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Interchange Plus vs Flat Rate: Which Pricing Model is Best?

June 3, 20246 minute read

Do you think your business could save money on credit card processing rates by changing the merchant account pricing? Most businesses look at two main options for payment processing fees: interchange plus and flat rate models. The flat rate is easy to understand, like 2.9% plus $0.30 for each transaction. But it might cost more in the long run.

The interchange plus model has changing rates based on the card used. For common cards in North America, this can actually make fees lower. Yet, figuring out which model is best for your business can be complex.

Deciding between flat and interchange plus requires looking past simplicity. It’s key, especially for bigger businesses or those with transactions over $5,000 monthly. Also, there are new models like membership pricing for big merchants doing over $1 million yearly. These could be strong options too.

Understanding Interchange Plus Pricing

Choosing interchange plus pricing means you see all costs clearly. It includes fixed markups for transactions and changing fees from credit card companies. This plan is good for companies because it lowers costs for most credit cards. Knowing how this works can help cut your payment costs.

What is Interchange Plus?

Interchange plus pricing has two parts: the interchange fee and the markup. The interchange fee goes to the cardholder’s bank. Then, there’s the extra cost for the processor per transaction. This setup is very clear. It shows the exact fees from Visa and Mastercard separately from your processor’s costs.

Benefits of Interchange Plus Pricing

This model stands out for being open about costs. It pulls apart what you pay for interchange and processor fees. So, you get a clear look at how much you’re really spending. Also, with lower fees on basic cards, more sales can mean big savings. This is great for big businesses or those with lots of sales every month.

Examples of Interchange Plus Costs

Let’s use a $100 buy as an example. With a 2% interchange fee and a 0.5% markup, you would pay $2.50. Such clear pricing can save money over time, unlike flat rate plans. These hide their actual fees. Even though rates from Visa may change, interchange plus shows you everything.

Comparing interchange plus vs flat rate plans shows interchange usually saves money, especially for big sellers. Knowing fees lets you pick the payment plan that meets your business’s needs.

Flat Rate Pricing Explained

Flat rate pricing makes dealing with credit card fees simple and easy. It’s perfect for small businesses or startups. With a fixed rate, like 2.75% per transaction, you can easily predict how much you’ll pay each month for processing fees.

How Flat Rate Pricing Works

Flat rate services charge one rate for all card types. This means the fee is the same for basic, premium, or corporate cards. So, no matter what, you always know what you’re up against. While this makes things simple, services like Stripe and Square might hide higher fees in their rates to make more profit.

Advantages and Disadvantages of Flat Rate Pricing

There are good and bad things about flat rate pricing.

  • Simplicity: A clear rate helps with budgeting processing fees.
  • Predictability: No surprises when costs don’t change for different card types.
  • Suitability for Smaller Businesses: It’s great for those with low sales who value ease of use over savings.

However, this model has some drawbacks:

  1. Higher Costs: It can be more expensive than other models without proper breakdowns.
  2. Lack of Transparency: Hidden fees and markups make it hard to know where your money goes.
  3. Not Ideal for High-Volume Merchants: Big businesses might find themselves paying more in the long term.
Aspect Flat Rate Pricing Interchange Plus
Transparency Low High
Cost Predictability High Variable
Complexity Low High
Overall Cost Potentially Higher Potentially Lower
Suited For Small Businesses High-Volume Merchants

When choosing flat rate services, businesses must consider the trade-offs. The predictability and ease can be great benefits for small operations. As a business grows, though, the costs might become a burden. At that point, looking into interchange plus pricing could save more money in the long run.

Choosing Between Interchange Plus vs Flat Rate

When picking a payment model for your business, you have two main options: interchange plus and flat rate. Interchange plus offers both clear benefits and potential downsides. Flat rate, on the other hand, brings in a straightforward cost but may not fit everyone. Your decision should match your business’s unique needs and how you typically process payments.

  • Offers transparent pricing with a breakdown of interchange fees and markups.
  • Generally more cost-effective for businesses with higher monthly transactions.
  • Beneficial for those with a substantial volume of standard credit card transactions.

Flat Rate:

  • Provides simple, predictable credit card processing rates.
  • Ideal for small businesses or startups with lower transaction volumes.
  • Reduces complexity in financial planning without concern for varying interchange fees.

Here’s a comparison of the key points between interchange plus vs. flat rate. This will help you choose wisely.

Feature Interchange Plus Flat Rate
Transparency High, with detailed cost breakdown Low, with inclusive pricing
Best for High-volume businesses Small businesses
Cost Predictability Variable, based on transaction type Fixed, predictable fees
Monthly Transaction Volume Efficient for transactions above $5,000 Suitable for lower volumes


Understanding payment processing fees is key for every business. Your choice between interchange plus and flat rate depends on your needs and how much you sell. Interchange plus pricing is clear about costs. It’s good for small credit card purchases and might save you money on big sales. Yet, it needs you to understand your sales data well.

Flat rate pricing is easy to understand and good for new or small businesses. It makes budgeting easier, but you might pay more for each sale because some fees are bundled. Stripe, Square, and Braintree are well-known for their flat rate plans. These plans are simple but don’t show all the costs clearly.

Your decision should match your short-term and long-term goals. If you aim for clear costs and savings on big sales, go for interchange plus. But, if you prefer simple, steady costs, flat rate may be better. Look at what each option offers your business. This will help you choose the best plan for managing your payment costs well.

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