Cost Plus Credit Card Processing: What is it and is it Right for You?

What is cost plus credit card processing, and is it a good fit for your business? Learn more about cost plus payment processing here.

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TL;DR: Cost plus credit card processing offers a transparent and potentially cost-effective way for businesses to handle card payments, with a fee structure that includes both fixed and percentage costs. It provides a clear understanding of transaction costs, flexibility in negotiations, and the possibility of finding a financially sensible solution through provider comparison.

Main Points:

  • Processing card payments involves ongoing costs, but businesses have options to manage these costs.
  • Cost plus credit card processing (interchange plus) combines a fixed interchange rate with a percentage markup, offering transparency and predictability.
  • This model is straightforward, allowing for easier budgeting and the potential for negotiation on markup rates.
  • Swipesum offers consultations and services to help businesses optimize their payment processing strategies and costs.

Payment processing is a core need for just about every modern business.  

Data from a Federal Reserve of San Francisco consumer survey shows us that credit cards were the single most popular payment method in 2022. They accounted for 31% of all consumer payments. Combined with debit cards, card payments as a whole represented 60% of all consumer payments in 2022.

Customers increasingly expect businesses to accept cards as payment. The downside is that processing card payments is both an obligation and an ongoing cost. The upside is that merchants have options related to the fee structure and overall cost of payment processing.

The complete picture is a little more complex, of course. Some approaches to calculating merchant fees can leave your business confused about the real cost of the service. Some types of merchant fee pricing can also drain an excessive amount of money from your business.

However, merchants still have the power to find the best card processing fee structure for their needs. By choosing the right model and through effective negotiations, you can keep costs manageable.

Swipesum is here to help merchants just like you do exactly that. Our industry experts find the right combination of payment tech and tools and take the lead in negotiations with merchant services providers, and so much more. The result is a truly optimized payments workflow in both cost and performance.

Book a free consultation to transform your company’s approach to payments.  

Want to learn more about common pricing models for merchant services fees? Let’s take a closer look at cost plus credit card processing.

What is the Cost Plus Credit Card Processing Fee Model?

The easiest way to understand the cost plus merchant services model is with a brief review of the three major approaches to pricing for these services.

Flat-rate Pricing

Flat-rate pricing for merchant services is very simple and direct. It’s easy to understand for most merchants, including small-business owners and others without a background in business finance. You may also hear it called pure percentage pricing.

In a flat-rate pricing model, your merchant services provider charges a fixed amount for each credit or debit card transaction your business processes. That cost might be represented as a specific fee, a fixed percentage of the total transaction, or both.

Tiered Pricing

Tiered pricing involves a wide range of fees depending on the type of card used, how the payment is processed, and other factors.  

Unique fees seemingly based on the actual cost of processing card payments in different scenarios may seem logical. However, the truth is that tiered pricing is very opaque. It’s especially difficult to understand the cost of processing payments in all of those different scenarios because the specifics generally aren’t easily available.

Although we’re not focusing on tiered pricing in this article, we want to make one thing about it clear. We strongly recommend avoiding tiered pricing when you choose a merchant services provider because it’s incredibly non-transparent.

A young man uses a credit card to make a purchase at a convenience store

Cost Plus Merchant Processing Pricing

Merchant services in a cost plus pricing structure include a percentage cost and a fixed cost.  

The fixed cost is the same as or similar to the interchange rate — the actual cost of processing a single card payment. The percentage cost is essentially the markup, the way in which the merchant service provider earns a profit.

Cost plus credit card processors are sometimes called interchange plus card processors. That’s because of the interchange rate’s key role in this merchant services pricing model.

Another way to understand cost plus is by remembering what that term means. Merchants pay the interchange rate plus the markup. In other words, a merchant service provider charges the merchant the actual processing cost plus a percentage of each transaction.

Cost plus credit card processing is a multi-step process that involves a few calculations for each card swipe, tap, or dip. However, we believe it’s the most transparent of all three options.  

Why? Because there aren’t any surprises. All of the costs to your business are spelled out in the agreement with the provider. That sometimes includes a monthly membership fee.

This membership fee is an advantage because it’s a fixed cost instead of a variable one. Your business won’t have to pay more money if it starts processing more card transactions. It’s entirely predictable — something that’s easier to account for in business budgeting.

Is Cost Plus Credit Card Processing Right for My Business?

The cost plus credit card processing model has a lot of advantages. While no merchant services fee structure is particularly easy and quick to understand, cost plus is very straightforward. You have a clear picture of the price of each and every transaction.

Cost plus is also a flexible approach to pricing for merchant services. Providers need to earn revenue and turn a profit, of course, but they’re also often open to some negotiations. That means negotiating over the markup (i.e. the percentage cost), which can be easier than negotiating over a wide range of context-dependent fees.

Additionally, we know that many merchants can find a cost plus model that makes sense financially. It often requires comparing different merchant services providers and negotiating for more favorable rates. However, the end result is a reliable and cost-effective solution for a wide range of merchants.

As much as we believe in cost plus credit card processing, we also recognize that other options can be better for certain merchants in certain situations. That’s why our approach to payments consulting and optimization takes all viable options into account. Our goal isn’t to push a specific fee structure but to deliver the best possible payments solution to your business.

Swipesum puts experienced payments industry specialists on your side for negotiations, vendor evaluations, and much more. Best of all, these services come at no additional cost to your business. Book a free consultation to learn how Swipesum can help your company save money on payment processing.

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Michael Seaman

Michael Seaman

Michael is the co-founder and CEO of Swipesum. A veteran of the payments industry, Michael and his brother Stephen have led Swipesum since its inception in 2016. In his free time, Michael enjoyes time with his three children.

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