Once reserved for big box retailers like Walmart, Home Depot, Target, etc., the availability of interchange plus pricing for smaller businesses, along with credit card companies’ decisions to allow zero fee credit card processing, leaves many merchants with some big decisions to make related to payment processing fees. The more you know about each option, the wiser choices you can make for your business needs.
What is Interchange?
Many people refer to interchange as the “costs” involved in processing credit cards. You can’t negotiate these rates. They are set by the credit card companies and not the merchant service providers. It can vary by the type of card used, the type of transaction, how the transaction is processed, and more. Everyone pays interchange and there is nothing your merchant service provider can do to mitigate those costs. There are, however, things they can do to help you understand the costs better and keep additional fees, charged on top of the interchange fees, lower.
Interchange Plus Pricing
That’s where interchange plus credit card processing comes into the picture. The “plus” in this equation refers to the merchant account pricing model that charges a fixed markup that is applied on top of the interchange fees. The availability of this type of pricing plan allows smaller businesses a level playing ground with larger enterprises when it comes to the costs of accepting credit cards, making it possible for local mom and pop retailers to offer your customers the convenience of secure payment processing without worrying about excessive fees.
With interchange plus pricing, higher volume merchants pay more fees because they pay the same amount as smaller merchants per transaction, but deal with higher volume transactions (resulting in more fees). What many merchants prefer about the interchange plus credit card processing system is that it is written in a two component format with the percentage fee and pre-transaction fee above interchange providing greater transparency in the pricing process.
Most businesses, especially smaller businesses, prefer the interchange plus as it offers greater transparency than other pricing models and has the potential to reduce their costs involved in credit card processing.
Zero Fee Credit Card Processing
Zero fee or “no cost” processing is a solution where processing fees are passed to your customers automatically when they choose to pay with a credit card. Instead of your business paying the processing costs, your customers take on those fees.
Permissible in all but 9 states (as long as certain requirements are met), passing your processing costs to customers is known as surcharging. But you should note that zero fee processing only works with credit card payments and doesn’t apply to debit transactions.
To get started, work with your processor to program your terminal to list surcharges as a separate line item on receipts, as well as ensure that only credit transactions are surcharged, and for the appropriate amount. Your processor will generally handle informing the credit card companies of your intent to surcharge, but you will need to obtain and display appropriate signage stating that your business surcharges
Once you understand the differences between interchange plus and zero fee credit card processing, you’ll be able to make an informed decision about which option, if either, is the better choice for you.
At BankCard Services we believe in offering affordable, ethical, and easy to use payment processing for businesses of all sizes on a month-to-month basis without long-term commitments. Our services are scalable to grow with your business without forcing you to purchase services your business doesn’t need quite yet, while offering plenty of technology and tools for the future. Contact us today to learn about the services we have to help you grow your business today and in the future.
Mickael is an entrepreneur and the Co-founder of Bankcard Services. He is a family man and loves technology, innovation, and soccer.