What is Interchange Plus (IC+) Pricing?

Interchange Plus (IC+) is a pricing model typically only offered to merchants with a high annual card turnover. Approximately 35% of UK merchants with an annual card turnover above £10 million will have IC+ or IC++ pricing (source). 

98% of UK SMEs with an annual card turnover of less than £10 million are on a standard blended pricing structure. 

In this guide, we’ll look at what interchange plus pricing is and how it differs from interchange plus plus (IC++) and blended pricing. 

What is interchange plus pricing (IC+)?

Before we unpack IC+ pricing in detail, it’s worth recapping the four main fee models available to merchants:

• Blended (also known as Standard)
• Interchange plus (IC+)
• Interchange plus plus (IC++)
• Fixed

These pricing models differ in how they calculate and merchant service charge (MSC) and how transparent they are how it is made up. Just to recap, the MSC is made up of:

• Interchange Fees
• Scheme Fees
• Acquirer Markup (aka Processor Fees)

The 3 main components of the MSC fees are retained by the acquiring bank, the card scheme and the card issuer as follows:

All 3 elements are charged for every card payment.

So why offer different pricing models if the fees are paid on every transaction? It mostly comes down to larger merchants having the buying power to get more transparency on how the MSC is charged.

Interchange plus pricing (IC+) is one of the more transparent pricing models, breaking the total MSC down into two components in the statement:

• The Interchange fee: As explained above, this is to cover the issuing bank’s risk and is passed from the bank to your acquirer, and then to you. In IC+ pricing, the interchange fee is passed on automatically and at cost.

• The ‘Plus’: The acquirer markup and card scheme combined together. These fees are not passed on at cost and is determined by the card network and payment processor individually.

How much are interchange fees?

Interchange fees are put in place by the card network (Mastercard, Visa, American Express, etc) and are, for the most part, advertised online for businesses to compare. 

Legislation came into play in 2015 to cap interchange fees at 0.20% on consumer debit cards and 0.30% on consumer credit cards.

This means that when a card transaction is made the acquirer should pay the card issuer no more than 0.3% of the value of any credit card transaction and 0.2% of the value of any UK debit card transaction. 

These caps do not apply to commercial cards which have higher fees. 

Visa interchange rates: UK, EU, US, SG, AU, IN

Mastercard interchange rates: UK,  EU, US, AU

You may also be interested in this comprehensive list of all card processing fees you may be liable to pay when processing card in the UK.

Brexit Effect On Interchange Caps 

As a result of Brexit, Mastercard and Visa revised the interchange fees for transactions between the UK and EEA from October 15th 2021.

Visa and Mastercard Consumer card-not-present (CNP) transactions between the UK and EEA countries will be charged in line with the interregional capped consumer rates of 1.15% for debit cards and 1.50% for credit cards (previously these were 0.20% for debit cards and 0.30% for credit cards). The consumer CNP interchange rates for EEA-issued cards at UK-merchant locations will remain unchanged.

The interchange rates for Visa Business cards will be set at 1.60% while Corporate and Purchasing cards are revised to 1.80%.

How much are interchange plus fees?

Despite this transparency, IC+ fees will vary depending on which card(s) your customers use and the markup your payment service provider (ISO or merchant acquirer) adds on. So while interchange plus pricing is more transparent versus blended/standard and fixed, it’s still not set in stone.

Interchange plus pricing vs interchange plus plus

If IC+ pricing offers greater transparency versus blended/standard and fixed pricing models, then interchange plus plus makes the total MSC even more transparent for merchants.

IC++ pricing breaks the total fee down into:

• The Interchange Fee: Passed on automatically at cost, as with IC+.
• The first ‘Plus’:The card scheme fee, passed on automatically and at cost.
• The second ‘Plus’: The acquirer fee, which is decided by the payment processor separately to cover their costs and profit margin. 

This pricing model is even more desirable for merchants as it minimises the risk of any hidden fees. However,  IC++ is a passthrough model and therefore subject to cost swings. 

Interchange plus pricing vs standard blended

Standard or blended pricing combines the interchange fee, card scheme fee and acquirer markup into several headline rates that are applied to different types of purchase transactions. These rates can either be in the form of a pence per transaction fee, a percentage of the transaction amount or a combination of the two.  

We cover the differences between blended and IC+ in more detail here.

How to secure lower payment processing fees

Merchant Savvy can help you negotiate more favourable acquirer markup fees, whichever pricing model you are on. 

Complete our online form so we can start the process of securing you extremely competitive  payment processing rates.