By Mary Hudson June 17, 2025
If you’re a business owner in Canada, understanding how you’re charged for accepting credit card payments can make a significant difference to your bottom line. Whether you’re a small retailer, an e-commerce operator, or a growing enterprise, the way you’re billed by your payment processor affects your costs, transparency, and ultimately, profitability. One of the most transparent and widely recommended pricing models in the industry is interchange-plus pricing.
For many merchants, the payment processing world can feel filled with confusing terminology and hidden fees. That’s where interchange-plus pricing stands out. It helps you see exactly what you’re paying to the credit card networks and what your payment processor is charging on top of that.
What Is Interchange-Plus Pricing?
Interchange-plus pricing is a model used by payment processors to charge businesses for processing credit and debit card transactions. It is called “interchange-plus” because it separates the interchange fee set by credit card networks (like Visa and Mastercard) from the markup added by the payment processor.
When you accept a card payment, a portion of that transaction goes to the card-issuing bank in the form of an interchange fee. This fee varies based on factors like card type, transaction method, and merchant category. In addition to the interchange fee, your processor adds a markup to cover their own services and operational costs.
With interchange-plus pricing, your statement clearly shows both of these components: the base interchange fee and the processor’s markup. This is different from other pricing models, which often bundle all charges into a single rate, making it harder to see where your money is going.
In Canada, this model is growing in popularity because it brings clarity and control to businesses that want to understand what they’re paying and why.
How Interchange Fees Work in Canada
In Canada, interchange fees are regulated by the credit card networks but are charged by the banks that issue cards to consumers. Visa and Mastercard each publish detailed interchange fee schedules, which list the exact percentages charged for various transaction types.
These rates depend on multiple factors. For example, transactions made using a premium rewards card may incur a higher fee than those made with a standard credit card. Similarly, card-present transactions (in-person swipes or taps) typically cost less in interchange than card-not-present transactions (online or keyed-in sales), which carry a higher fraud risk.
As of recent regulatory agreements, average interchange rates in Canada have been lowered and capped to ensure fairness. Visa and Mastercard both committed to reducing average interchange fees to around 1.4 percent on domestic transactions. However, the actual rate per transaction may be higher or lower depending on specifics.
Interchange fees in Canada can vary widely, and because they are non-negotiable, the real opportunity to save money comes from understanding how much your processor is adding on top of these base costs.
The “Plus” in Interchange-Plus Pricing
The “plus” portion refers to the markup your payment processor charges. This is where processors make their money, and it is the negotiable part of your overall fee structure.
Typically, this markup is expressed as a percentage and a fixed amount per transaction. For example, your processor may charge interchange plus 0.25% + $0.10. This means that for every transaction, you pay the interchange fee (set by the network) plus 0.25 percent of the transaction total and an additional ten cents.
The benefit of this approach is that you always know what part of your fees are going to Visa or Mastercard and what part is going to your processor. It gives you leverage when comparing providers because you can focus on the markup alone, knowing that the base interchange fee is the same regardless of the processor.
This transparency helps you identify if you’re paying more than necessary, especially if your current processor has been charging you a flat or tiered rate that obscures the true cost of processing.
Interchange-Plus vs. Flat-Rate and Tiered Pricing
There are three main pricing models used in credit card processing: interchange-plus, flat-rate, and tiered pricing. Understanding how interchange-plus compares with the others can help you choose the best fit for your business.
Flat-rate pricing is simple. You pay the same percentage for every transaction, regardless of the card used or how the payment is processed. This is common with companies like Square or Stripe, which might charge 2.9% + $0.30 for all card transactions. While easy to understand, flat-rate pricing often includes a significant markup above interchange and may not reflect the actual cost of each transaction.
Tiered pricing groups transactions into different categories (qualified, mid-qualified, and non-qualified), each with its own rate. The problem is that processors decide how to classify transactions, and many end up in the higher-priced tiers. This lack of transparency makes it hard to evaluate costs or compare offers from different providers.
Interchange-plus pricing offers the most visibility. You see the actual cost of every transaction and know exactly what you’re paying to whom. While the statements may seem more complex at first, this model empowers businesses with detailed cost breakdowns and greater control over processing expenses.
Benefits of Interchange-Plus Pricing
The biggest advantage of interchange-plus pricing is transparency. You’re not left guessing why a transaction cost what it did, or whether you’re being charged unfairly. This clarity helps you manage costs more effectively and make better financial decisions.
Another key benefit is fairness. Since interchange rates are the same across all processors, the only variable is the processor’s markup. This creates a more competitive environment, where processors have to earn your business based on service, support, and price.
Interchange-plus pricing is also scalable. As your business grows and transaction volume increases, it becomes easier to evaluate how processing costs impact your revenue. High-volume merchants can even negotiate lower markups based on their size and transaction patterns.
Lastly, this model supports cost optimization. By analyzing the interchange fees on your statement, you can learn which card types or transaction methods cost more and adjust your operations accordingly. For example, encouraging debit usage or in-person transactions can lower overall fees.
Who Should Use Interchange-Plus Pricing?
Interchange-plus pricing is ideal for businesses that process a moderate to high volume of card transactions and want better visibility into their costs. It’s especially valuable for retailers, restaurants, service providers, and online businesses that handle a variety of payment types.
If you’re a small startup with minimal sales, a flat-rate processor might offer more simplicity. But as soon as your monthly card sales reach a few thousand dollars, interchange-plus pricing usually becomes more cost-effective.
This model also benefits businesses that want to integrate payments with other systems like accounting, inventory, or loyalty programs. Since interchange-plus pricing is used by most full-service processors, it often comes with better tools and support for business growth.
Merchants with seasonal fluctuations, multi-location operations, or plans to scale across Canada will appreciate the long-term savings and flexibility that interchange-plus pricing offers.
Potential Drawbacks to Consider
While interchange-plus pricing is generally a great option, it does have some considerations to keep in mind. The first is complexity. Compared to flat-rate models, your monthly statement may include more detailed line items, which can be confusing at first.
You’ll see separate entries for each transaction, including the base interchange fee, the assessment fee (another network fee), and your processor’s markup. This level of detail is useful for analysis but may require more effort to understand initially.
Also, because interchange rates vary, your effective rate will fluctuate month to month. This makes budgeting slightly less predictable, although it also reflects the real costs of your transactions. Over time, many merchants come to appreciate the accuracy of this approach.
Finally, not all processors offer interchange-plus pricing. Some may advertise low rates but bundle fees into non-transparent models. If you’re committed to using interchange-plus, be sure to confirm that it’s explicitly stated in your merchant agreement.
How to Compare Interchange-Plus Offers
When evaluating payment processors that use interchange-plus pricing, the key is to compare the “plus” part. That means looking at the markup and the terms surrounding it.
Ask for a detailed quote that outlines the percentage and per-transaction fee on top of interchange. A common offer might be interchange + 0.30% + $0.10, but this can vary based on your business type, size, and risk level.
Also consider other fees: monthly account fees, terminal rentals, PCI compliance charges, chargeback fees, and batch processing fees. Some providers advertise low markups but compensate by adding unnecessary extras elsewhere.
You should also ask about contract terms, cancellation fees, and customer support availability. A low markup doesn’t mean much if it’s paired with poor service or rigid agreements.
Choose a provider that offers clear documentation, easy-to-understand statements, and responsive support to help you navigate issues or growth.
Reviewing Your Statement for Accuracy
Once you’re on an interchange-plus plan, reviewing your statements monthly can help you catch errors and identify areas for improvement. Start by checking that the markup percentage and per-transaction fee match what was promised in your agreement.
Then look at the interchange rates applied to your transactions. You can compare them to Visa and Mastercard’s published rates online to ensure they align. This will also help you understand which types of cards are driving up your costs.
Pay attention to your effective rate. This is your total fees divided by your total sales volume. It gives you a big-picture view of how much processing is costing you. If it starts to creep up, investigate the cause and talk to your provider about optimization.
Over time, your statement will become a valuable tool for managing your payments. The more familiar you are with the details, the better equipped you’ll be to make strategic decisions.
Optimizing Payment Acceptance to Lower Fees
One of the benefits of interchange-plus pricing is that it gives you the data to optimize your transactions. For example, encouraging customers to use Interac debit instead of credit cards can significantly lower your interchange costs.
You can also promote in-person payments over online or manually keyed-in transactions. Since card-present transactions are considered less risky, they usually come with lower interchange fees.
If you operate online, using tools like address verification, fraud filters, and tokenization can reduce the risk of chargebacks and improve your qualification for lower interchange categories.
Some businesses may even choose to pass processing costs to customers using surcharging (where legal) or by offering cash discounts. These strategies must be used carefully and in compliance with Canadian payment regulations, but they can help offset costs.
Conclusion
Interchange-plus pricing offers a fair, transparent, and scalable way for Canadian merchants to handle payment processing fees. By breaking down the cost structure into interchange and markup, it gives business owners the insight they need to evaluate providers, optimize operations, and plan for the future.
While it may seem more complex at first, interchange-plus pricing empowers businesses with information. It helps you understand what you’re paying, where your money is going, and how to adjust your strategy to reduce unnecessary costs.
Whether you’re just starting out or looking to grow across Canada, this model can support your goals while keeping your payment ecosystem honest and efficient. By learning the ins and outs of interchange-plus fees, you’re not just managing payments—you’re managing profitability.