Interchange-plus (IC+) pricing charges you the exact interchange fee set by the card networks for each transaction, plus the network's own fees, plus a fixed markup from the processor. A flat rate charges one blended price for every card. At high volume, interchange-plus usually costs less because cheaper cards, like debit, stop paying the same price as the most expensive ones.
The three parts of every card fee
Whatever your pricing model, each card payment carries the same underlying costs. The model only changes how they're packaged.
- Interchange
- Paid to the bank that issued the card. Set by the card networks and the same whichever processor you use. Varies by card type: debit, standard credit, premium rewards, corporate, international.
- Network fees
- Paid to Visa, Mastercard, American Express and Discover for using their networks. Also the same for everyone.
- Markup
- What the processor keeps. This is the only part that can be negotiated, and the part a flat blended rate hides.
On a flat rate such as 2.9% + 30¢, all three parts are blended into one price. You pay the same whether the card cost the processor 0.5% or 2.5% in interchange, and the difference stays with the processor.
Segment widths are illustrative. The real split depends on your card mix.
How interchange is set
Interchange is the largest part of any card fee, and it isn't one number. The card networks publish tables with hundreds of rates. Which one applies to a transaction depends on:
- Card type. Debit, prepaid, standard credit, premium rewards, business, corporate and purchasing cards all carry different rates. Premium and commercial cards cost the most.
- Channel. Card-present payments (chip, contactless) cost less than card-not-present payments online or by phone, because the fraud risk is lower.
- Merchant category. Some industries, such as supermarkets, utilities or education, have their own rate programs.
- Data quality. Sending address verification, the security code and, for commercial cards, Level 2 or Level 3 data can qualify a transaction for a lower rate.
- Where the card was issued. Cross-border transactions carry higher interchange and network fees than domestic ones.
On interchange-plus, every one of these differences shows up in your costs, in both directions. On a flat rate, none of them does.
Interchange-plus vs flat rate: a worked example at $25M
Take an online merchant with $25M a year in card volume and a $100 average ticket. On a flat 2.9% + 30¢ rate, every transaction costs the same percentage. On interchange-plus, each card costs what it actually costs, plus a fixed markup.
| Cost | Flat 2.9% + 30¢ | Interchange-plus |
|---|---|---|
| Interchange (average 1.80% assumed) | $800,000 blended, not itemized | $450,000 |
| Network fees (0.13% assumed) | $32,500 | |
| Processor markup (0.20% + $0.10 per transaction assumed) | $75,000 | |
| Total fees | $800,000 | $557,500 |
| Effective rate | 3.20% | 2.23% |
| Difference per year | $242,500 (30% lower) |
Interchange, network and markup figures are illustrative assumptions for a domestic, card-not-present mix of debit and consumer credit cards. Your real interchange depends on card types, and your markup on the pricing agreed.
The flat rate has to cover the most expensive cards a processor might see, so it builds in a margin on cheaper ones. Interchange-plus removes that margin. The processor's earnings become one visible line you can negotiate.
When interchange-plus saves the most
- A meaningful share of debit cards. Regulated debit interchange in the US is capped far below credit card rates, but a flat rate charges both the same.
- Standard consumer credit cards. Non-rewards credit cards carry lower interchange than premium rewards cards.
- Mid to large ticket sizes. A flat 30¢ per charge matters less at a $100 ticket than at $10, but a competitive per-transaction markup on IC+ is usually lower still.
- Higher volume. Markups shrink as volume grows. At $10M+ a year, you can negotiate a markup that a flat-rate provider would never show you.
When a flat rate can win
Interchange-plus is not automatically cheaper. A flat rate can come out level or ahead if most of your volume is on premium rewards, corporate or international cards, which carry the highest interchange, or if your volume is small enough that the markup offered is high. Flat pricing is also simpler to forecast. That is why the right comparison is total fees on your own card mix, not headline rates.
How to read an interchange-plus statement
An IC+ statement is longer than a flat-rate one, but each line answers a question.
- Interchange by card category. Volume and cost per category (for example, regulated debit, consumer credit, rewards, commercial). This shows your real card mix.
- Network or scheme fees. Assessments and per-transaction fees from Visa, Mastercard, American Express and Discover.
- Processor markup. The agreed percentage and per-transaction fee. This line should match your contract exactly, every month.
- Other fees. Chargebacks, gateway, monthly or compliance fees. Check each against the proposal.
Divide the total by your volume for the effective rate, and compare it month to month.
Variations you'll see in proposals
- Interchange-plus (IC+). Interchange at cost, network fees at cost, plus a markup. The cleanest version.
- Interchange-plus-plus (IC++). The same thing, with network fees listed as their own "plus". Common in European proposals; the economics are identical if both pass-throughs are at cost.
- Subscription or membership pricing. Interchange and network fees at cost, plus a fixed monthly fee and a small per-transaction fee instead of a percentage markup. Can be very cheap at high volume and large tickets.
- "Interchange-plus" with a padded pass-through. Network fees marked up or bundled into a "network" line that isn't at cost. Ask for confirmation in writing that pass-through lines are at actual cost.
Questions to ask a processor about interchange-plus
- Are interchange and network fees passed through at actual cost, with no markup?
- What is the markup: a percentage, a per-transaction fee, or both? Does it differ by card brand or region?
- What other fees apply: gateway, chargeback, monthly, PCI, setup, early termination?
- How are statements itemized, and can we export interchange by category every month?
- Is the markup fixed for the contract term, and what happens at renewal?
The answers should all appear in the written proposal. If one doesn't, ask for it before you sign.
Can you get interchange-plus from Stripe?
Stripe offers interchange-plus to some merchants as part of custom pricing. It isn't on the standard plan, so you need to ask, and the markup you're offered depends on your volume and leverage. Our guide on negotiating Stripe fees covers how to ask. If Stripe's offer isn't competitive, a licensed processor can provide interchange-plus directly; our free savings analysis prices it on your real card mix.