How can Interchange+ save me money?

Sep 18, 2022 | Payment Processing Blog

As it turns out, processing cards is not that expensive.

The unavoidable cost of processing cards is not that high – and your processor is probably just greedy.

The “unavoidable cost” of processing cards is called interchange. Interchange is the fee the fee that the card brands (Visa, Mastercard, American Express, Discover) charge for using their networks.

But for most transactions, interchange rates are actually quite low. For debit cards (which account for around 65% of all transactions), interchange rates can be as low as .05%+22 cents.

Clover, Square, Stripe, etc. will charge you somewhere around 3%+a small transaction fee (usually 20-30 cents) to run cards for your business – but for 65% of all transactions, their unavoidable costs are several full percentage points less than what they’re charging you. They lose out on around 35% of transactions, but in this case, the house always wins. And considering the upside on all the rest of the transactions are so great (losing in this case typically means breaking even or losing around 0.3%, while winning puts them up around 2.5%) these are odds they are willing to take.

So how does Interchange+ work? Instead of applying a flat rate, where you lose out on 65% of all transactions, we turn the tables in your favor. We bill your account a dynamic amount per transaction, dependant on this interchange rate, and add a small fee, mostly for being the friendly faces you can call when things go wrong. You now take the same odds that the big guys do – but they’re in your favor this time. And we’re just along for the ride.

One of the cheapest card types to run (from an interchange standpoint) is called Regulated Debit – this is the debit card issued by ones own bank when you sign up for the account. Let’s go over a pricing breakdown on regulated debit cards (which make up around 65% of card transactions) and compare us to the other guys.

The unavoidable cost: 27 cents

$100 transaction with Stripe: $3.20 ($2.93 more than their costs)
$100 transaction with Clover: $2.50 ($2.23 more than their costs)
$100 transaction with Square: $2.70 ($2.43 more than their costs)
$100 transaction with us: 67 cents (40 cents more than our costs)

That is an average savings of around 5x with us. 5 times cheaper on 65% of transactions compounds quickly. Using this model, one PolyPay (our processing partner who makes all of this possible) customer was able to save $22,000 annually.

Interchange+ is just one of our programs to save you money. We also have intuitive ways of passing most if not all of these fees on to your customers, saving you 85-100% of your per transaction costs.