An Interchange Pass Thru Rate is usually the best "deal" for a Merchant.
What this means is you are charged an exact fee by the MSP (Merchant Services Provider) for their portion of the services. Nothing is hidden within the various charges and fees.
In this type of arrangement, the rates that a Visa or MasterCard charge are billed to you at their COST - pre-established by Visa and MasterCard for the exact type of CC you are processing.
In this type of system, you will be paying the COST Fees of Visa or MasterCard and then an exact MSP Fee, pre-established as well.
MSP Processing Fee = 15 Basis Points
Visa or MC COST Fee for a "type" of their issued credit card = 166 Basis Points
This particular method is almost always cheaper for the Merchant. Plus, their is no "Fluff" built into their pricing.
Visa and MasterCard change their pricing in the spring and again in the Fall.
If your are on a Tier Method, those new Fees are changed to your overall Tier prices. If you are in a Pass Thru system, ONLY the Visa or MasterCard Fees can be changed. The MSP Fee must remain the same during your contract.
Many Merchants find in the Tier Method they are paying more every Spring and Fall because many MSP Companies will raise their rates along with the Visa and MasterCard rate changes.
Remember in the Tier Method, ALL charges (MSP and Visa/MasterCard) are shown as just one number for each Tier Grouping.
It is very difficult to be 100% sure only the Visa and MasterCard Fees were raised!!
As in any situation, it is best to have your statements analyzed at least once a year. However, it is really very difficult to truly understand all the various Fees and Charges that appear on a typical statement. We see statements all the time from lots of different MSP Companies and I still don't understand all of them. However, we send the statements to our home office so they can be really looked over accurately.
Nothing worse than thinking the statement implies one thing when it is something entirely different!
If you have a "choice", always go for the Interchange Pass Thru Rate system. At least there you will have a distinction of costs between the MSP and the Credit Card Companies.
By Bernie Martin
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