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Trading Ease For Transparency With Interchange-Plus

man-cleaning windowI've already talked about tiered-pricing in my previous posts. I've talked about the fact that I dislike it as pricing model, and that I prefer a different model instead. That different model is interchange-plus also known as "interchange pass through."

A quick review of what interchange-plus actually is...

Until recently, only the largest merchants have been able to obtain “Interchange-Plus” Pricing. Otherwise known as “interchange pass through” pricing, Interchange-Plus is the practice of pricing a merchant with a transaction fee and then passing the exact interchange and assessment costs from the Associations to the merchant. -

Instead of narrowing down the interchange rate categories into a few manageable tiers, interchange-plus just passes the Visa and Mastercard interchange rates directly to the consumer. The acquirer then tacks on their markup, and calls it a day. A detailed writeup of what interchange pass through pricing is, can be found on the FeeFighters site.

So, what's the benefit?

With interchange-plus, you know exactly what Visa and Mastercard are charging you, and you know exactly what your acquirer's markup is. You don't have to guess why only a fraction of your transactions are falling under the Qualified Rate tier that you were quoted by your agent, and why most of your other transactions are listed under the more expensive Mid-Qualified and Non-Qualified tiers.

Although tiered-pricing was setup by acquirers to make it easier for us merchants to understand our statements, it offered an incentive for the acquirer as well.

In addition, common practice was for acquirers to mark up and charge significantly more for “downgraded” transactions (those that did not qualify for the best rate applicable). These “downgrades” often comprised the majority of the profit acquirers received on merchants, as business owners focused mainly on the “qualified” or best rate. -

But, with interchange-plus, they don't have that incentive...

Interchange-Plus does not allow acquirers to increase profit on “downgraded” transactions. -

So, interchange-plus = bad for acquirers, but good for you.

There has been a great deal of debate about whether Interchange-Plus is a purer form of pricing. Interchange-Plus puts the merchant in a situation where they will always pay their acquirer the same and be directly responsible for the costs from the Associations, with no mark-ups. However, this pricing methodology can create merchant confusion as understanding statements with numerous qualification levels is complex and tedious. -

The question to be asking yourself is; are you willing to sacrifice ease for transparency? In a time like this, I'd opt for interchange-plus.

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Amad Ebrahimi

Amad has worked in the eCommerce and online marketing world since 2002. He started as an eBay seller, then slowly graduated to building & marketing his own websites and consulting others to do the same. He founded Merchant Maverick out of frustration with all the misinformation and shady tactics that he encountered when trying to find a merchant account for his and his client's businesses. He's the man behind most of the merchant account reviews, and articles posted on Have any questions related to credit card processing? Talk to him.

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  1. Our company has been getting constant calls from a Merchant Services company called National Exchange Interchange. They insist in speaking to the owner about an important banking matter. From what little they have told us we have been doing business long enough that we have now a lower credit risk due to minimal fraud or charge backs and we now qualify for a lower rates. They will not mail us anything and don’t have a website but they are willing to send someone to our office, of course they aren’t “Selling” us anything. They are very persistent calling us on the phone. Is this real or a scam?

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    • Hi Deborah,

      I’d advise you not to give them any information about your business, and in fact not to speak with them at all. Tell them you’re not interested and that you’d like to be placed on their “Do Not Call List.” If your business profile has indeed changed and you do qualify for better rates, your current processor can lower your rates. Just ask for a rate reassessment. If you’re interested in switching processors, I’d suggest any of our highest rate providers, most of which use interchange-plus as their go-to pricing model. I’ve never heard of National Exchange Interchange, and can’t find anything about them. I wouldn’t trust them.

      Good luck!

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  2. Im in the convenient store business and branded. im getting ready to change to an unbranded gas and need to pick a great processor. currently doing 7 million a year in card transactions who and what do i need? Help!

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  3. Have you ever reviewed United Payment Services? If so, can you send me your review.?

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    • Hi Paul. We have not reviewed United Payment Services yet, so I can’t give you any definitive information. I can tell you that they are an ISO who uses First Data for their processing. I’ve also heard that they have three-year, auto-renewing contract and charge an early termination fee of about $250-400. Overall, I don’t get a great vibe from them. I’d recommend one of our higher rated processors instead. Best of luck!

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  4. I work in the industry and the problem stems from business owners still stuck in the “low sticker rate” mentality. I try to explain the “effective rate” or total cost of processing but when my cost + model shows them a qualified rate of 1.80, they don’t get that a fraction of their transactions will fall under that and the real savings comes in the form of reducing the non-qualified surcharges that they will end up paying because company xyz offered them a qualified rate that’s actuall BELOW COST! Not understanding that where i can potentially keep their total cost of processing in the 2% range, they will probably end up paying over 3% on average.

    I would suggest business owners negotiate fairly with their merchant services provider based on the interchange plus model.

    Always review your statements!!

    What acquirers pay is public information. Contact me to review your statement and for an explanation of charges.

    • Not Rated
  5. Thank you so much for making this so easy to understand! I will be reposting on my facebook to share with my merchants!

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