Why Is Interchange Plus Pricing Harmful to the Church?

There are four basic pricing models used when a church accepts online donations. In part three of this series, we will unpack interchange plus pricing.

My Well Team

Interchange plus pricing is considered to be one of the fairest models out there. While it is a better option than our previous two models, it still relies on for-profit pricing. Before I explain this model, we first need to understand interchange rates and basis points. 

What Is Interchange

Interchange is the percentage card companies charge a vendor to accept card payments. If you’ve ever been curious about how card companies like Visa, Discover, and Mastercard can afford their promotions and cashback offers, the answer is interchange. 

Each card company has a different interchange rate for each of its card types. A few of these companies have typically higher rates than others, and these rates can change every year. Regardless of size or volume, anyone that processes card payments is charged the same interchange rates. Understanding interchange is crucial to any successful payment processing strategy.

What Is A Basis Point

A basis point is equal to 1/100 of a percent or 0.01%, so 100 basis points would be one percent. The reason they exist in the first place is to make an easy-to-understand rate of measurement. Since percentages can add up to a large sum every month, it helps to have something tangible to understand when discussing figures. Most people don’t mind being charged an extra 0.7%, but they would be upset about 70 basis points.

What Is Interchange Plus Pricing

Now to understand interchange plus pricing, all you need to do is add a number of basis points to interchange. So instead of each transaction being charged a blanket percentage, companies will charge churches exactly the interchange rate plus basis points and processing costs.

Pros of Interchange Plus Pricing

The biggest asset of using this model is that you, as the church, are charged a fairer rate. As you learn which payment methods have the highest interchange rates, you can encourage your givers to use a more cost-effective one. Since ACH/eCheck have a 0% interchange rate, if everyone used ACH as their default method, your savings would increase as givers stopped using credit and debit cards.

Cons of Interchange Plus Pricing

One of the few drawbacks to using this pricing model is the difficulty of interpreting billing statements. The other disadvantage of this pricing model is its price. Simply put, it’s still not the best deal available.

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Bringing It All Together

Interchange plus is very fair but still adds a percentage on top of processing fees. Churches should be able to accept as much of their donations as possible. My Well Ministry offers one more pricing model to examine that does not add basis points.

To continue learning about payment processing, be sure to subscribe to our mailing list to be notified when our next blog in this series comes out.

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