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Enhanced Interchange Plus

Estimated reading time: 6 minutes

Credit Card Interchange Fees vs. Discount Rates

Is it true as a Merchant you don’t pay Credit Card Interchange Fees, but instead pay a “Merchant Discount Rate“? While this is technically not false, it isn’t exactly true either. It is a bit like saying when you buy Ice-Cream that you aren’t buying Milk, or Oil when buying Gas.

Interchange is the #1 expense in a credit-card processing transaction, the cost paid to the Card Brand issuer. Enhanced Interchange Plus simply sets your Merchant Discount Rate equal to the non-negotiable Interchange Fees, plus fees for processing the transaction.

These rates depend upon Card Brand, and the Merchant Industry Vertical. Recent Visa and Mastercard Interchange Rates are below.

Visa vs Mastercard Interchange Card Fees

How does Credit Card Enhanced Interchange Plus Work?

Enhanced Interchange Plus

Enhanced Interchange plus pricing works much like the name implies. Enhanced Interchange plus applies a fixed markup to the non-negotiable Visa, Mastercard, Amex or Discover’s interchange fees.

This fixed markup is segmented and enhanced by Industry Vertical. Higher risk verticals receive a higher markup, and lower risk verticals receive a lower markup. There are two components of the markup: one is expressed as basis points and the other as an authorization fee.

The type of card being used (debit, credit, personal, business, etc.), the way a card is processed (online, swiped through a machine, etc.) and other variables combine to determine which interchange category a transaction qualifies for (non negotiable card-brand interchange).

Regardless of which interchange category a transaction qualifies for, the markup assessed to a transaction is the same. The interchange charges and markup together yield the merchant discount fee, which is the merchant’s ultimate cost of the transaction.

How does Enhanced Interchange Plus Lower Fees?

Enhanced Interchange plus is the most transparent, cost-effective form of merchant account pricing. The separation of processing costs also allows for the optimization of interchange expenses. Enhanced Interchange Plus rates reflect the Risk factors and costs in your industry vertical. Passing interchange fees directly onto businesses with a fixed markup, generally eliminates hidden fees.

The cost of Enhanced Interchange Plus processing will depend on the markup rate, segmented by Industry Vertical. However, generally speaking, Enhanced Interchange Plus pricing will yield a substantial savings over the same processing volume when compared to other pricing models such as tiered or enhanced recover reduce (ERR).

Enhanced Interchange plus is the most desirable form of merchant account pricing both for its transparency and potential to allow for lower costs. The Payment processor’s risk of Card mix is eliminated, and as a result their cost is predictable, and they can pass on this savings to the merchant.

Even a lower volume merchant could save over $1,000 annually*Not Guaranteed in processing fees with Vertical Merchant Solution’s Enhanced Interchange Plus rates.

Lower Credit Card Percentage

Industry Vertical