If you've been shopping around for payment processing, you may have heard the term "interchange plus" — also called "cost plus" or "pass-through pricing." It sounds technical, but the concept is simple: you see exactly what every transaction costs, broken down into what the card network charges and what your processor charges. No bundling, no surprises.
It's the pricing model we use at Merchant1 Solutions. Here's why it matters for your business.
What Is Interchange Plus Pricing?
Every card transaction has a base cost called interchange — a fee set by Visa, Mastercard, Discover, or Amex that goes to the issuing bank. Interchange rates vary by card type, transaction method, and business type. There are hundreds of interchange categories.
With interchange plus pricing, your statement shows:
- The actual interchange rate for each transaction (e.g., 1.80%)
- Plus a fixed markup from your processor (e.g., 0.30% + $0.10)
- Your total cost: 2.10% + $0.10 on that transaction
The key difference: With interchange plus, you pay actual cost for every card type. A basic debit card costs less than a premium rewards Amex — and you get the benefit of that difference. With flat rate pricing, you pay the same percentage on everything, which means you overpay on low-cost cards.
How It Compares to Other Pricing Models
| Interchange Plus | Flat Rate | Tiered | |
|---|---|---|---|
| Transparency | Highest — see every fee | Medium — one rate, but bundled | Low — opaque bucket system |
| Cost for debit cards | Low — pays actual interchange (~$0.22 flat on regulated debit) | Same as credit — you overpay | Varies — often "qualified" rate |
| Cost for rewards cards | Higher interchange passed through | Same flat rate | Often bumped to non-qualified surcharge |
| Negotiability | Only the markup is negotiable — clear baseline | Rate may be negotiable | Complex — many variables |
| Best for | Most established businesses | Very low volume or startups | Nobody — primarily benefits the processor |
| Statement complexity | More line items — but each is meaningful | Simple | Complex but uninformative |
Real World Example
Let's say you run a restaurant and in one month you process:
- $15,000 on basic Visa credit cards (interchange: ~1.54%)
- $8,000 on debit cards (interchange: ~$0.22 flat regulated)
- $7,000 on Visa Signature Rewards (interchange: ~2.30%)
With flat rate pricing at 2.6%: you pay $780 total.
With interchange plus at 0.30% + $0.10: you pay approximately $568 total — a $212/month difference, or over $2,500/year. And that's on only $30,000/month in volume.
Why Don't More Processors Offer It?
Flat rate and tiered pricing are more profitable for processors — especially on debit cards and low-rate credit cards where there's a bigger spread between actual interchange and the rate charged. Interchange plus requires the processor to be transparent about their margin, which most prefer to avoid.
Large national processors often push tiered pricing because it's easier to scale and more profitable. Local processors and ISOs who are competing on relationship and service are more likely to offer interchange plus because transparency builds trust.
Ask any processor you're evaluating: "Do you offer interchange plus pricing?" If they say no, or if they can't clearly explain what their markup is on top of interchange, that's a red flag.
What's a Fair Markup?
Processor markups on interchange plus vary. As a rough benchmark:
- Low volume (under $10k/month): 0.40%–0.60% + $0.10–$0.15 is typical
- Moderate volume ($10k–$100k/month): 0.20%–0.40% + $0.08–$0.12
- High volume (over $100k/month): 0.10%–0.25% + $0.05–$0.10
Monthly fees, PCI fees, and statement fees are separate from the per-transaction markup and should be factored into your total cost comparison.
How to Switch to Interchange Plus
If you're currently on flat rate or tiered pricing, switching to interchange plus usually involves signing up with a new processor. Some processors will renegotiate pricing for long-standing accounts — but many won't, because the existing setup is profitable for them.
The easiest path: send us your last 2–3 months of statements. We'll tell you your current effective rate, what it would be on interchange plus through us, and what the actual dollar savings would be annually. The analysis is free and there's no obligation.
For most businesses doing meaningful volume, the switch pays for itself in the first month.