Selecting the best merchant account pricing model for your small business can be more complex than many business owners realize. There are a number of options including tiered pricing models, flat-rate models, interchange-plus, and subscription. While all of these methods have their advantages and disadvantages, we believe that interchange-plus and subscription-based pricing models are best suited for the majority of small businesses.
With this in mind, today we will be exploring how interchange-plus and subscription-based pricing models are similar, how they remain different, and some relevant information which may help your small business make an informed choice.
The Basics of Payment Processing Fees
To keep things simple for the sake of readability, let’s consider processing fees to be in one of two camps:
Merchant account fees: merchant service providers may charge scheduled fees, transactional fees, and incidental fees. Incidental fees are one-offs such as fees for installation, chargeback fees, etc. Scheduled fees are fees which are charged on a weekly, monthly, or annual basis. Transactional fees are charged per transaction, which are typically based on a percentage of the sale amount or a percentage plus a flat rate.
Credit card processing fees: of course the credit card companies take a piece as well. Many credit card companies charge a percentage for each transaction, but the actual rate and details vary from company to company.
Interchange-Plus Pricing Model for Merchants
Now that we understand the very basics of credit card processing fees, let’s explore what that looks like for an interchange-plus merchant agreement. The interchange in interchange-plus refers to the credit card processing fees. This covers what must be paid to the credit card association and their issuing bank. The plus portion of interchange-plus refers to the merchant account fees.
The biggest advantage of interchange-plus billing models is that the merchant is able to see exactly what he or she is paying in fees to both the credit card associations and to the merchant services provider. Other pricing models such as tiered and flat-rate combine these two rates, making statement analysis very difficult if not impossible.
Subscription Pricing Models for Credit and Debit Card Payment Processing
At a glance, it might seem like subscription-based pricing models would be the exact opposite of interchange-plus. While interchange-plus shows an unparalleled amount of detail when it comes to credit card payment processing, surely subscription-based billing has relatively little information?
It is actually quite the opposite. Subscription pricing models for payment processing is arguably second behind interchange-plus when it comes to detailed information. The reason is simple: subscription based pricing also lists the interchange rates separately from your merchant account fees.
The primary difference is in the way your merchant account fees are listed. With a subscription-based model, transactional fees and/or scheduled fees may be lumped into a monthly rate which will remain static over time. The exact details may differ depending on your agreement. Incidental fees will likely be charged separately.
Should I Choose an Interchange-Plus or Subscription Pricing Model?
There is no one answer to this question. Each business and business owner must come to this decision based on their volume, their individual needs, and ultimately their personal preference. The real question to ask here is: how can I find the best credit card processor for my small business? Here are a few high level considerations:
Find an organization (and individual) you can trust. With the prevalence of processing giants like PayPal and Square, it can be easy to get lost in the shuffle. Instead, consider looking for a professional merchant services provider with experience that will also take the time to get to know you personally.
Find a credit card payment processor that offers the billing options you prefer. Any merchant service provider worth their salt should be able to steer you in the right direction when it comes to interchange-plus vs. membership pricing. What you want to avoid is “one-size-fits-all” companies that cannot offer what you need.
Make security and fraud protection a priority. As with so many things in life, there is a huge difference between value and being flat out cheap. The best prices in the world will not save your company from a security breach, excessive chargebacks, or even account terminations.
Consider a merchant services provider with a wide range of services. Some companies specialize, and that’s okay. Yet it may be worth considering an organization that offers equipment, security, enterprise resource planning services, and more.
True Merchant Offers a Wide Range of Pricing Models for Payment Processing Services
Payment processing can be needlessly complex. That is why at True Merchant we strive to simplify the process and choose payment processing solutions which fit the individual needs of our clients and their businesses. Our payment processing professionals are able to provide flexible pricing options which fit the budget of just about any business. We are proud to offer a wide range of services including payment processing, CardPointe, CardSecure, EBT payments, and much more.
For more information, feel free to contact our sales team today and find out how True Merchant can go to work for your small business!
