Key Takeaways
- Interchange and assessments are non-negotiable — only markup can change
- Interchange-plus is the most transparent pricing model on the market
- Effective rate (total fees ÷ total volume) is the only number that matters when comparing processors
- Padded interchange, downgrade traps, and line-item parades are how clean pricing turns dishonest
- A clean statement is short, itemized in plain English, and stable month over month
If you've ever asked a processor what your real rate is and gotten back "well, it depends on the card mix" — congratulations, you've met interchange-plus. It's the most honest pricing model in payments and also the easiest one to use against you. Here's how it actually works, and how to tell whether the deal you're being quoted is a good one.
Where every dollar of card cost comes from
When a customer pays you with a card, the money you don't get goes to three places:
- Interchange — set by Visa and Mastercard and paid to the bank that issued the card
- Assessments — set by the card networks themselves
- Markup — the part the processor and ISO keep
Interchange and assessments are non-negotiable. They are what they are. Markup is the only number anyone in payments can actually change.
What "interchange-plus" actually means
Interchange-plus quotes you the wholesale interchange cost at-cost — the processor passes it through with no markup — and then adds a published markup on top. For example: interchange + 0.25% + $0.10 per transaction.
That's it. That's the whole model. The reason it's the most honest pricing structure available is that you can see exactly what your processor is making on every line of your statement. Tiered pricing and flat-rate pricing hide the markup. Interchange-plus shows it.
Why "effective rate" is the only number that matters
Your effective rate is total fees divided by total volume, expressed as a percentage. It is the only number you should care about when comparing processors.
Take last month's statement. Add up every fee — discount rate, transaction fees, monthly fees, PCI fees, the "network access" line item that nobody can explain. Divide by your processed volume. That's your effective rate.
Effective rate = (total fees ÷ total volume) × 100. If you can't compute this on the back of a napkin from your statement, your statement is intentionally hard to read.
The games processors play
Interchange-plus is honest on paper. Here's how it gets dishonest in practice:
1. "Padded" interchange
The processor quotes you interchange + 0.20% but reports a higher "interchange" number than what they actually paid to the issuing bank. You're paying markup on top of markup, and you'd never know unless you cross-reference the Visa interchange tables yourself.
2. The downgrade trap
Certain card types — rewards cards, corporate cards, keyed-in transactions — fall into higher interchange categories. A processor optimizing for their own margin will let your transactions "downgrade" without telling you, and your effective rate climbs while the quote stays the same.
3. The line-item parade
A clean statement has interchange, assessments, your markup, and a handful of identifiable fees. A bad statement has 30 line items with names like "network compliance," "regulatory adjustment," and "acquiring fee." Each one is small. Together, they're 40 basis points.
What good looks like
- Your markup is published and consistent month over month
- Interchange line items match the Visa / Mastercard published tables
- Monthly, PCI, and statement fees are itemized in plain English
- Your effective rate has been stable for the last six months
- Someone at the processor will get on a call and walk you through it
If you're not sure how your statement reads, send us one. We'll mark it up, line by line, and tell you what we'd quote — including the parts where you're already getting a fair deal. The point isn't to win every account. The point is for you to know what you're paying for.
Elliott runs Bonita Payments from New Orleans. He writes General Quarters to share the playbook most ISOs would rather their agents and merchants never see — pricing math, residual structure, and what actually separates a partner from a vendor.