Dual pricing is a game-changer for businesses looking to eliminate the burden of credit card processing fees. But how does the money actually flow? Who gets paid, and where does each dollar go? Understanding this process helps merchants see the true financial benefits while knowing how the entire system works. Let’s break it down step by step.
1. The Customer: Choosing Cash or Card
Customers see two clearly marked prices: a cash price and a card price. They choose how they want to pay:
- Cash: They pay the lower price, and no processing fees apply.
- Card: They pay the higher card price, covering the cost of processing.
📌 Key Benefit: The merchant no longer absorbs the cost of card processing.
2. The Merchant: Collecting Payment and Keeping Profits
With dual pricing, merchants keep 100% of their sales revenue because the card price includes the processing fee.
- When a cash sale happens, the merchant gets the full amount.
- When a card sale happens, the merchant still gets their full asking price, while the processing fee is deducted from the total amount charged to the customer.
📌 Key Benefit: Merchants eliminate processing fees and maximize profits.
3. The Agent: Earning Commission on Transactions
Agents (Independent Sales Agents, or ISAs) help businesses implement dual pricing solutions. They earn commission based on the total card transaction volume processed by their merchants.
- Every time a customer pays with a card, a percentage of the transaction (from the processing fee) is split between the ISO, agent, and processor.
- The more volume the merchant processes, the more the agent earns.
📌 Key Benefit: Agents have a recurring income stream without charging merchants directly.
4. The ISO/Processor: Handling Transactions and Settling Payments
The Independent Sales Organization (ISO) or payment processor is responsible for:
- Routing transactions securely between the merchant, customer’s bank, and card networks.
- Depositing funds into the merchant’s account.
- Withdrawing processing fees (which were covered by the customer in the card price).
The ISO/processor takes a small percentage of the transaction for managing this process.
📌 Key Benefit: ISOs/processors earn from processing fees without charging merchants directly.
5. The Card Networks (Visa, Mastercard, etc.): Charging Interchange Fees
Visa, Mastercard, Discover, and Amex charge interchange fees on every card transaction. This fee is paid by the processor and is part of the total processing cost.
- These fees vary by card type (e.g., rewards cards often have higher fees).
- They are non-negotiable and go directly to the card networks.
📌 Key Benefit: Card brands profit from every transaction, regardless of the pricing model.
6. The Banks: Issuing and Acquiring Fees
Two banks are involved in every card transaction:
- Issuing Bank (Customer’s Bank): The bank that issued the customer’s credit/debit card. It earns a portion of the interchange fee.
- Acquiring Bank (Merchant’s Bank): The bank that deposits the merchant’s funds. It may charge a small fee for settlement services.
📌 Key Benefit: Banks profit through interchange fees and transaction handling.
The Full Payment Flow (Visual Breakdown)
- Customer chooses payment method (Cash or Card).
- Merchant collects payment (Cash = full amount, Card = full amount including processing fee).
- For card transactions:
- Payment is routed through the processor and card networks.
- Interchange fees go to banks and card brands.
- The processor deducts fees and deposits net revenue into the merchant’s account.
- The agent and ISO receive their share of processing fees.
📌 Final Result: The merchant keeps their full price on every sale, and the payment ecosystem operates efficiently behind the scenes.
Why Merchants Should Care
Traditional processing models eat into profits with unpredictable fees. Dual pricing puts merchants back in control by eliminating these costs and ensuring every dollar earned is a dollar kept.
💰 Stop losing money on processing fees! Contact us today to see how dual pricing can maximize your profits while keeping customers happy.
