Interchange is the fee that card issuers, such as Visa and Mastercard, charge merchants for accepting their credit or debit cards as a form of payment. These fees are intended to cover the cost of processing and settling the transaction, and are typically a percentage of the total transaction amount plus a fixed fee.
Interchange plus pricing is a pricing model used by merchant services providers (MSPs), such as payment processors, to determine the cost of accepting credit and debit card payments. In this model, the MSP will charge a markup, or “plus” rate, on top of the standard interchange fees set by the card issuers. This markup is usually expressed as a percentage of the transaction amount, and can vary depending on the type of card and the type of transaction.
The advantage of the interchange plus pricing model is that it is considered to be more transparent than other pricing models, as it separates the interchange fees set by the card issuers from the markup charged by the MSP. This allows merchants to have a better understanding of the costs associated with accepting card payments, and can also make it easier to compare pricing from different MSPs.
One of the disadvantage of the interchange plus pricing model is that it may be more complex for merchants to understand and compare prices. Additionally, the plus rate that merchant services providers charge may be not fixed, it may increase over time, making it difficult to budget for the cost of accepting credit and debit card payments. Additionally, the cost of interchange fees can also fluctuate depending on the type of card, the type of transaction, and other factors, making it difficult to predict what the overall cost will be.
Interchange pricing and tiered pricing are two different pricing models used by payment processors to charge merchants for the acceptance of credit and debit card transactions.
Interchange pricing is a pricing model where the merchant is charged a percentage of the transaction amount plus a fixed fee, known as the interchange rate, set by the card networks (e.g. Visa, Mastercard). The interchange rate varies depending on the type of card used (e.g. rewards card, corporate card) and the type of merchant (e.g. retail, e-commerce).
Tiered pricing, on the other hand, is a pricing model where the merchant is charged different rates for different types of card transactions. The rates are grouped into tiers, with each tier having a different rate. This pricing model is often used by independent sales organizations (ISOs) and merchant service providers (MSPs).
The terms “qual” and “non-qual” refer to whether a transaction qualifies for the lowest tier of rates or not. In a tiered pricing model, transactions that meet certain criteria (such as being swiped or entered manually) will qualify for the lowest tier of rates, while those that don’t meet these criteria will be charged a higher rate, referred to as “non-qual” rate.
It’s also worth noting that, some MSPs may offer lower plus rate, but they may charge other hidden fees such as monthly fee, gateway fee etc. making the cost much higher in total.
In summary, interchange plus pricing can be more transparent, but also more complex, and it’s important for merchants to carefully review the costs and fees associated with this pricing model before choosing a merchant services provider.