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Until recently interchange pricing has only been available to merchants with enough processing volume to support the profits that merchant service providers have become accustomed to reaping from the conventional three-tier pricing structures that have dominated the merchant account landscape.

A three-tier pricing model produces a substantially larger profit than does an interchange pass-through model. This has made providers reluctant to offer this preferred pricing structure to all but the most sought after high-volume merchants. In just the past year or so a couple different factors have contributed to the increased availability of interchange pricing.

The fierce market competition in the payments industry has been stressed even further by an unfavorable economic climate driving down supply and bringing the possibility of interchange pricing to merchants to whom it was previously unavailable. The spread of information online and web sites like CardFellow that assists businesses in finding the best merchant account have begun to enlighten merchants about the existence of substantially less expensive pass-through pricing.

Interchange has always been the basis for merchant account fees but it has been masked by a simplified three-tier pricing structure. Interchange fee schedules released by Visa and MasterCard twice annually in April and October collectively have hundreds of different discount and authorization fees that can intimidate even a seasoned merchant. As intimidating as these schedules are, the time spent to understand them will yield a healthy return when a merchant is able to secure an account that utilizes a pass-through model.

CardFellow has provided data showing that some merchants have reduced processing expenses by more than 40% after switching from a tiered merchant account to a pass-through model. Average savings while still impressive are slightly more conservative at roughly 20%. The savings a merchant will see when switching from a tiered to an interchange pricing schedule will vary depending on various factors such as the type of business and the amount of downgrades the merchant was experiencing on their tiered plan.

For merchants, interchange pricing means a new learning curve and a slightly longer search for the best merchant account that is richly rewarded with substantially less expensive credit card processing costs.

For providers, it brings the reality of smaller profits and even more competition. Although on the rise, the mainstreaming of interchange pricing is going to be a hard-fought battle for businesses. The electronic bankcard industry is one of the most profitable financial industries in our modern economy, and getting providers to let go of the large margins they've come to enjoy isn't going to be easy. With that said, the free market will inevitably prevail and even the most stubborn merchant service providers will need to succumb to the interchange pricing movement that is just now coming over the horizon.

This article about Interchange Pricing and more can be found at Merchantcouncil.org to help you find the best merchant account for your credit card processing needs.

Article Source: ArticlesBase.com - The Mainstreaming of Merchant Account Interchange Pricing