Interchange-plus pricing is a way of charging merchants for card payments in which the acquirer passes through the actual cost of each transaction and adds its own fixed markup on top. The cost passed through is the interchange paid to the card issuer plus the network's scheme fees. The markup, usually a percentage, a fixed amount per transaction or both, is the only part the acquirer sets.
The model is sometimes called cost-plus pricing, and in Europe a version that lists scheme fees as a separate line is often called interchange-plus-plus. It is the main alternative to flat-rate pricing, where every card costs the same, and to tiered pricing, where the acquirer sorts transactions into a few rate bands of its own design.
Interchange-plus pricing in plain terms
Imagine hiring a builder on a "cost plus fee" contract. You pay exactly what the bricks, timber and cement cost, as shown on the supplier's invoices, and then a separate agreed fee for the builder's work. If the price of timber rises, your bill rises; if it falls, you save. The builder's own fee stays the same either way.
Interchange-plus pricing works like that contract. The card networks and banks set the cost of the "materials" for each payment, and those costs differ by card type. The merchant sees those real costs on the statement and pays them as they are. The acquirer then adds its agreed fee for its own work, which is the one number the merchant can actually negotiate.
Formula and example
The fee on a single card transaction under interchange-plus pricing is:
- is the interchange on the transaction, set by the network for that card type and merchant category.
- is the scheme or assessment fees charged by the network on the transaction.
- is the acquirer's percentage markup, written as a decimal.
- is the value of the transaction.
- is the acquirer's fixed fee per transaction.
Take a $100 sale on a rewards credit card. Suppose interchange is 1.80% plus $0.10, which is $1.90, and scheme fees come to $0.14. The acquirer's markup is 0.25% plus $0.08:
The merchant pays $2.37, or 2.37% of the sale. On a basic debit card with interchange of $0.40 and the same markup, the fee would be much lower, because only the pass-through part changes. The figures are illustrative; real rates come from tables such as the Visa interchange rates table and the Mastercard interchange rates table.
How it compares with other pricing models
| Model | What the merchant pays | Main trade-off |
|---|---|---|
| Interchange-plus | Actual interchange and scheme fees plus a fixed markup | Transparent, but statements are long and the total varies |
| Flat-rate | One rate for every card, such as a percentage plus a fixed fee | Simple and predictable, but low-cost cards subsidise expensive ones |
| Tiered | A few bands, such as qualified, mid-qualified and non-qualified | The acquirer decides which band each card falls into |
Whichever model is used, the merchant's overall merchant discount rate is made of the same building blocks. Interchange-plus simply shows them.
Who uses it
Interchange-plus is the usual choice for medium and large merchants, whose volume justifies a negotiated markup and who have staff to read detailed statements. Acquirers, independent sales organizations and larger processors offer it alongside simpler packages. Small businesses served by a payment facilitator are more often on flat rates, although some facilitators offer interchange-plus to customers above a certain volume.
The model helps merchants see the effect of their card mix. A shop whose customers mostly use regulated debit cards pays far less than one whose customers use premium rewards cards or pay online as card-not-present transactions, which usually carry higher interchange.
Regulation and disclosure
In the European Union, Article 9 of the Interchange Fee Regulation (EU) 2015/751 requires acquirers, from June 2016, to offer and charge merchant service charges broken down by card category and brand, and to state interchange and scheme fees separately in the merchant's agreement. A merchant may still ask in writing for a blended price. The rule pushed much of the European market towards interchange-plus or interchange-plus-plus pricing. In the United States there is no equivalent federal rule; the pricing model is a matter of contract between merchant and acquirer.
Limitations
- Complex statements. A busy merchant may see hundreds of interchange categories each month, which makes it hard to check the bill.
- Variable costs. The total moves with the card mix and with network rate changes, so monthly costs are harder to budget.
- Other fees still apply. Monthly, compliance and chargeback fees sit outside the formula and must be added to judge the true cost, which is what effective acceptance cost measures.