Standing in the 21st century, it is very important to understand the new ecosystem of the entire payment industry. Yes, it has been changed since the arrival of COVID-19. People are now giving more preference to online payment and therefore, business owners are making new strategies. So that they can now accept credit card payments. COVID-19 has already flattened the growth of small businesses and therefore, they are making new strategies to cope up with the situation. We at International Payment Solutions are very much impressed to see their efforts and therefore, we have already introduced many advanced payment solutions.
Well, online payment pricing structure is very complicated and therefore, many merchants show hesitation to accept it. Interchange plus pricing and flat rate pricing are inextricably related to online payment pricing. Interchange plus pricing has a very complicated structure whereas flat rate pricing offers a simple payment pricing. We have already explained how flat-rate pricing works. Here, we are going to tell you how interchange plus pricing works.
Interchange Plus Pricing
Well, it is a fact that interchange plus pricing is quite complicated. Here, the fluctuating interchange rate sometimes creates problem for the merchants. But, it is very transparent and therefore, we want all our merchants to understand this complicate pricing structure so that they don’t face any problem while accepting card payments.
A credit card transaction is a real time process. Merchant processor, credit card network and credit card issuing bank are involved in this process. Well, before getting into interchange plus pricing, you must know what interchange rate is. It is actually issued by the credit card brand. The interchange rate depends upon the type of transaction and type of card are being accepted by your business. The payment processor shares the fluctuating interchange rate with the merchants and adds their margin fee on top of the interchange rate. This is called interchange plus pricing.
Therefore, interchange plus pricing consists of the interchange rate that actually fluctuates and the payment processor margin rate. The best part is that if you process a credit card transaction that is actually eligible for low interchanger rate, your interchange rate pricing will be on the lower side. Ultimately, you will make a lot of profit in your business. However, the reverse can also be possible. Yes, if you are accepting a credit card transaction that is costly to process, the interchange rate will be on the higher side. Ultimately, your interchange plus pricing will be increased.
Yes, there is a monthly fee that merchants have to pay if they go with interchange plus pricing. The merchant processor solution generally takes this monthly fee for providing the security and card processing service. But, the monthly fee will not make any kind of damage in your business. The profit that you will make in interchange plus pricing structure will be enough for you to cover this monthly fee.
However, if you have a small business and your monthly transaction volume is very low, you should not go with interchange plus pricing. In such a scenario, you should go with flat rate pricing which offers a simple online pricing structure.
Why Interchange Plus Pricing Is So Good For Merchants?
Although interchange plus pricing is more complicated than others, it has endless benefits. Go through the following points to know more about it:
Maintain A Transparency Between Merchant And Payment Processor: In case of interchange plus pricing, the merchant processor shares the interchange rate on each transaction with the merchant. Merchant processor adds a margin charge on top of the interchange rate. Therefore, in such a scenario, the businessman will understand how much the actual interchange rate and interchange plus price are. It will maintain a transparency between the merchant and merchant processor solution. It will also help the business owner to increase the profit as they will get to know the credit card processing rate for different types of credit card and payment methods. Depending on these aspects, they can make new strategies.
Zero Overpayment: There is zero overpayment when it comes to interchange plus pricing. Yes, in case of flat rate pricing, the merchants have to pay a fixed rate to the payment processor. It does not matter whether the card is qualified for high interchange rate or low, the merchant has to pay a flat rate pricing. So, if you processing a credit card that is qualified for low interchange rate, you will still have to pay a flat rate. In such a case, you will overpay for lower cost transactions.
Not An IPS Merchant?
By now, you have probably understood the advantages of choosing interchange plus price structure. Now, if you want to avail of the benefits, you must pair your business with any merchant processor solution. We will recommend you to go with International Payment Solutions that offers advanced payment solutions through which you can elevate your business to the next level.