When a customer pays by card, the fee you pay is not one charge. It is three, collected together and split between different parties. Understanding the split is the fastest way to understand any processing quote.
1. Interchange: paid to the card-issuing bank
Interchange is the largest part of the cost. It is set by the card networks and paid to the bank that issued your customer's card. Rates depend on the type of card (debit, credit, rewards, business), how it was accepted (tapped or dipped in person costs less than a keyed-in or online payment), and the type of business.
Interchange is the same no matter which processor you use. Anyone who promises to "lower your interchange" is either changing how you accept cards or is using loose language.
2. Assessments: paid to the card networks
Visa, Mastercard, Discover and American Express each charge a small network fee on every transaction. Like interchange, these are fixed by the networks and passed through by every processor.
3. Markup: paid to the processor
Everything above interchange and assessments is the processor's markup: the percentage, per-transaction fee and monthly fees they add. This is the only part of the cost that differs between providers, and the only part that is negotiable.
How pricing models package these three costs
- Interchange-plus: interchange and assessments passed through at cost, plus a stated markup. The most transparent model.
- Tiered: transactions sorted into qualified, mid-qualified and non-qualified buckets at different rates. Simple to read, but often more expensive, because many transactions land in the higher tiers.
- Flat rate: one percentage on everything. Predictable for very small businesses, but usually costly as volume grows.
What this means when you compare quotes
Compare the markup, not the headline rate. Ask any provider to show you, using your own statement, what you would have paid last month under their pricing. That is exactly what a BrightStar rate review does.
Published · BrightStar Merchant Services
