Understanding merchant pricing is essential for both establishing new merchant accounts in your portfolio as well as retaining those accounts over time. Being knowledgeable about pricing in the merchant processing industry will help to set you apart from others in the field, provide your sales office with ample revenue (residuals) and enable you to assist your new and existing merchants with statement analysis, pricing questions and rate reviews.

Pricing is made up of four components:

  1. Interchange

  2. Assessments

  3. Cost

  4. Margin (Profit)

Interchange makes up most of the expense on a transaction, in fact, roughly 90% of the cost of a transaction is interchange. Interchange is complex, made up of more ethan 900 different categories for Visa, MasterCard and Discover alone! American Express does not participate in interchange but does have a program of fees that functions similarly to interchange. Interchange is applied to every transaction and is charged according to merchant and cardholder influences. Things like swiping a card vs. hand keying and when the transaction is settled by the merchant will change the cost of interchange on a transaction.