The trend of passing fees onto customers is gaining momentum. However, it is important to note that this practice is illegal in certain states and goes against the processing agreement set by major credit card companies. To address this challenge without incurring costs for your business, a dual pricing model can be implemented.

 In a dual pricing model, businesses set two different prices for their offerings: a retail price and a cash price. The retail price includes the cost of processing fees associated with credit card transactions, while the cash price reflects a discounted amount for customers who pay with cash or other non-card payment methods. This approach allows businesses to recover the processing fees without directly passing them onto customers and potentially violating legal or contractual obligations.

Interchange fees, also known as interchange rates or swipe fees, are transaction fees charged by credit card networks (such as Visa, Mastercard, or American Express) to the merchant’s bank (acquirer) for processing credit or debit card transactions. These fees are a fundamental component of the payment ecosystem and help cover the costs associated with facilitating electronic payment transactions.

1. Flat Rate Pricing: This model offers simplicity and predictability by charging a fixed percentage or flat fee for each transaction, regardless of the card type or transaction value. It is often preferred by small businesses or those with low transaction volumes.

2. Interchange-Plus Pricing: In this model, the merchant pays the actual interchange fee set by the card networks, along with an additional fixed markup or percentage fee charged by the payment processor. It provides transparency as the interchange fees are passed through directly, but it can be more complex to understand and analyze.

3. Tiered Pricing: With tiered pricing, transactions are categorized into different tiers or pricing levels based on factors such as card type (e.g., debit, credit), transaction method (e.g., swiped, keyed), and risk level. Each tier has its own predetermined rate. While it offers simplicity, it may lack transparency, as the specific rates for each tier may not be clearly disclosed.

The choice of a pricing model for merchant services depends on various factors, and each model comes with its own set of advantages and disadvantages. Our team is here to assist you in making an informed decision. We can assess your latest statements and provide you with a comprehensive analysis of how each pricing model would impact your bottom line. Feel free to reach out to us, and we’ll guide you through the process.