Card Payment Fees: Should You Choose IC++ or a Blended Rate?

Card Payment Fees: Should You Choose IC++ or a Blended Rate?

If you run a business and you take card payments, you’ve probably wondered if you’re getting a good deal on your processing fees. One thing many people don’t realise is that there are two different ways providers charge you, and the difference could be costing you money.

The first option we are going to analyse is IC++ pricing. This is probably the least understood pricing model; however, you can potentially save a lot of money by moving to this pricing structure, so let’s take a look at IC++ pricing in more detail.

Is IC++ the Right Choice for Your Business? Here’s How It Works and What You Could Save:

Let’s break it down in plain English:

IC++ (Interchange Plus Plus) is a pricing model where your card processing fees are charged at individual rates, which can result in significant savings over time.

Let’s say you have a turnover of £10,000 with an average order value of £20.00.

The average breakdown for each card type used is:

Visa Debit: 40%
Visa Credit: 10%
Visa Business: 4%
Mastercard Debit: 31%
Mastercard Credit: 13%
Mastercard Business: 2%

Here is an example of business rates on an IC++ pricing model:

Terminal Fee: £20.00 per month
Authorisation Fee: 3p per transaction.
Visa Debit: 0.4%
Visa Credit: 0.8%
Visa Business: 1.25%
Mastercard Debit: 0.4%
Mastercard Credit: 0.8%
Mastercard Business: 1.25%

To keep the maths simple, how much would this cost each month with a turnover of £10,000 per month and an average order value of £20.00?

Total Transactions: 500
Authorisation Fee: 3p x 500 = £15.00

Terminal Fee (1 x terminal): £20.00
Visa Debit: 40% of £10,000 at 0.4% = £16.00
Visa Credit: 10% of £10,000 at 0.8% = £8.00
Visa Business: 4% of £10,000 at 1.25% = £5.00
Mastercard Debit: 31% of £10,000 at 0.4% = £12.40
Mastercard Credit: 13% of £10,000 at 0.8% = £10.40
Mastercard Business: 2% of £10,000 at 1.25% = £2.50
PCI Compliance: Free
Total: £89.30 per month

This may seem like a lot to take in, but having custom pricing for each card type can massively benefit your business if your customers pay mostly by debit cards, which these days people do.

When Should You Choose an IC++ Rate?

This option is appropriate for businesses that process over £4,000 through their card machines per month.

If you know your customers mostly use Visa Debit or Mastercard Debit, an IC++ model can work very well for your business, especially if you have a higher turnover. Let’s break it down as to how it works.

Is a Blended Rate the Simpler Option for Your Business? Here’s What It Means and What You’ll Pay:

With a blended rate, everything is rolled into one simple percentage. For example, you might pay 1.5% per transaction, and that’s it. It doesn’t matter how many transactions you have, or the split of your card breakdown with a blended rate; they are super simple to manage because you will have the same percentage rate mirrored across all card types!

At the moment, the average blended rate in the industry is 1.5%. Quite often, people pay for the device upfront with a blended rate, although some customers still pay monthly, but for this example, we won’t have a monthly fee for the terminal on a blended rate. 

‘How does a Blended Rate compare to the IC++ Rate?’, you may ask. Well, let’s run the breakdown again, but this time with a blended rate.

So, how much would this cost each month with a turnover of £10,000 per month and an average order value of £20.00?

Total Transactions: 500
Authorisation Fee: 0p (most blended rates have no authorisation fee)

Terminal Fee £0.00
All Card Types: 100% of £10,000 at 1.5% = £150.00
PCI Compliance: Free
Total: £150.00 per month

As you can see from the maths, you can save around £60.00 per month by moving over to an IC++ rate, which could equate to £720.00 per year savings based on the figures above.

When Should You Choose a Blended Rate?
Blended rates are often best suited to smaller businesses processing up to £4,000 per month, as well as seasonal traders who prefer the flexibility of no monthly fees or long-term contracts. For businesses that value simplicity and upfront pricing, blended models can work well. However, if your card turnover is regularly above £5,000 per month, or you’re planning to grow, it’s worth reviewing your rates to ensure you’re not overpaying.

To Summarise:

IC++ Rate

The Good:

• The percentage charge rates across each card type are generally a lot lower than the charge of a blended rate

• Works out a lot cheaper if you take lots of card payments

• Rates are often fixed, so you’re not subject to rate reviews every 3 months

• Great if you want control over what individual card rates you pay

The Bad:

• It can be difficult to understand the monthly/annual statements

• Your total fees can change slightly every month (with some providers… not us!)

Blended Rate

The Good:

• Very transparent – you know exactly what you’re paying

• Fixed rate – great for budgeting and keeping track of your costs

• Often comes without a set contract of X months

• Great for seasonal businesses

• Ideal if you don’t take loads of card payments

The Bad:

• Often more expensive than other pricing models if you have a high turnover rate

• Subject to pricing changes, as you’re not in any form of contract
  

So, Which One Is Better for Your Business Type?

It entirely depends on your business:

• Small businesses or start-ups: A blended rate is usually easier to manage. You always know what you’re paying.

• High-volume businesses (like cafes, barbers, shops): IC++ could work out cheaper, especially if most of your customers pay by debit card.

• Larger or growing businesses: It’s worth comparing both to see where you could save more in the long run.

Top Tip: Ask for a Free Merchant Statement Review

If you’re not sure what you’re currently paying, ask your provider (or us) to review your latest card statement. We’ll break it down for you and show you whether IC++ or a blended rate would be better for your setup.

Final Thoughts

There’s no one-size-fits-all when it comes to card processing fees. The best choice depends on how your business runs, how many card payments you take, and how much you’re processing.

Understanding the difference between IC++ and blended rates could save your business hundreds or maybe even thousands of pounds a year – and it only takes a few minutes to check.

If you would like to learn more or have any questions, feel free to call us for a friendly chat on 01603 339096 or visit https://businesspaymentssolutions.co.uk/