Interchange Plus Pricing Method

Credit card processing uses multi-tire pricing for small and medium sized businesses usually. There are three types of tiers, which are used normally. They are called qualified, mid qualified and non qualified. Debit cards can have a fourth tier which can be acquired after doing some negotiations. It is used for offline processing. This system of pricing has become obsolete due to increasing number of rewards and corporate cards in the offer these days. But processors used this system for many years.

Tier pricing system is really useful when the merchant accepts only few standard credit cards. Visa and MasterCard has number of interchange types for different types of card types they issue. But all of these types will come under one type of tier pricing. But the merchant service bill, which contains transaction charges, will become higher with transactions like debit, rewards and availability of corporate cards. The reason being, all these transactions will be either mid or non-qualified transaction process.

Merchant account providers make profit mainly from these card transactions. Therefore they makes these ordinary transactions look like hard ones to make profit. The non qualified and mid qualified transactions costs the account holder a very big transaction fee. It will be around 2.9% to 3.5%. Therefore these types of transactions are much more profitable for them. But these charges will depend on the service provider as well.

Interchange plus the pricing can prevent extra charging for the transaction for the customer. Interchange plus the processing will cost only a 0.25% extra for a transaction than the other types of transactions. It can make the merchant account holder to pay 1-2% of the other types. This will be saved if the interchange plus pricing method is used.

Interchange plus pricing has the concept of giving the real cost of the transaction directly to the customer without any intermediate parties. So this will reduce any of the unwanted costs available with it. This only includes a charge depending on the number of transactions and a charge for the sales volume in dollars. This will be around 0.25% to 0.50% for the volume and $0.10 to $0.15 for a transaction.

Realistic sales volume from a credit card for a business will be somewhere around $5000 or bit more than that for a six month period. But the banks consider it as $12,000 to $25,000 for 12 to 24 months. These values are only dependant on documented transactions.

These are few of the cash advance account related problems that are faced by business owners. But the owners of the businesses will face many more special case problems when they deal with credit card transactions. They will be addressed in case-by-case basis by banks or service providers.

It is better to look out for mid or non-qualified transactions in your monthly statement from the bank. They will cost you more than anything else. That’s why there tier system always regarded as inferior to four tier transactions. It will be a really good idea to go for an interchange plus pricing method for more profits.

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