Finance term
Interchange Plus Pricing
Also known as: IC+ pricing, cost-plus pricing, pass-through pricing
Definition
Interchange plus pricing is a transparent payment-processing model where the merchant pays the actual interchange rate (set by Visa/Mastercard and published at usa.visa.com/support/small-business/merchant-resources.html and mastercard.us/en-us/business/overview/merchant-resources.html) plus a fixed processor markup — typically IC + 0.10%–0.40% + $0.05–$0.15 per transaction — instead of a blended flat rate.
Detailed explanation
Traditional flat-rate processing (e.g., 2.9% + $0.30 across all cards) bundles interchange, network fees, and processor margin into a single opaque rate. Interchange plus pricing (also called 'pass-through' or 'cost-plus') separates these components: the merchant sees the actual interchange charged on each transaction plus the processor's fixed markup.
Interchange rates vary by card type, transaction method, and merchant category — Visa and Mastercard publish their full rate tables publicly (Visa: usa.visa.com/support/small-business/merchant-resources.html; Mastercard: mastercard.us/en-us/business/overview/merchant-resources.html). Debit cards carry lower interchange (often 0.05%–0.80%) than premium rewards credit cards (1.80%–3.25%). Under interchange plus, a merchant paying IC+0.25% on a debit card pays far less than on a premium Visa Infinite card.
The FTC's guidance on credit card fees and merchant rights is at ftc.gov/business-guidance. The Durbin Amendment (Dodd-Frank Act Section 1075, codified at 15 U.S.C. § 1693o-2) caps debit card interchange for large issuers at 21 cents + 0.05% per transaction — enforced by the Federal Reserve under Regulation II (12 C.F.R. § 235). For merchants processing over $10,000/month in card volume, interchange plus typically produces lower effective rates than flat-rate pricing when the card mix skews toward debit and standard credit cards.
◈ Worked example
- Flat-rate pricing: 2.9% on every transaction regardless of card type. IC+ pricing: Visa debit at 0.80% IC + 0.25% markup = 1.05% effective; Visa Infinite rewards at 2.40% IC + 0.25% = 2.65% effective. Same merchant, far lower blended rate on IC+.
- Restaurant processing $80K/month — 60% debit, 40% credit. Flat rate at 2.9%: monthly fee $2,320. IC+ at average 1.40% effective: $1,120. Annual savings: ~$14,400.
- Switching from flat-rate (2.9%) to interchange-plus (IC + 0.3%) pricing at $50K/month card volume: save ~$150–200/month if average interchange is below 2.6%.
Common questions
The most-asked questions about Interchange Plus Pricing — answered straightforwardly.
Is interchange plus pricing always cheaper than flat-rate? +
For merchants with high debit card or standard credit card volume (above ~$10K/month), yes — interchange plus nearly always wins on effective cost. For low-volume merchants or those with high premium rewards card usage, flat-rate simplicity may offset the modest savings. Run your actual card-mix numbers against IC+ quotes before switching.
How do I get interchange plus pricing? +
Request it explicitly from your processor. Stripe, Square, and PayPal default to flat-rate for small merchants. Processors like Helcim, National Processing, Dharma, and Stax offer interchange plus. Most traditional merchant account providers (Worldpay, Elavon, Priority, TSYS) default to IC+ for merchants processing over $10K–$20K/month who ask for it.
What is the difference between interchange plus and tiered pricing? +
Tiered pricing (qualified/mid-qualified/non-qualified buckets) is the least transparent model — processors define which cards fall into each tier and often downgrade premium cards into higher-cost non-qualified buckets without disclosure. IC+ shows you every interchange rate and a fixed markup. Tiered pricing is generally the worst deal for merchants; IC+ is the most transparent.
Further reading
This glossary entry is educational content. ClearValue Lending is a business & personal financing platform — not a lender, broker, or financial advisor. Specific product terms vary by lender; verify with the lender or issuer before applying. See privacy policy.
https://clearvaluelending.com/glossary/interchange-plus-pricing