What Is Interchange-Plus?

There are a few pricing models when merchants choose non-Cash Discount. Between tiered, bundled, and Interchange-Plus, we choose Interchange-Plus to get you the best card payment fees.

A transaction consists of three parts to Interchange-Plus: Interchange Fees, Assessments, and our margin. Interchange-Plus, abbreviated IC-PLUS, is also called Cost Plus Margin, Cost Plus, or Interchange Passthrough.

Interchange Plus Margin Formula

I. Interchange Fees​

Hundreds of Interchange Fees are set by the banks (Visa & MasterCard). Our bank paid this wholesale cost to transfer fund to consumer’s credit card’s bank. These fees cover their operating cost.

As an example, for VISA Reg. Debit transaction, the Interchange Rate is 0.05% + 22¢

 

II. Assessments​

Many Assessments are also set by the banks to make money. It’s a percentage (%) charge applied to a volume. An international transaction, network access, and card-not-present are examples of Assessments. Interchange fees and Assessments go to the bank.

The Assessment for VISA Reg. Debit transaction is 0.13% + 2¢

III. Plus Margin​

We add a marginal cost as an Independent Sales Organization on top of Interchange Fees. All together we have a formula. It’s Interchange Plus Margin or just Interchange Plus.

Our VISA Reg. margin is, similar, to an assessment: 0.15% + 7¢.

 

A Simplified Example

1. Combined Fees of IC-PLUS

Here’s a list of the fees discussed above.

  1. 1. 0.05% + 22¢ { Interchange
  2. 2. 0.13% + 2¢ { Assessment
  3. 3. 0.15% + 7¢ { Our Margin
  4. ———————–
  5. 4. 0.33% + 31¢ { Total Fees

When added together we have a transaction total of in line 4.

2. Exercise

Now apply that formula to a $10 ticket.
$10.00 * 0.0033 + 31¢ = 0.34¢ in fees.
.

Now apply that formula to a $100 ticket.
$100.00 * 0.0033 + 31¢ = 0.64¢ of fees.

3. Wait! About Tax!!

Now apply that formula to $10 ticket with tax. We need the item taxed first.
$10.00 + ($10.00 * 0.0925)
= $10.00 + 0.93¢
= $10.93
The updated item to be charged is $10.93, so now we replace $10 in step 2:
$10.93 + ($10.93 * 0.0033) + 31¢
= $10.93 + 4¢ + 31¢
= $10.93 + 35¢
Even when taxed, the fee has increase by one penny. No much.
.

Now a $100 ticket plus tax is $109.25. Replacing $100 from example 2:
$109.25 + ($109.25 * 0.0033 + 31¢)
= $109.25 + (36¢ + 31¢)
= $109.25 + 67¢

When taxed on the item with interchange-plus model only adds mere pennies to the total cost.

The Math Chart

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