Overview
This article explains how interchange cost-plus (IC+) pricing works within foreUP Payments, why processing fees can vary by transaction, and how different payment methods, card types, and card brands affect your total cost.
Credit card processing costs are not all controlled by foreUP. A processing fee typically comprises several components, including fees set by card brands, fees paid to card-issuing banks, and the foreUP markup that supports the payments platform.
Flat-Rate vs. Interchange Cost-Plus (IC+)
There are two common pricing models in credit card processing: flat-rate pricing and interchange cost-plus pricing. foreUP Payments uses the IC+ model because it provides more transparency into the true cost of each transaction.
| Model | How It Works | Key Takeaways |
|---|---|---|
| 💳 Flat Rate | All transactions are charged the same blended rate, regardless of card type, card brand, transaction risk, interchange cost, or method of entry. | Pros: • Simple to explain and understand • Predictable rate per transaction Cons: • Often more expensive overall • Lower-cost transactions may subsidize higher-cost transactions • Limited visibility into the true cost of processing • Harder to understand what is driving fees |
| ✅ Interchange Cost-Plus (IC+) | You pay the actual interchange and assessment fees set by the card networks, plus a fixed, transparent markup from foreUP. | Pros: • More transparent pricing model • Shows the true cost of different transaction types • Often more cost-effective for businesses with a mix of lower-cost transactions • Helps you understand and influence processing costs Cons: • Costs vary by card type, card brand, and transaction method • Monthly effective rates may fluctuate based on customer payment behavior |
What Is Interchange Cost-Plus?
In the IC+ model, merchants pay the real underlying cost of each transaction plus a fixed markup. This is sometimes described as a wholesale pricing structure because card network costs are passed through rather than hidden in a blended flat rate.
A typical processing cost includes:
- Interchange fees: Fees paid to the cardholder’s issuing bank. These are set by the card brands and vary by card type, transaction method, industry, and other factors.
- Assessment fees: Fees charged by the card networks, such as Visa, Mastercard, Discover, and American Express.
- foreUP markup: A fixed markup that supports the foreUP Payments platform, payment tools, reporting, support, and related services.
Why Processing Fees Vary
IC+ pricing is more transparent, but it also means your processing costs can change from transaction to transaction. This happens because not all cards and payment methods carry the same cost.
For example, a tapped debit card at the point of sale usually costs less to process than a manually keyed premium rewards credit card. IC+ pricing reflects the real cost differences rather than blending them into a single flat rate.
Key Benefits of IC+
- Clearer visibility into the true cost of each transaction
- Ability to compare costs across card brands, card types, and transaction methods
- Often more cost-effective for businesses that process lower-risk or card-present payments
- No overpaying on low-cost transactions to subsidize higher-cost transactions
- Itemized processing costs with a transparent foreUP markup
- Better insight into how customer payment behavior affects your fees
How Interchange Rates Are Calculated
Interchange rates are determined by several factors. Because these variables can change from one transaction to the next, it is difficult to predict exact future interchange costs. However, reviewing past processing data can help you understand trends and identify what may be driving your average cost.
- Card Brand:
Each card brand, such as Visa, Mastercard, Discover, and American Express, sets its own interchange rates. These rates are typically updated periodically, often in April and October. - Card Type:
Credit cards generally cost more to process than debit cards. Premium rewards cards often cost more because issuing banks use interchange revenue to help fund cardholder rewards programs such as points, cash back, and travel benefits. Transaction Method:
How the card is accepted has a major impact on cost.- Card-present (CP): Swiped, inserted, or tapped transactions usually have lower costs because the card is physically present.
- Card-not-present (CNP): Online, keyed, or saved-card transactions usually have higher costs because they carry higher risk.
Important: Any transaction using a saved card on file is treated as card-not-present (CNP), even when processed in the POS. This is required by card network rules.- Merchant Category Code (MCC):
Different business types have different MCCs, which can impact interchange based on industry category and risk. foreUP commonly uses:- 5812 – Eating Places and Restaurants
- 7992 – Golf Courses (Public)
- 7997 – Membership Clubs
- 9399 – Government Services
- Transaction Amount:
Larger transactions usually result in higher total fees because most processing costs include a percentage of the transaction amount. Some fees may also include a small per-transaction component.
Example: Why Two $100 Transactions Can Cost Different Amounts
Even when two transactions are for the same dollar amount, they may not have the same processing cost.
| Transaction | Typical Cost Impact | Why |
|---|---|---|
| $100 debit card tapped in person | Usually lower cost | Debit and card-present transactions usually carry lower interchange fees. |
| $100 premium rewards credit card entered online | Usually higher cost | Rewards credit cards and card-not-present transactions typically carry higher interchange fees. |
With flat-rate pricing, these transactions may appear to cost the same because they are blended into one rate. With IC+ pricing, you can see the actual cost differences between transaction types.
FAQ
Tip: Click a question below to expand the answer.
Why doesn't foreUP use a flat-rate model? +
foreUP uses IC+ because it provides more transparency. Flat-rate pricing blends many different transaction costs into one rate, which can cause merchants to overpay on lower-cost transactions. IC+ shows the actual underlying cost of each transaction plus foreUP’s fixed markup.
Why do my processing fees change from month to month? +
Your fees can change based on the types of cards your customers use, how payments are entered, the mix of card-present and card-not-present transactions, transaction amounts, and card brand costs. IC+ pricing reflects those real differences instead of hiding them inside a single blended rate.
Can foreUP control interchange rates? +
No. Interchange rates are set by the card brands and issuing banks. foreUP does not control those pass-through costs. foreUP’s controllable portion is the fixed markup added on top of interchange and assessment fees.
Why are manually keyed transactions more expensive? +
Manually keyed transactions are considered card-not-present because the card is not physically read by the terminal. Card-not-present payments usually carry higher risk and therefore often have higher interchange costs.
Why does a saved card count as card-not-present? +
A saved card on file is treated as card-not-present because the physical card is not being inserted, tapped, or swiped at the time of payment. This applies even when the payment is processed from within the POS.
Why are rewards credit cards more expensive to process? +
Premium rewards cards often carry higher interchange fees because issuing banks use interchange revenue to help fund cardholder rewards programs such as points, cash back, travel benefits, and other perks.
Why are debit cards usually cheaper than credit cards? +
Debit cards usually carry lower interchange costs because they are funded directly from the cardholder’s bank account and generally have lower credit and rewards-related costs than credit cards.
Why do American Express transactions sometimes cost more? +
American Express has its own pricing structure and card programs. Depending on the card type and transaction method, American Express transactions may carry different costs than Visa, Mastercard, or Discover transactions.
Why does online checkout usually cost more than in-person payment? +
Online checkout is usually treated as card-not-present because the physical card is not read by a terminal. Card-not-present transactions generally carry higher risk, which often results in higher interchange costs.
Why can different areas of my business have different processing costs? +
Different parts of your business may use different merchant category codes, transaction methods, and card mixes. For example, restaurant transactions, golf shop transactions, membership payments, and online payments may not all qualify for the same interchange categories.