Cost Plus Credit Card Processing

Now we've arrived at what is called Cost-Plus or Interchange-Plus pricing. You may see it referred to with other names but, here's what this is all about.

Up until a couple years ago, this type of pricing was primarily only available to the WalMart's and Sears type merchants. You know, the large national chains. In fact, they demanded this type of pricing. With the ever increasing competitiveness in the field, some processors, have opted to make this same pricing available to a broader base of merchants. However, many will try and steer you away from it because it no longer avails them the opportunity to "hide" fees. It offers total transparency for you, the merchant. Here's how it works:

In the credit card industry, rates (Interchange rates) are set by Visa and MasterCard on behalf of their member banks. Every merchant services provider (processor) pays the exact same rates. From that basis, they tack on their miscellaneous markups and profits and pass it on to you in the form of your Discount Rate. In the Three Tier and Four Tier examples discussed elsewhere on my other sites, the processor then decides which "category", "tier" or "bucket" they're going to put each of your transactions. In cost-plus pricing you will be getting the interchange rates "passed thru" to you "plus" some basis points and possibly some cents as well. Let's look at some examples.

When looking at Interchange Rates, there are three components. There is rate, per item and assessments. The rate and per item gets paid directly to the card issuing bank when a sale is made. The assessment goes directly to either Visa or MasterCard. Currently (as of the April 2009 schedules) Visa CPS Retail Consumer Credit card (this would be for a generic, no frills Visa card swiped thru a terminal) shows a rate of 1.54%, per item of $.10 and assessments of .0925%. So, in order to determine true "cost" add the 1.54% and the .0925% and you'll come up with 1.6325% plus the per item fee of $.10. Keep in mind, of course, that this rate is the cost to the processor. From there they will add on their "Plus" to give you a final rate. They will either add on basis points (i.e .25%, for example) or some cents (i.e. $.20) or, maybe even a combination of both.

Now, in comparison, a Visa CPS Retail Consumer Debit card has an Interchange Rate of 1.03% $.15 per item. Assessments of .0925% would still apply as well so we'll come up with a total Interchange Rate of 1.1225% $.15. Again, keep in mind that the processor will be adding their "Plus" onto these figures which will ultimately be what you are charged.

Under Cost-Plus pricing, your statements will be more lengthy because of the numerous different card and transaction types that exist. There will be a line item for each specific type of card that was taken by your business during the month. There are over 200 different types of transactions but the benefit of this type of pricing is obvious. You will see exactly what types of cards you are getting, and in what dollar volume. You'll be able to see exactly the cost and how much the processor is making. Keep in mind that your processor is in business to make a profit and rightfully so, as are you. They provide a valuable service and take on a substantial risk for providing you with this service. They are entitled to a fair profit but it must be reasonable and justifiable. If you'd like more information and understanding on Cost Plus pricing, you can email me or even send me a fax of your current statement and I'll see if you could qualify, furthermore, if it would make sense for you to have this form of pricing.

My Email

Fax: 888-783-8690

And, if you'd like to get even a more thorough understanding of how this whole industry works, discover how Interchange Rates affect you and increase your knowledge overall, go to my website. It will introduce you to my eBook that provides a wealth of information for you regarding this ever-increasing cost center in your business. It will be a wise business investement that will pay for itself many times over.

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I have been seeing reps recently presenting what they are calling "Cost-Plus" pricing to merchants that isn't really true. What they are presenting is "their Cost-Plus pricing. Here's what I mean by this. Every rep in the field, has some relationship with a processing provider. They have a "buy rate" from the provider. Let's say their "cost" or "buy rate" is $.07. In other words, take the Interchange rates, and add $.07 and that is their "cost". So, what they present to you as Cost Plus is Interchange, plus their cost of $.07, plus, whatever they decide to add on. When receiving pricing from anybody, ask them to show you the exact "cost" basis that they are using. It should be actual Interchange. It's probably best to make certain that you are getting "Interchange Pass-through Plus" pricing. Take heed to this word of caution because it could make a big difference in your costs. It's a shame that some reps utilize "trickery" or "vaguery" to get your business but, unfortunately, it seems to prevail in this business.

Now the last thing I want to do is appear like all those other merchant services reps out there trying to get your business. I know from years of experience in the field how vaguery and outright misrepresentation, unfortunately, seems to prevail in this industry. If for any reason, you think you're not getting the straigt scoop from your current provider, or from those that are courting you, please don't hesitate to contact me. No matter where you are in the country, I can be of service so don't let my location in beautiful western Michigan be a deterent for you. I'd welcome the opportunity to be of service.

FAX: 888-783-8690
PHONE: 231-329-4400
My Email

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And, if you'd like to get even a more thorough understanding of how this whole industry works, discover how Interchange Rates affect your costs, and increase your knowledge overall, go to my website. It will introduce you to my eBook that provides a wealth of information for you regarding this ever-increasing cost center in your business. The knowledge you obtain there will assist you in driving more profits to your bottom line.

My Website