Let’s perform a sample $100 transaction so you can see how all of this works. In this example, we’ll use a common card type that retailers accept – the Visa Rewards card. Bear in mind that specific industries will be subject to different rates, but this is a good example for common retailers, and you can use the below example as a template and simply plug in different interchange rates or margins. Here is a refresher of the pricing components for interchange-plus pricing:
Let's start with a $100 sale.
- Interchange Fees: 1.65% + $0.10
- Card Association Fees: 0.13% + $0.02
- Dharma Margins: 0.25% + $0.10
- Total Fees: $2.25
On this particular card, you’d have paid a total of 2.25% on a $100 sale.
Where is that money going?
Let’s see how the above fees breakout:
- 75% of the fees were paid back to the card-issuing bank
- 7% of the fees were paid back to the card-association fees
- 18% of the fees were paid to Dharma Merchant Services
As you can see, the vast majority of the fees are going back to the card-issuing banks, and a significant portion also go to the card associations. With interchange plus rates, Dharma’s role in providing customer service, risk management, integration assistance and more will often represent less than 20% of your total fees paid.