaction. The "plus" part is the processor's markup, which can be a small percentage, a fixed per-transaction fee, or a combination of both. This markup covers the cost of their services, including the payment gateway, customer support, and other merchant services.

For example, if a transaction has an interchange rate of 1.50% + $0.10, and the processor's markup is 0.20% + $0.05, the merchant would pay a total of 1.70% + $0.15 for that specific transaction. This transparency allows merchants to better understand their processing fees and negotiate more effectively with their providers. It also helps merchants identify opportunities to reduce costs by understanding which card types or transaction methods incur lower interchange fees. Businesses that process a high volume of transactions, or those with varied transaction types, often find interchange-plus to be the most cost-effective and predictable credit card processing solution, saving them significantly on overall payment processing expenses.