Flat Rate vs. Interchange Plus Pricing: What’s Best for Your Business?

If you’ve ever felt overwhelmed by the maze of credit card processing options, you’re not alone. One of the most common questions I get from business owners is: “Should I choose Flat Rate or Interchange Plus pricing?”

Great question!

Understanding the difference between Flat Rate and Interchange Plus pricing models can save you hundreds or even thousands of dollars each year in processing fees. In this post, I’ll break down the pros and cons of each, help you decide what’s best for your business, and show you how to take control of your payment processing.

What Is Flat Rate Pricing?

Flat rate pricing is exactly what it sounds like: you pay a single, fixed rate on every transaction, regardless of the type of card used or how the transaction is processed.

How Flat Rate Pricing Works?

For example, a provider might charge 2.75% on every transaction whether it’s a Visa debit card or an American Express credit card.

Pros of Flat Rate Pricing

Simplicity: Easy to understand and predict.

No Surprises: One consistent rate, no matter what.

Great for Small Businesses: If you process a low volume of transactions, flat rate pricing can be convenient.

Cons of Flat Rate Pricing

Higher Costs: You might pay more per transaction than necessary.

Lack of Transparency: You won’t see how much of that fee goes to the card networks versus the processor.

What Is Interchange Plus Pricing?

Interchange Plus (or “cost-plus”) pricing is a more transparent model where you pay:

Interchange fee + a small markup from the processor.

How It Works

For example:

Visa charges an interchange fee of 1.50% + $0.10.
Your processor adds a markup of 0.30% + $0.05.
You pay 1.80% + $0.15 on that transaction.

Pros of Interchange Plus Pricing

Transparency: You see exactly where your money is going.
Lower Costs: Especially beneficial for businesses with higher processing volumes.
Customizable: Tailored to your industry and card types.

Cons of Interchange Plus Pricing

Complexity: Interchange fees vary depending on card type, transaction method, and more.
Requires Monitoring: You’ll need to review your merchant statement regularly to ensure accuracy.

Flat Rate vs. Interchange Plus: A Side-by-Side Comparison

Real-World Example

Let’s say your business processes $10,000/month in credit card transactions.

Flat Rate Model (2.75%)

$10,000 x 2.75% = $275 in fees

Interchange Plus Model (1.6% average + 0.3% markup)

$10,000 x (1.6% + 0.3%) = $190 in fees
Savings: $85/month = $1,020/year

For a growing business, that’s money you could reinvest in marketing, staffing, or equipment.

Which Pricing Model Is Best for You?

Here’s how to choose based on your business needs:

Choose Flat Rate Pricing if

You process less than $5,000/month in credit card transactions.
You want simplicity and predictability.
You don’t want to deal with complex statements.

Choose Interchange Plus Pricing if

You process more than $5,000/month.
You want to reduce costs and gain transparency.
You’re willing to monitor your statements for accuracy.

Cash Discount Programs: The Game-Changer

Still unsure? Here’s a powerful tip:

A Cash Discount Program allows you to offer a lower price to cash-paying customers, while card users pay the processing fee. This effectively eliminates your processing costs.

This works well with either pricing model, but pairs best with Interchange Plus due to its flexibility and transparency.

Final Thoughts

Choosing the right pricing model can have a major impact on your bottom line. While Flat Rate Pricing offers simplicity, Interchange Plus Pricing delivers transparency and long-term savings—especially as your business grows.

Want a personalized recommendation?
Let’s review your statement together and find the best fit for your business.

👉 Schedule Your Free Consultation

I’m Clara Gahon, and I’m here to help business owners like you succeed with smart payment processing strategies.

Thanks for reading—and here’s to your success on Freedom Street! 🚀

Flat Rate vs. Interchange Plus Pricing: What’s Best for Your Business?