Key takeaways
- Every model passes through the same underlying costs: interchange, network fees and a processor margin.
- Flat-rate pricing is simple and predictable, but often costs more as volume grows.
- Interchange-plus is the most transparent: you see the true cost plus a fixed markup.
- Tiered pricing can hide costs; ask for a clear breakdown before you sign.
The building blocks of every price
No matter how a processor presents its pricing, three costs sit underneath every card transaction:
- Interchange: a fee paid to the cardholder’s bank. It varies by card type (debit, credit, rewards, business), how the card was accepted (in person or online) and your business category.
- Network fees: charged by the card brands for using their networks.
- Processor markup: what your processor earns for routing, fraud tools, support and funding.
Pricing models differ in how they bundle and show these costs to you.
Flat-rate pricing
With flat-rate pricing, you pay one percentage (sometimes plus a small per-transaction fee) on every sale, regardless of card type.
Why businesses like it: it’s simple. You can predict your costs without studying interchange tables, which makes it popular with new or small businesses.
The trade-off: the rate has to cover the most expensive cards, so you often overpay on the cheaper ones, like basic debit cards. As your volume grows, that gap can add up.
Interchange-plus pricing
Interchange-plus (also called cost-plus) passes the actual interchange and network fees through to you and adds a fixed, clearly stated markup, for example a small percentage plus a few cents per transaction.
Why businesses like it: transparency. You see exactly what the card networks charge and exactly what your processor earns. When you take cheaper cards, you pay less.
The trade-off: statements are more detailed, and your effective rate changes month to month with your card mix. For most growing businesses, that’s a fair price for transparency.
Tiered pricing
Tiered pricing groups transactions into buckets, usually “qualified,” “mid-qualified” and “non-qualified,” each with its own rate. The processor decides which transactions land in which tier.
The trade-off: it can look attractive because the advertised “qualified” rate is low, but many transactions fall into the more expensive tiers. Because the rules are set by the processor, it’s harder to see what you’re really paying.
How to compare offers: your effective rate
The single most useful number is your effective rate: total processing fees for the month divided by total card sales. It cuts through models and marketing so you can compare like with like.
- Take a recent monthly statement.
- Add up every fee: transaction fees, monthly fees, gateway fees and any extras.
- Divide by your total card volume for the same month.
Ask any prospective processor to estimate your effective rate using that statement, and to list every fee that isn’t included in the per-transaction price.
Fees to watch for
- Monthly minimums and account fees
- PCI compliance or non-compliance fees
- Statement, batch or gateway fees
- Early termination fees and long auto-renewing contracts
- Chargeback and retrieval fees
None of these are automatically bad. Some cover real services. They just need to be visible.
Which model is right for you?
As a rule of thumb, flat-rate suits businesses that value simplicity above all and process modest volumes. Interchange-plus suits businesses that want transparency and expect to grow. Whatever you choose, insist on clear statements and a partner who will walk you through them.
Frequently asked questions
Is interchange-plus always cheaper than flat-rate?
Not always, but for businesses with steady volume and a healthy share of debit or standard cards, interchange-plus usually results in a lower effective rate because you pay the true cost of each card.
What is a good effective rate?
It depends on your industry, card mix and how you accept payments. Online and high-risk businesses typically see higher effective rates than in-person retail. Compare offers using your own statement.
Can I negotiate processing fees?
Interchange itself isn't negotiable, but processor markup, monthly fees and contract terms often are, especially as your volume grows.
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