Interchange-Plus Pricing
What Is Interchange-Plus Pricing? Definition and How It Works
Definition
Interchange-plus pricing is a card acceptance pricing model where the merchant pays the actual interchange rate for each transaction passed through at cost, plus a fixed acquirer markup, providing full visibility into the underlying card cost and a transparent consistent acquirer margin.
How it works
Interchange-plus (IC+) pricing disaggregates the three components of card acceptance cost: interchange (the fee paid to the card issuer, set by the card scheme and varying by card type, channel, and region); scheme fees (assessments paid to Visa or Mastercard typically 0.05-0.15%); and acquirer margin (the processing provider's profit expressed as a fixed basis point markup and/or a per-transaction fee).
Under this model, a merchant's statement shows the interchange rate applied to each transaction category, the scheme fees assessed, and the acquirer's margin. For example a Visa consumer debit transaction might show: interchange 0.20% + scheme fee 0.07% + acquirer margin 0.30% + per-transaction fee USD 0.05 = effective rate of 0.57% + USD 0.05. A Visa premium commercial credit card transaction would show: interchange 1.50% + scheme fee 0.07% + acquirer margin 0.30% + USD 0.05 = effective rate of 1.87% + USD 0.05.
Interchange rates are published by Visa and Mastercard and vary by: card type (consumer debit vs consumer credit vs commercial); cardholder geography (domestic vs cross-border); transaction channel (card-present vs card-not-present); and in some cases transaction size and merchant category code.
Interchange-plus-plus (IC++) is a further variant that separately itemises scheme fees at actual cost rather than including them in the plus margin. IC++ is the most granular cost transparency model and is common in enterprise acquiring agreements in Europe.
Why it matters
Interchange-plus shows merchants their actual interchange cost per card type, enabling informed decisions about card acceptance policies and cost optimisation. Merchants with predominantly consumer debit transactions pay the low debit interchange rate, not a blended rate set for a higher-cost mix. Because interchange is passed at cost, the acquirer's margin is visible and can be benchmarked against market rates for equivalent volume. Merchants must understand interchange categories, monitor their mix, and validate that interchange is being passed through correctly. Interchange-plus creates incentives to optimise transaction routing for better interchange qualification.
With PXP
PXP offers interchange-plus pricing for enterprise merchants with itemised interchange, scheme fee, and margin reporting. PXP's dashboard enables merchants to analyse their cost structure by card type, channel, and geography for complete acceptance cost visibility.
Frequently asked questions
How do merchants validate that interchange is being passed through correctly?
Merchants on interchange-plus pricing should periodically reconcile the interchange rates on their statements against Visa and Mastercard's published interchange rate tables. Key checks: confirm that the interchange category applied to each transaction matches the expected category for that card type and channel; verify that the acquirer markup is consistent with the agreed-upon basis points; check that scheme fees are not inflated. Discrepancies may indicate downgraded transaction qualification or billing errors.
What causes interchange downgrade and how does it affect cost under interchange-plus?
Interchange downgrade occurs when a transaction qualifies for a higher-cost interchange category than expected due to missing or incorrect transaction data. Common causes: missing AVS data for card-not-present transactions; delayed capture; missing level 2/3 data for corporate card transactions; and incorrect MCC coding. Under interchange-plus the merchant bears the full cost of interchange downgrade because interchange passes through at actual cost.
What is the difference between interchange-plus and interchange-plus-plus?
Interchange-plus passes interchange at cost and charges a fixed acquirer markup that includes scheme fees. Interchange-plus-plus passes interchange at cost AND passes scheme fees at actual Visa/Mastercard cost with the acquirer's margin being a clearly identified separate component. Under IC++ the merchant pays: interchange at actual cost + scheme fees at actual cost + acquirer margin (fixed agreed markup). IC++ is the most transparent model and is common in European enterprise acquiring.
How does interchange-plus pricing interact with payment method routing?
Under interchange-plus the merchant's cost varies by card type. Routing decisions directly affect the interchange rate applied. For co-badged cards routing through the domestic network may attract a lower interchange rate than routing through the international scheme, a form of least-cost routing. Understanding interchange-plus creates incentives for merchants to actively manage routing decisions to minimise interchange costs.
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