Interchange-Plus Model Basics

There are several different pricing models, used by credit card processing companies today, and interchange plus is one of the most popular among them. The way it works is very simple. A credit card merchant processor simply adds its mark-up to the interchange rates that are published regularly by Visa and MasterCard and the result is what the merchant pays as a card processing cost. So if the interchange rate for a Visa CPS/Retail Credit card is 1.54% + $0.10 per transaction and the credit card transaction processing provider has a mark-up of 0.30% + $0.15 per transaction, the resulting rate will be 1.74% + $0.25 per transaction and that is what the merchant will be charged.

Merchant services providers can use one mark-up for all interchange rates or, which is more often the case, different mark-ups for different types of cards. For example, if a payment processing services provider wants to offer the same discount rate for both Visa and MasterCard credit cards, it will have to use different mark-ups, as the interchange rates, used by each Credit Card Association, are different.

The interchange plus pricing does not apply to Discover and American Express rates. In fact, none of the pricing models, used by the payment processing companies, applies to them. Both Discover and American Express set their own pricing and mark-ups are not allowed.

Dealing with Invalid Chargebacks

In order to eliminate frivolous customer disputes and invalid chargebacks, the Credit Card Associations of Visa and MasterCard have implemented sophisticated verification systems that significantly reduce chargeback levels and greatly improve the chargeback process. When Visa or MasterCard detect an invalid chargeback, it is automatically returned to the card issuer that originated it, and the merchant and merchant services provider never see it. Many credit card processing companies (including UniBul) also have systems that routinely review exception items, allowing them to resolve issues before a chargeback is necessary. Together, these systems ensure that the chargebacks that you receive are legitimate or that only you can respond to them.

Even though the chargeback verification systems are becoming ever more sophisticated, there is still a chance that an invalid chargeback may find its way around them and into your merchant processing statement. In addition, a chargeback may be cleared by the Credit Card Associations' verification systems, as it meets their requirements, and still be invalid. In these cases you should follow through as quickly as possible and represent your supporting evidence to proof that the credit card processing charges were valid.

Although invalid chargebacks cannot be completely eliminated, you can significantly reduce their number by following certain payment card processing best practices. Ask your merchant account provider for assistance in implementing these best practices into your organization. If the levels of invalid chargebacks remain consistently high, even after all of your efforts to contain them and all of the assistance that you have received from your merchant account provider, it may be possible that your processor simply lacks the expertise to address the issue and your best option may be to switch to another payment processor. Be sure to do your due diligence when researching your prospects and consider all aspects of the service. Contact merchants who are currently using your prospect's merchant services and evaluate their level of satisfaction. Keep in mind that the right processing partner can save you money and help grow your business.

E-Commerce Merchant Account Set-Up

Setting up an eCommerce merchant account (here is our solution) is pretty similar to establishing a manual credit card processing service, with a few notable exceptions. You will need the following:

• A functioning website. This requirement is self-explanatory and does not require a comment.


• A SSL Certificate. You need the SSL to ensure that the information that your customers provide is handled in a secure way and it is protected from identity thieves.


• A shopping cart. This is the service that collects your customers' purchase details and payment information. It integrates into your website which is usually done by the person who builds the website. There are a great number of shopping carts out there, some of which you can get for free. It can also be built by your developer. Each choice has its pluses and minuses and the decision on which one to select should be made on a case-by-case basis.


• An eCommerce payment gateway. A payment gateway is the service that connects your shopping cart with your credit card merchant processor and transmits the payment information. It usually is offered by your internet credit card payment processing provider. It serves the exact same purpose that a physical terminal does, and it performs the same range of functions.


• An internet merchant account. This is the service that will enable you to accept credit card transactions and other electronic forms of payment. It links all previously mentioned components into an inter-related system and is your connection with your merchant services provider and the Credit Card Processing Networks of Visa and MasterCard. There are many providers out there and you should have no problem locating them. It will be a good idea to request several proposals and compare the terms before you make your decision.

I have not talked about pricing here, as it has been discussed in great detail in other credit card processing articles. I would like to remind you, however, that you should always evaluate the whole merchant account processing pricing proposal and not just the single rate or fee that usually gets advertised.