B2BPay Hub

Pricing models

What is interchange-plus pricing, and is it better?

Short answer

Interchange-plus pricing passes through the interchange set by the card networks at cost and adds a disclosed markup, itemized separately on your statement. It is better than tiered or flat-rate pricing for most B2B sellers for one specific reason: it is the only model where you can see whether your transactions are qualifying. Under tiered pricing a downgrade is absorbed into a bucket, and under flat rate it does not affect what you pay at all.

Written by
B2B Pay Hub editorial team
Reviewed
Reviewed by a B2B Pay Hub payments specialist
Published
Updated
Share on LinkedIn Email this answer

The fuller explanation

That visibility is worth more than the headline rate difference, because it is what makes optimization possible. You cannot improve qualification you cannot measure.

Flat-rate pricing is structurally bad for B2B specifically: you pay the same percentage on a Level 3 qualified purchasing card as on a consumer rewards card, so improving your data returns you nothing.

When comparing providers, compare markup against markup. Interchange is identical for everyone and including it in a comparison rewards whoever has the more favourable customer mix.

Important caveats

  • Interchange-plus is not automatically cheaper. A high markup on interchange-plus can exceed a low-markup tiered arrangement.
  • Moving pricing model without fixing data quality changes what you can see, not what you pay.

Other ways people ask this

These phrasings share the same answer, so they live on this page rather than on duplicate URLs.

  • Interchange plus vs tiered
  • Cost plus pricing
  • Should we switch to interchange plus?

Follow-up questions

Will a processor move us to interchange-plus on request?
Often yes, particularly if you ask directly and have an alternative. It is worth asking before assuming a switch is required.

Was this helpful?

Where this fits

QuestionWhat is my true processing rateYour effective rate is total processing fees divided by total processing volume for the same period, expressed as a percentage. It includes every fee on the statement: interchange, assessments, markup, monthly fees, PCI fees, gateway fees, batch fees and statement fees. It is the only number that describes what you actually pay, and it is almost always higher than the headline discount rate you were quoted.Open Guideb2b payment processing guideB2B payments are not retail payments with bigger numbers. The card types are different, the interchange rules are different, the invoices are larger, and the buyer is an AP department rather than a shopper. Most of what this costs you comes from treating the two as the same thing.Open QuestionLevel 3 data explainedLevel 3 processing is the transmission of detailed line-item data alongside a commercial card transaction so it qualifies for the lowest interchange rate the card networks offer. It requires product codes, item descriptions, quantities, unit prices, freight and duty on top of the Level 2 requirements of sales tax and a purchase order reference. It applies only to commercial, corporate, purchasing and government cards, because consumer cards have no Level 3 category.Open QuestionHow to audit my processing statementWork in three passes. First, total every fee for the month and divide by total volume to get your effective rate. Second, separate the statement into interchange (set by the card networks, pass-through), assessments (Visa and Mastercard, also pass-through) and markup (your processor's margin, the only negotiable part). Third, find the commercial card transactions and check which interchange category each settled at.Open ResourceInterchange Downgrade ReasonsWhat each common downgrade means, why it happened, and whether it is fixable on your side or your processor's. Most are fixable, and most businesses never see them because tiered pricing hides them.Open

Read next

  1. 1What is my true processing rateYour effective rate is total processing fees divided by total processing volume for the same period, expressed as a percentage. It includes every fee on the statement: interchange, assessments, markup, monthly fees, PCI fees, gateway fees, batch fees and statement fees. It is the only number that describes what you actually pay, and it is almost always higher than the headline discount rate you were quoted.
  2. 2b2b payment processing guideB2B payments are not retail payments with bigger numbers. The card types are different, the interchange rules are different, the invoices are larger, and the buyer is an AP department rather than a shopper. Most of what this costs you comes from treating the two as the same thing.
  3. 3Level 3 data explainedLevel 3 processing is the transmission of detailed line-item data alongside a commercial card transaction so it qualifies for the lowest interchange rate the card networks offer. It requires product codes, item descriptions, quantities, unit prices, freight and duty on top of the Level 2 requirements of sales tax and a purchase order reference. It applies only to commercial, corporate, purchasing and government cards, because consumer cards have no Level 3 category.

Find out what your card volume actually costs

Send three months of statements and one representative invoice. You get back a line-item breakdown of what is downgrading and what it costs annually, whether or not you do anything with it.

Request an interchange audit