When a Merchant signs up for online payments, they are charged a fee for each transaction that is made. This fee can be one of two pricing models, known as “interchange ++” and “blended”.
The interchange ++ pricing model is designed to be the more transparent of the two, with the Merchant paying the interchange fee separately to the Merchant Services Charge (MSC). But, what does interchange ++ mean?
The interchange fee is a cost charged to the acquiring (merchant’s) bank by the issuing (cardholder’s) bank. This fee incentivises banks to keep transactions secure and occurs every time a card payment is made, be that chip and pin or e-payments.
The first “+” denotes the card scheme fee. This is a fee paid to a card scheme, such as VISA or Mastercard, by the acquiring bank.
The second “+” represents the acquirer fee. The acquirer fee is a fee charged by the acquiring bank for their services during a transaction.
Within the blended pricing model, the interchange fee and MSC are charged together to the Merchant in one combined, or blended, figure. This often will include a mark up fee as well, and therefore means it is not always the most cost-effective method to facilitate transactions. Due to different card schemes having different costs per transactions, the mark up ensures you will always be paying the price of the highest card scheme, even if they’re not used in the transaction.
The Merchant Services Charge (MSC) is the combined cost of the card scheme, interchange fee, and acquirer fees.
The authorisation fee is a fee charged by the issuing bank to cover the cost of its services. Instead of being a percentage like the other types of fees mentioned, this is a “pence per transaction” fee, usually ranging between 2-10p. This fee is also charged during interchange ++ transactions.
When deciding what type of transaction fee a Merchant should pay, it is always important to consider the following: