What is Interchange?

In the credit card processing world, the term Interchange is quite common, it is also very often misunderstood.

A simple way to understand Interchange is to think of it as the wholesale rate the card brands (Visa, MasterCard, Discover and American Express) charge all of the processing companies. All processors, no matter how big or small, have the same interchange cost.

The interchange rate is made up of two components; the discount rate which is a percentage of the transaction amount, and a per transaction fee. The discount rate varies widely from .05% up to over 3%; the transaction fee component ranges from $0.05 to $0.22.

There are over 300 different card types and each one has its own interchange rate.

Ethix Pricing – Interchange Plus
Interchange plus pricing is the most aggressive pricing model for merchants, it is also the most transparent as you know exactly what the interchange rate is for each card type and exactly how much your credit card processor is making on your transactions.

Interchange plus pricing means the merchant pays the interchange rate (the exact wholesale rate is passed through) plus a fee to their credit card processor. That fee is usually measured in basis points. Each basis point is 1/100th of a percent.

For example, at Ethix we charge 25 basis points for a fee of 0.25%. If you ran a card-present transaction of $50 with an exempt Visa check card, the interchange fee would be 0.30% + $0.15. That gives you an interchange rate of $0.15 + $0.15 for a grand total of $0.30 for the transaction.

Interchange pricing is a bit complex, but it is important to understand what you are paying to minimize the cost of your payments system.

Think Local

We are finding that most of our merchant clients are choosing to support local charities and nonprofits through our program, we feel it really makes sense on many levels.

While there is nothing inherently wrong with large national and international nonprofits – the work many of them do is phenomenal – sometimes the larger organizations have high overhead costs and therefore less of the donation dollars go to wok on the actual Cause than the administration of the NGO itself.

By supporting smaller local and regional organizations, quite often much more of the dollar donated goes to work on the Cause, and, the impact of the those dollars donated is felt very close to home. There is a clear and tangible benefit to being able to see the impact an organization is making when it is right in your own community, the “feel good factor”, something we all love to experience, is very palpable when you can see the impact your contributions are making first hand.

Untimely we need a balance of support going to local, regional and international charities and non profits. Here at Ethix we support whatever charity or nonprofit our clients chose, we feel it is our role to support the idea and energy behind philanthropy, not to decide that a particular way in which that desire to give back shows up is better or worse than some other way.

There are as many ways to do good work on the planet as there are people who wish to do that good work, and we support all of it.

Gross vs Net profit as it relates to our donation program

givingtreeEthix donates 25% of our Gross revenue to the nonprofit or charity of your choice. The term gross revenue has caused some confusion so we put this article together to clarify. 

Revenue is described in two primary forms, GROSS and NET. Gross revenue is the total top-line revenue before any expenses are deducted while net revenue is the total revenue after costs and expenses have been deducted.  

We wanted our donation program to be clear, simple and effective so we chose to donate 25% of the revenue before we pay our expenses. This means your donation comes first, then our expenses and finally, if there is anything left, profit. We feel this is the only way to truly stand behind the program as we envisioned it, a situation that puts money back into your community where you decide it will be most effective.

We would like to thanks our patrons for their support in us but more importantly to helping show that when we work together, there truly is enough to give back and create a stronger community around us.

Ethix Partners with the LA Dental Society

LA-Dental-EthixEthix has recently entered into a fundraising partnership with the Los Angeles Dental Society to support its doctor members with great merchant services and rates, and create a new donation revenue stream for the Society to benefit its members and the communities they serve.

The Los Angeles Dental Society is a component of the California and American Dental Associations. They are dedicated to helping people in the Los Angeles area find dental care that’s right for them. LADS offers a comprehensive search engine that will help you find dental care by geographical area, area of specialty, and more.

The Los Angeles Dental Society serves the City of Los Angeles and the cities of Bell, Bell Gardens, Beverly Hills, Cudahy, Downey, Hollywood, Huntington Park, Leimert Park, Lynwood, Maywood, South Gate, Watts, West Hollywood, and City of Commerce with over 1,200 Dentist members.

The Los Angeles Dental Society Foundation exists to provide public benefit programs for the Society. It is a separate, 501(c)(3), charitable nonprofit that provides funds for a spectrum of programs and services that promote the oral health of the dental profession and the local Los Angeles community. Programs include scholarships for USC dental students, grants to oral health community clinics, and in-kind donations to oral health organizations.

Often when we think of non-profits we think of service organizations which do make up the bulk of non-profits organizations. There are however a significant number of Trade Association non-profits that serve both businesses and consumers in numerous ways. LADS is a great example of one such organization.

If you are part of a trade organization and would like to learn more about our nonprofit residual fundraising program, please contact us here.

Non-Profit Fundraising

donation jarMost fundraising done by non-profits involves some kind of an event such as an auction, dinner gala, golf tournament, casino night, etc. These events are productive and do raise money most of the time, they do however require a tremendous amount of work and often significant costs that cut into the profit from the event. Another issue is that these events are typical a one-time influx of cash – once the event is over and the funds are received, that’s the end of the revenue for all of that work that was done.

An attractive option for non-profits to add to their fundraising efforts is to raise funds that are residual in nature. Receiving a payment every month, for years into the future, is an attractive proposition to most non-profits vs. the one time hit traditional fundraisers produce. Knowing that you will be receiving these funds every month allows for more accurate and consistent budgeting for programs and expenses.

The Ethix fundraising program provides non-profits with a reliable monthly residual income stream they can count on for years into the future. In addition, the amount of effort required to implement the program is minimal.

A good mix of event based fundraising and residual income fundraising makes sense for many non profit organizations and the Ethix program is a good fit form many organizations that have business and business owner supporters.

Smart Cards

smartcardBy now most people have seen or at least heard about the new credit and debit cards with chips in them – Smart Cards. These cards, while new here in the US, have been in Europe for more than a decade.

Banks in the US have begun to roll out these new cards; chances are if you have received a new or replacement card in 2015, it has a chip in it. In September of this year, all merchants in the US will be required by Visa and MasterCard to have updated equipment to be able to process these Smart Cards. Many merchants have had to upgrade to new terminals in the past several months and most are expected to do so by this Fall.

If you are processing credit cards at your retail location, you will need to upgrade your current system to be able to accept Smart Cards. If you are not sure what this entails or need any assistance with this process, we are happy to help, just reach out to us.

Leonard Nimoy had it right

What did Leonard Nimoy have to do credit card processing? Likely very little, but he was once quoted as saying:


“The miracle is this: the more we share, the more we have.”

Leonard was a man that truly understood what is at the core of the Ethix philosophy.

There is enough for all of us on the planet; for those of us with abundance it is our responsibility to share it with those less fortunate. By doing so, we all grow and it just keeps expanding.

To Leonard, rest in peace, you will be missed. To all of you that support Ethix, help us spread the word and the change.


The Hidden Costs of Stripe and PayPal

DSCF7236We’ve received quite a few questions recently regarding how Ethix is different than processors like PayPal (who also owns Braintree) and Stripe, so we thought it would be a timely topic for a blog post. The biggest difference comes down to what merchants are really most concerned about: cost.


Both Stripe and PayPal/Braintree charge flat rate pricing, an increasingly popular cost structure for processors. And it’s easy to see why – simplicity is attractive. Flat rate pricing is easy to understand and it saves merchants from the annoyance of sifting through complex credit card processing statements. There’s no risk of missing some fine print and — at least on the surface – it appears to be totally transparent.

The flat rate pricing illusion

Flat rate pricing is simple. Credit card processing is not. In fact, flat rate pricing isn’t designed to be competitive at all–the attraction comes from the ease in which merchants can understand the structure. It’s a marketing tactic. With all the intricacies involved in credit card processing, it’s all but impossible for processors to charge a flat rate that is competitive while still remaining profitable as a company. Here’s why.

Whether they’re aware of it or not, every transaction a merchant processes incurs three fees:

  1. A fee to the issuing bank, e.g., Chase, B of A, etc. (interchange)
  2. A fee to the card brand, e.g., Mastercard or Visa (assessment)
  3. A fee to the credit card processor

While assessments are fixed costs, the interchange rate is not. This rate can vary from as low as 0.05% to over 3%. Processors that charge a flat rate need to account for every possible interchange rate. The good thing about flat rate pricing is that there’s no guesswork and it’s easy for a merchant to figure out how much it’s going to cost them to process their payments. Unfortunately this convenience comes at a cost of spending about 20% more than they have to on processing costs.

Stripe and PayPal/Braintree use a fixed percentage of volume pricing structure of 2.9% + $0.30 per transaction. This is on the higher end in comparison to interchange rates, and for merchants with low ticket transactions that extra $0.30 can be a real burden.

 “Interchange Plus” pricing optimizes costs

Quite simply, “interchange plus” pricing means the merchant pays the interchange rate plus a fee to their credit card processor. That fee is usually measured in basis points. Each basis point is 1/100th of a percent.

For example, at Ethix we charge 25 basis points for a fee of 0.25%. If you ran a card-present transaction of $50 with an exempt Visa check card, the interchange fee would be 0.30% + $0.15. That gives you an interchange rate of $0.15 + $0.15 for a grand total of $0.30 for the transaction. That same transaction through Stripe or PayPal would cost $1.75!


Another cost of processing with many flat rate processors is the funding timeline. Since companies like Stripe are technically payment aggregators, it’s not cost-effective for them to maintain the reserve required to fund their clients in a timely manner.

Through PayPal/Braintree, it takes 48 hours to receive your money. With Stripe, it takes a week. That’s seven days between purchase and funding, which can become a huge burden for many merchants, and can complicate accounting long-term.

And as for APIs…

Stripe and PayPal/Braintree are lauded for their developer-friendly APIs, and it’s no wonder. They’ve put together a collection of quality SOAP and REST APIs that allow businesses to have control over the customer-facing piece of their payment process. In fact, their APIs are so well-marketed that companies will often overlook the higher prices of processing. What these merchants don’t realize is that they don’t have to make that sort of sacrifice for simple, high-quality developer tools.

Payment processors like like our partner CardConnect provide SOAP and REST APIs and developer tools that rival the best in the industry. Plus, if you process with Ethix/CardConnect, you know your customer’s card data is protected with our patented tokenization process.

In summary

With a little education on pricing, business owners don’t have to settle for a flat-rate structure. Even smaller, low-volume businesses and startups should expect transparency, access to their money when they need it, and a full suite of developer tools. Expect more from your processor – you deserve it.


Who can we donate to?

yepWe are often asked by our new and prospective merchant partners if they can chose any non-profit to receive the Ethix 25% donation – the simple answer is Yes!

Any non-profit or charitable organization is eligible; in fact they do not need to be an official IRS registered non-profit like a 501c3 or even located in the United States. We define eligibility as “any organization doing good work on the planet”.

Our philosophy on this is simple: we believe that there are as many ways to do good work on this planet as there are people wanting to do it. We are not here to decide which projects or groups are worthy and which are not, our goal is to support the intention to affect positive change and steer our donation funds in whichever direction our merchant partners desire to that end.

Do you have a charitable cause you like to support? We support schools, PTA’s, churches, community groups and industry associations as well as the many traditional cause specific types of non-profits. Introduce Ethix and we will work with them to create a new passive residual income stream to support the good work that they do.

Tiered vs. Interchange Plus Pricing

tieredinterchangeplusVisa and MasterCard issue over 400 different card types in the US, each one of these card types has a wholesale cost all the processing companies pay, this wholesale cost is called Interchange and it’s the same price regardless of how big or how small the processor may be.

Typically with a tired pricing structure we see a qualified, mid qualified and non qualified tier.  With the tired pricing structure the processor takes all of those 400 plus card types and puts them in one of these buckets or tiers.  As a merchant, you pay that tiered price regardless of the actual Interchange price the processor pays.

With an Interchange Plus pricing structure the merchant pays the exact (pass-through) wholesale Interchange cost plus one fixed mark-up.

Margins for the processors on the tiered structure are usually much larger with a tiered structure; it can be as much as 1.00% or more on many of the card types.  Interchange pass-through margins are typically much lower, often below 0.50%.

Most small and mid sized merchants in the US are familiar with the long standing standard tiered pricing structure for merchant services.  Traditionally, the Interchange Plus structure has been reserved for larger merchants (over $100k/month in processing volume).

The standard mark-up we use at Ethix is 0.25%.  This offers a very fair and competitive price for our clients with complete transparency – you know exactly how much margin we are making.  We offer the Interchange pass-through rates to all of our clients, regardless of size.

If you are on a tiered structure with your current provider we invite you to contact us to see how much you could be saving with an Interchange pass-through pricing structure with Ethix.