Flat Rate Pricing is Easy but Expensive: The Counter, Interchange Plus

In the world of credit card processing, selecting the right pricing plan can make a significant difference in your business's bottom line. One pricing model that stands out as the best choice for many merchants is the Interchange Plus pricing plan. Unlike the flat rate plans offered by large tech companies, Interchange Plus provides transparency, potential savings, and fairness. Here's why Interchange Plus should be your go-to choice.

Understanding Interchange Plus Pricing

Interchange Plus Pricing is a model where the merchant pays the interchange fees set by the card networks (Visa, MasterCard, etc.) plus a fixed markup. This fixed markup is typically a small percentage and/or a fixed amount per transaction.

• Interchange Fees: These are the fees set by the card networks, paid to the card-issuing banks. These fees are non-negotiable and are the same for all processors.

• Plus (Markup): This is the processor's fee, which is added on top of the interchange fee. This fee is negotiable and can vary based on the processor and the merchant's transaction volume and risk level.

For example, if the interchange fee for a transaction is 1.5% + $0.10 and the processor's markup is 0.5% + $0.10, the total cost to the merchant would be 2% + $0.20 per transaction.

Why Interchange Plus is Superior to Flat Rate Plans

Flat Rate Plans are simple but can be expensive in the long run. Large tech companies often offer flat rate pricing for the sake of simplicity, charging merchants a single rate for all transactions. While this seems straightforward, it often leads to merchants overpaying for lower-cost transactions.

Here’s a breakdown of why Interchange Plus is a better choice:

1. Transparency:

• Interchange Plus provides a clear breakdown of fees. Merchants can see exactly how much they are paying to the card networks and how much goes to the processor.

• Flat Rate plans lump all costs together, making it difficult to understand the actual costs and potentially hiding high margins for the processor.

1. Cost Efficiency:

• With Interchange Plus, merchants benefit from the lower interchange rates on debit cards and other lower-cost transactions.

• Flat Rate plans average out costs, meaning merchants pay the same high rate regardless of the actual interchange fee, leading to higher overall costs, especially on lower-value transactions.

1. Savings Passed to Merchants:

• The average processing margin on Interchange Plus plans typically ranges between 0.50% and 1%. This lower margin means more savings for the merchant.

• Flat Rate plans often have higher margins built in to cover the risk of high-cost transactions, resulting in less savings for the merchant and more profit for the processor.

How Interchange Plus Works in Practice

When a transaction is processed, here’s how the costs break down with Interchange Plus:

1. Interchange Fee: A fee set by the card networks, based on the card type and transaction details.

2. Processor Markup: A fixed percentage and/or fixed fee added by the processor.

3. Total Cost: The sum of the interchange fee and the processor markup.

For example, consider a $100 transaction:

• Interchange Fee: 1.5% + $0.10 = $1.60

• Processor Markup: 0.5% + $0.10 = $0.60

• Total Cost: $2.20

In a flat rate model, you might be charged a flat 2.9% + $0.30, totaling $3.20 for the same transaction. Over thousands of transactions, the savings with Interchange Plus can be substantial.

Conclusion

Choosing the right pricing plan is crucial for your business's financial health. Interchange Plus pricing offers transparency, cost efficiency, and direct savings that flat rate plans cannot match. By passing the savings directly to the merchant, Interchange Plus ensures that you keep more of your hard-earned money, rather than paying unnecessary fees to the processor.

At Turbo Payment Tech, we specialize in providing Interchange Plus pricing to help businesses like yours save money and thrive. Contact us today to learn more about how Interchange Plus can benefit your business and start saving on your credit card processing costs.