Practical Ecommerce

Credit Card Processing: ‘Interchange-Plus’ Pricing Not Necessarily Fair, Part 3

Editor’s Note: Contributor Phil Hinke is a credit-card veteran who now consults with merchants on lowering their processing costs. Hinke believes the credit card processing industry is often unfair to merchants. He believes the Durbin Amendment — which lowers debit card interchange rates — is fostering deceptive pricing practices by some merchant account providers. He explains his views in the article below.

As I stated in “Part 1” and “Part 2” in this series, I am a strong advocate of interchange-plus pricing. However, I am concerned that some merchant providers and their salespeople appear to be misrepresenting interchange-plus pricing . For that reason, I’ve concluded that interchange-plus pricing does not automatically mean fair or honest pricing. The purpose of this article is to discuss deceptive interchange-plus practices that I have seen recently from credit card merchant providers.

The Term ‘Interchange Plus’ Is Used Loosely

Many years ago, I endured a timeshare sales presentation in Hawaii because the promotion offered the use of a Jeep for the weekend just for attending. When I went to pick up my Jeep, the company gave me a mini-Jeep looking vehicle that in no way could fit all four of us. Fortunately, “Jeep” is a trademarked name so I threatened to file suit if I did not receive what was offered. I got my Jeep.

However, the term “interchange plus” is not trademarked. When a salesperson offers interchange-plus pricing, you may think it means the pricing is based on published interchange rates and pass-through fees plus the mark-up you negotiated with the provider. Many merchant account providers do, in fact, price this way. However, as you will see below, not all of them do and you need to be specific in what you ask for and perform a detailed audit of what you receive to confirm.

A Real Example of an Incorrect ‘Interchange’ Rate

The following images were copied from two sections of an actual merchant statement. The first is from the summary page and shows this merchant processed $11,228.42 in Visa sales for the month. The merchant negotiated “interchange-plus” pricing with a provider mark-up of 0.20 percent (see “Disc %”) and a 10 cents per-item fee (see “Disc P/I”). Based on the mark-up, the provider received $28.86 (see “Discount Due”) for the mark-up. This is correct.

Sample summary page.

Sample summary page.

The following images, however, are from the itemized fee section — interchange rates, pass-through fees, and monthly fees — of the statement.

The first image, below, states the 0.11 percent “Dues & Assessments” charge by Visa that equals $12.35. This is correct.

Dues & Assessments.

Dues & Assessments.

The image below states the “Visa Acquirer Processing Fee” — sometimes listed as “APF fee” on merchant statements. This equaled $1.31. It is also correct, as the APF fee is 1.95 cents ($.0195) per transaction.

Visa Acquirer Processing Fee.

Visa Acquirer Processing Fee.

From the three images, above, we have the (a) provider mark-up, (b) “Dues & Assessments,” and (c) “APF.” The main component remaining, then, with interchange-plus pricing is the actual interchange rate. Let’s look at one of the card types listed on the statement.

Visa rewards card rate.

Visa rewards card rate.

“CPS/Rewards 2” is a Visa rewards card rate. Three customers used this type of card for their purchases during the month for a total of $2,427.71. Supposedly, the interchange cost was $59.05. However, let’s do the math.

Namely, $59.05 on $2,427.71 in sales with three transactions means the rate is 2.42 percent + 10 cents. There is just one problem. Visa’s published interchange rate for the Reward 2 card type is 1.95 percent + 10 cents. Apparently, what this merchant account provider calls “Interchange” for CPS/Rewards 2 is 0.47 basis points — 2.42 less 1.95 — more expensive than what Visa publishes as interchange.

The merchant thought he was paying 0.20 percent +10 cents over the published interchange rate and pass-through fees. In reality, the merchant was paying 0.67 percent plus 10 cents over published interchange rate and pass-through fees for Visa Reward 2 transactions. There were other card types on this statement with questionable interchange costs as well.

I reviewed my findings with the salesperson. He honestly thought that he was offering interchange-plus pricing based on published interchange rates. I have talked to other salespeople — with other merchants — who thought the same thing. Remember, there is no regulated certification program to sell card processing — like there is with securities or real estate. A high percentage of credit-card-processing salespeople and customer service personnel do not have a detailed understanding of interchange and how it works.

Improper Card-Association Pass-Through Fees, Too

Interchange-plus pricing should include (a) published interchange rates, (b) card associations — Visa, MasterCard, Discover, and American Express — pass-through fees, and (c) the provider’s negotiated mark-up. Unfortunately, in addition to misstating the actual interchange rates, I am seeing more statements where merchant account providers are inflating the actual card association pass-through fees.

The following is one example. The image below is from a merchant statement and shows the Visa pass-through fee, called “Acquirer Processing Fee (APF).” It states that there were 190 transactions where the Visa APF was charged. The fee was 5 cents for each transaction and totaled $9.50. There is just one problem, Visa only charges 1.95 cents for this fee.

Inflated pass-through fee.

Inflated pass-through fee.

I am seeing more and more of this. I am seeing statements where a “Visa Access fee” or “Visa Auth fee” is being charged in lieu of the APF. I have seen these fees as high as 10 cents — where Visa actually charges just 1.95 cents. I’ve seen the same for MasterCard and Discover fees. These inflated fees, in my view, are nothing more than a way for some providers to squeeze an additional transaction fee out of the unknowing merchant while putting the blame on the card companies in the process. Do not expect the salesperson or customer service personnel to have a detailed understanding of interchange and fees.


  1. Interchange-plus pricing is not a panacea.
  2. Interchange-plus pricing is not immune to deceptive practices.
  3. Be specific in what you want during negotiations.
  4. Review your statement to make sure you get what you negotiated.
  5. Your salesperson and customer service personnel may not understand card-pricing details.
Phil Hinke

Phil Hinke

Bio   •   RSS Feed


Sign up for our email newsletter

  1. tekgems December 15, 2011 Reply

    I completely understand. It is very deceptive practice and after having been through various merchant accounts, I can state many providers are unethical and crooked. The only one I liked was with First Federal Bank processing with First Data. All the other one’s sales pitch and contract did not match. NEVER base your decision on what the sales person says. Often times, they are either outright lying or incompetent. Always ask for clarification on anything you do not understand. If the contract is not explained to you in a manner where everything is clear to you, do not sign.

    2.42% is not great… but I’m paying 2.65% for Visa Rewards… so that’s even worse.

  2. Ben Dwyer December 16, 2011 Reply

    We are also seeing an increase in "peripheral markups" on the analyses we do for our clients at CardFellow. We are also seeing an increase in bill-back and enhanced bill-back where downgrades are being spread over two or more months to conceal actual gross charges.

  3. philhinkePEC December 16, 2011 Reply


    2.65% is too high for reward cards and can be a warning of other pricing issues. MerchantFeeSavers audits merchant statements for free. If you want, just send (3) monthly statements to [phil at] and we’ll audit and send back a report.

    Phil Hinke

  4. James Stein December 23, 2011 Reply

    It is not likely that we will ever bring e-commerce risk (and processing costs) down to card-present levels, but we can definitely take measures to make it bearable. The e-commerce industry has been around for more than a decade now, which has given us plenty of time to develop best practices that all merchants should incorporate into their payment acceptance procedures. Do it consistently and you will see fewer chargebacks and fraudulent transactions.

  5. Jamie Estep December 29, 2011 Reply

    We run into markups on assessments, interchange and association usage fees like NABU and APF fees regularly. I don’t like to comment directly on what rate is fair and what is not because there’s always more to it, but there’s no way to justify marking up these fees. Simply put, it’s impossible for a merchant and even for many ISO’s and sales agents to understand a merchant’s statement when the true cost is hidden (in plain site nonetheless) in what is assumed to be passthrough fees.

  6. Douglas Perry January 2, 2012 Reply

    Small businesses should be careful when dealing with interchange rates. Often the interchange rate is combined with other fees in what is called a ‘discount rate’. You should be careful when looking at these fees and be sure to ask for a written interchange rate quote. If you are interested in finding reputable processors that can work through the information with you, I run a review website at that discusses reliable processors.

  7. TC4u February 21, 2013 Reply

    The reason I clicked the link to this article, was due to the headline. Which is totally misleading. How can you possibly compare any pricing module to unscrupulous agents/ISO’s?
    You should rename this "Regardless of Pricing, Check for Ethics"

    You really should clarify for those passing through, or half reading, that Interchange Plus IS the best pricing, then you can go into you "but"…

  8. SAM March 2, 2017 Reply

    On a statement it has Fee type
    SC = Service Charges
    IC = Interchange Charges
    FEE + Fees

    Is there a way to determine which on are the Providers? Are all Fee the Provider?
    Is there a list of Charged for Visa/MC?
    Thanks SAM

  9. Phil HInke March 4, 2017 Reply


    V/MC publish their Interchange Rates. They can change periodically but the current interchange rates can be found at:

    I published the Pass-through fees in my July 2016 article. However, MC has added a $15 annual location fee since then.

    All other rates/fees on your statement are from your processor