Interchange-Plus Pricing

Interchange-plus pricing, also called cost-plus pricing or pass-through pricing, is a payment processing pricing model in which the merchant pays the actual interchange rate assessed on each transaction (passed through at cost by the processor) plus a fixed, transparent markup that represents the processor's and acquirer's margin. The formula is: interchange rate + processor markup. The total cost for each transaction is the sum of these two components, and because the interchange component is passed through at the actual network rate, the merchant sees exactly what they are paying and to whom.

The defining advantage of interchange-plus pricing is transparency. The interchange component of the bill reflects the actual wholesale cost of each transaction, it goes up when the cardholder uses a premium rewards card, down when they use a regulated debit card, and varies by transaction type (card-present versus card-not-present). The processor's markup is fixed and disclosed. The merchant can see, in their processing statement, exactly what each transaction cost at the interchange level and what the processor earned.

This transparency contrasts sharply with Blended Rate Pricing and Tiered Pricing, which bundle interchange and markup costs together. Under bundled models, merchants cannot see how much of what they pay is interchange (the wholesale cost) versus processor margin, which means they cannot evaluate whether their processor's pricing is competitive.

Interchange-plus pricing is the preferred model for most mid-size and enterprise merchants because it delivers fair pricing: merchants pay the actual market rate for each transaction type, with no hidden subsidization of premium card transactions by basic card transactions (as occurs in blended models). For merchants with significant volume, interchange-plus typically delivers materially lower effective rates than flat-rate or blended alternatives. A typical interchange-plus markup for a mid-sized merchant might be 10-15 basis points plus $0.02-0.05 per transaction above interchange.