Cloudbeds Payments - Cost+ Versus Blended Rate Pricing

Mariia Korostashevych

Updated June 19, 2024 12:47

Overview

Cloudbeds Payments offers a Cost+ pricing model for its merchants. Similar to the IC+ or IC++ (interchange plus) model, Cost+ is an alternative to blended rate pricing that offers an added layer of transparency.

Every payment transaction carries processing fees, including interchange (charged by card issuing banks, e.g., Chase) and card network fees (charged by credit card networks, e.g., Visa, MasterCard, Amex). These processing fees are set by the card brands and networks and passed through to payment processors (e.g., Cloudbeds). With Cost+ pricing, Cloudbeds passes these fees to customers plus a small markup.

Difference between the Cost+ and blended rate pricing

The passthrough costs differ based on card type, card owner country, card presented country, and more. Here are some examples of card attributes, all of which can incur different fees:

Basic card, rewards card, travel card
Country location of each of the above card types
Where transaction takes place if card presents as domestic versus international
Virtual credit cards (VCCs)
Card brand of all of the above

Each card brand has its own interchange fee schedule, ranging from <1% to 5+%. These fees are per transaction so that each transaction can have a different passthrough cost. On top of the passthrough costs, processors add their markup, usually a fixed percentage rate. Examples are provided below.

A blended rate combines all these fees into one fixed rate. This means the customer pays one rate per card type (brand, domestic/international) instead of a different fee for each transaction type, which takes card type, bank, customer, location, and more into consideration.

If the Cost+ model is cost + 1.2% and the blended rate is 2.9% (domestic) and 3.9% (international), here are costs for different cards under the two pricing models:

These examples are for illustrative purposes only.

Guest Card	Cost +	Blended
Domestic guest with a domestic card	0.8% passthrough costs 1.2 % provider markup 2.0% to customer	2.9% to customer
International guest with international card	3.0% passthrough costs 1.2% provider markup 4.2% to customer	3.9% to customer

Pros and cons of Cost+?

The benefit depends on the guest mix and card mix. Generally, blended rates are better for merchants who prefer simplicity in reconciling their fee expenses. Cost+ is a more transparent model, where the properties can see the markup separate from the passthrough fees. Cost+ can be more cost-effective for customers with high processing volumes and who understand their specific customer card breakdown.

To sum it all up, here is how you can think of the two pricing models using the above hypothetical rates:

Cost+: Variable passthrough rates of <1% to >5% + 1.2% markup per transaction
Blended: Your rates are 2.9% and 30 Cents for Standard Cards | +1% for Specialty / International Cards*

Note: All transactions also include a fixed fee in addition to the transaction percentage rate. For example, transaction rate (Cost+ or blended) and $0.30** would be charged per transaction.

Example of how and when the Cost + fees are charged

Let's say the fee is cost+1.2%+0.35 EUR. When a transaction happens, we use a set rate (like 2.4%) to estimate what cost+1.2%+0.35 EUR might be. Then, at the start of the next month, Cloudbeds compares the actual cost of +1.2%+0.35 EUR to this estimated rate. Depending on the difference, Cloudbeds will either add or subtract that amount from your account.

In this section of the monthly statements, you can find the reconciliation: