This article originally appeared on informed-merchant.com, a blog started by one of our founders, Sean, before he started FeeFighters.
Usually the best way to get a good deal on your credit card processing is to negotiate pricing on an “interchange plus” basis. “Interchange Plus” is not a very common form of billing. More commonly, merchant accounts are priced in tiered pricing.
Interchange plus is the most transparent form of pricing for Merchant Account services. Interchange is the cost that your Merchnat Account Provider gets charged by VISA and Mastercard. For a complete description see our article “What Is Interchange“. Interchange plus means that the Merchant Account Provider passes through whatever they are getting charged plus a markup for their services. Depending on the size of your business you can get a markup anywhere from 0.05% to 1.00% plus $0.02-$0.20 / transaction.
Historically only the biggest merchants with the most negotiating power were able to get interchange plus pricing but the market is getting increasingly competitive and merchants are becoming better informed due to the internet and smaller companies are now able to negotiate in this way.
With Tiered Pricing Merchant Account Providers can take advantage of the fact that you can’t exactly compare their pricing to each other and play tricks such as Marking Up The Downgrades and Inconsistent Buckets.
With Interchange Plus you even the informational playing field and can focus on negotiating and shopping around 1 number, the markup, and can bid the processors off against each other (taking into account that different processors offer different levels of service). I highly recommend interchange plus pricing. For an example of how much more transparent interchange plus billing is, see “Reading an Interchange Plus Merchant Statement“.