Interchange-Plus Pricing, or Cost-Plus Pricing
Interchange is often referred to as "cost" because it carries the same cost for every provider. Now that you know all about interchange fees from our previous page, you're ready to learn about how merchant service providers price their accounts. The more you know about how this industry works, the easier it will be for you to ensure that you're getting a fair deal.
Most merchant service providers price their accounts with something called "tiered pricing," which you can learn more about by reading our article: Tiered Pricing: Just Say No! We'll focus on interchange-plus pricing in this article. We already learned that interchange fees will always have two components, like so:
- 2.00% + $0.10
Interchange-plus pricing works by adding a constant, flat margin on top of interchange. So typically, interchange-plus pricing models will also be written in the two component format, with a percentage fee and per-transaction fee above interchange. This allows merchant service providers to price their accounts fairly, because merchants who process at higher volumes will pay more fees, but only proportionately so. The same goes for smaller merchants. By offering a constant margin, smaller merchants are not penalized for processing minimal amounts.
What this also provides for is transparency. As a certified Benefit Corporation and B-Corp, Dharma is committed to showing our clients where we're making money and how. We're also committed to a fair pricing model that ensures our merchants know what to expect. With interchange-plus pricing, you'll get to see exactly how much money was paid to the card-issuing banks, how much went to Visa/MasterCard/Discover, and how much went to Dharma. Click below to see an example:
This is a lot different than many other models out there. Most merchant service providers don't disclose the interchange rates. Instead, they only disclose the rate at which you're assessed - meaning there is a lot of incentive to overcharge for services. It's unfortunate, but our industry has a negative reputation due to egregious fees, confusing pricing structures, and a predatory mindset towards smaller merchants. Dharma was created to change all that. Please click below to learn more about things to avoid, and click around our website to see for yourself how we like to operate.