By Carla Loftis July 1, 2025
For small business owners in Kentucky, managing expenses is key to profitability. One of the most misunderstood but significant costs in running a business is credit card processing. Every time a customer pays with a card, the business pays a fee. These fees can vary widely depending on the pricing model you choose. Among the various options available, interchange-plus pricing is gaining attention for its transparency and potential savings.
If you are a Kentucky merchant trying to get a better handle on your payment processing costs, understanding interchange-plus pricing is a smart place to start. It helps you see exactly what you are paying, where the fees go and how you can keep more of your hard-earned revenue.
What Is Interchange-Plus Pricing
Interchange-plus pricing is a method used by payment processors to charge merchants for accepting credit and debit card payments. It breaks down the cost into two parts. The first part is the interchange fee set by the card networks like Visa and Mastercard. The second part is the processor’s markup, which is the “plus” in interchange-plus.
This structure makes it easier for business owners to see exactly what portion of the fee goes to the banks and what part is being charged by the processor. Unlike flat-rate or tiered pricing models that combine all costs into a single rate, interchange-plus offers full visibility into how fees are calculated.
The Interchange Fee Explained
The interchange fee is paid to the customer’s bank and is determined by the card networks. It varies based on factors such as the type of card used, the transaction method and the industry of the merchant. For example, a rewards card typically has a higher interchange fee than a basic debit card. Similarly, an in-person transaction usually has a lower fee than a manually entered one.
These rates are non-negotiable and apply across all processors. What makes a difference is how the processor adds their margin on top of this fee.
The “Plus” Part of the Equation
The “plus” in interchange-plus is the markup charged by your payment processor. This is the fee they earn for providing the service, including the payment gateway, reporting tools and customer support. The markup is usually expressed as a small percentage plus a fixed fee per transaction, such as 0.25 percent plus 10 cents.
This part of the fee can be negotiated and varies depending on your sales volume, average ticket size and industry.
Why Interchange-Plus Is a Good Fit for Kentucky Merchants
Kentucky is home to a wide range of small and mid-sized businesses, from family-owned diners to regional retailers. For many of these businesses, interchange-plus pricing offers a way to better manage processing fees and make smarter financial decisions.
One of the main benefits of interchange-plus pricing is its transparency. With a clear breakdown of fees, you can identify areas where you might reduce costs, such as encouraging the use of lower-cost payment methods or negotiating a better processor markup.
Avoiding Hidden Fees
Tiered pricing models often categorize transactions into “qualified,” “mid-qualified” and “non-qualified” tiers. While this might sound simple, it actually obscures how much you are paying and why. You may be charged more for certain transactions without a clear explanation.
With interchange-plus pricing, there are no vague categories. You see the actual interchange rate plus the processor’s fee for each transaction. This transparency helps prevent overcharging and ensures you are not paying more than necessary.
Better for Growing Businesses
As your business grows and processes more transactions, interchange-plus pricing can offer better savings compared to flat-rate models. Flat-rate pricing might be easier to understand initially, but it often results in higher effective rates for merchants with larger volumes.
Interchange-plus allows your processing fees to scale more appropriately with your sales. The more efficient your transactions, the more you can benefit from the lower underlying interchange rates.
How to Evaluate Interchange-Plus Offers
If you are considering switching to interchange-plus pricing, it is important to evaluate offers carefully. Not all processors are the same, and some may use the term “interchange-plus” while still adding unnecessary fees elsewhere.
Start by asking for a full pricing breakdown. This should include the exact percentage and per-transaction fee the processor will charge on top of the interchange. Also ask about monthly fees, PCI compliance charges, and any equipment or software costs.
Understanding Your Effective Rate
The effective rate is your total processing cost divided by your total sales volume. It gives you a snapshot of what you are really paying. Even with interchange-plus pricing, it is useful to calculate your effective rate to compare offers and monitor your costs over time.
Some Kentucky merchants choose to work with independent payment consultants to help evaluate proposals and ensure they are getting a fair deal. This can be especially helpful if you are not familiar with the technical details of payment processing.
Local Support Adds Extra Value
Choosing a payment processor with local support in Kentucky can make your experience even better. Local representatives often understand the regional business landscape and can offer faster, more personalized service. When combined with the clarity of interchange-plus pricing, this local connection can help you manage your payment system more efficiently.
Tips to Maximize Savings with Interchange-Plus
Once you are on an interchange-plus plan, there are additional steps you can take to minimize your costs. Train your staff to handle transactions correctly. For example, swiping or using chip readers instead of manually entering card details can lower your interchange rates.
Encourage customers to use debit cards when possible, as they typically carry lower interchange fees. Review your monthly statements to identify patterns and ensure that your rates are consistent with your contract.
Regularly Review Your Agreement
Market conditions and business needs change. Set a reminder to review your processing agreement at least once a year. If your sales volume has increased or if you have added new services, you may be able to negotiate a lower markup with your processor.
Keeping an open line of communication with your payment provider also ensures that you stay informed about updates, rate changes and new tools that could benefit your business.
Conclusion: Choosing Clarity Over Convenience
For merchants in Kentucky, understanding how credit card processing fees work is an important part of running a cost-effective business. Interchange-plus pricing offers a level of clarity and fairness that other models often lack. By showing exactly where your money is going, it allows you to make smarter decisions, negotiate better deals and protect your margins.
Whether you are a new business just starting out or an established company looking to cut costs, taking the time to explore interchange-plus pricing can lead to long-term savings and stronger financial control. When combined with local support and ongoing review, this pricing model becomes a powerful tool in your business toolkit.
As the payment landscape continues to evolve, knowledge and transparency will remain your greatest allies. Interchange-plus pricing gives you both and puts you in control of your processing costs, one transaction at a time.