Every merchant is eventually offered both models, usually by people with an interest in the answer. Flat rate is one number for every card. Interchange-plus passes the card networks’ cost through at what it actually costs and adds a fixed markup. Which one is cheaper for you is a factual question about your own statement, and it can be settled in about twenty minutes.
What the two models actually are
Under flat rate, the processor charges the same percentage and per-item fee regardless of which card is presented. A debit card that costs the processor very little and a premium travel-rewards card that costs a great deal are billed to you identically. The processor absorbs the variance and prices to protect itself against the expensive end.
Under interchange-plus, your bill separates. Interchange, set by Visa, Mastercard, Discover and American Express, paid to the card-issuing bank, is passed through at cost. Assessments, also set by the networks, are passed through at cost. On top of that sits your processor’s markup, quoted as something like interchange + 0.55% + 10¢. That markup is the only part anyone can negotiate.
The three inputs that decide it
- Card mix. If your customers pay with plain consumer debit, interchange is low and flat rate is charging you for variance you do not create. If they pay with business, corporate or premium rewards cards, interchange is high and flat rate is absorbing it for you.
- Average ticket. Per-item fees dominate small tickets and vanish on large ones. At a $9 average ticket, 30¢ is 3.3%; at a $600 average ticket, 15¢ is 0.025%.
- Volume, mostly because of fixed monthly fees. Interchange-plus programs often carry monthly service and PCI lines that are meaningless at $80,000 a month and punishing at $6,000.
A worked example
Take an HVAC shop running $62,000 a month over 210 transactions, an average ticket near $295. About 65% is taken in person, 35% is invoiced.
On Paydigo flat pricing: roughly $40,300 in person at 2.60% + 15¢ gives about $1,048 plus $20; $21,700 card-not-present at 2.90% + 30¢ gives about $629 plus $22. Total near $1,719, an effective rate of about 2.77%, with no monthly service, PCI or annual fees.
On an interchange-plus program at interchange + 0.55% + 10¢, with this shop’s mix producing a blended interchange plus assessments of, say, 1.95%: pass-through is about $1,209, the markup is $341 plus $21 in per-item fees, and monthly lines of $9.95 service, $9.95 PCI and $49 annualised to roughly $4 add about $24. Total near $1,595, an effective 2.57%.
Interchange-plus wins here by about $124 a month. Now change one input: if this shop served mostly commercial customers paying with business rewards cards, blended interchange might run 2.35% instead, pushing the interchange-plus total above the flat-rate total. Same program, opposite answer.
Where the crossover usually sits
As a rule of thumb, interchange-plus starts to win somewhere between $30,000 and $50,000 a month of card volume, and it wins earlier when your card mix is expensive or your average ticket is large. Below that, fixed monthly fees usually eat the savings and flat rate is both cheaper and simpler.
Treat that as a place to start looking, not as an answer. The only reliable method is repricing one real month of your own statement under both models.
How to do the comparison yourself
Pull a recent statement. Compute your effective rate: total fees divided by total volume. Then list every fee that is not the discount rate or the per-item fee, and total those separately, that is your fixed and incidental burden.
Ask any processor quoting interchange-plus for two things in writing: the markup, and the complete list of monthly and incidental fees. Then apply their markup to your actual volume and transaction count and add their fixed fees. If they will not give you the second list, you cannot do the arithmetic, which tells you something.
The behavioural difference
One thing rarely mentioned: the models create different habits. Flat rate is invisible, you stop thinking about payments, which is genuinely valuable for a small operator. Interchange-plus is legible, you can see which card types cost you and adjust behaviour, for example by pushing large commercial invoices to bank payment at 1% capped at $10 rather than accepting a corporate card on a $9,000 job.
If nobody in your business will ever look at a statement, the transparency of interchange-plus buys you nothing and the simplicity of flat rate is worth real money.
What to take away
Neither model is honest or dishonest; they allocate variance differently. Flat rate suits smaller volume, small tickets and consumer debit mixes. Interchange-plus suits higher volume, larger tickets and business-card-heavy customers, and it rewards a merchant who will actually read the detail. Reprice one real month both ways, include every fixed fee on both sides, and let your own statement settle it.
Michelle Hope
Payments Editor, Paydigo
Michelle Hope writes about payment economics for the businesses that live on them, trade contractors, route-based service companies, and the agents who sell to them. Her work focuses on the unglamorous mechanics: effective rates, recurring-billing recovery, dispute ratios, and the difference between a rate sheet and a statement.