Interchange Plus vs Flat Rate vs Tiered Pricing

The Pricing Model on Your Merchant Statement Is Either Saving You Money or Costing You Extra — Here's How to Tell

When a customer swipes their card at your business, multiple parties take a cut before the money reaches your bank account. How those cuts are structured and what you're charged depends entirely on your pricing model. Most merchants sign up for whatever their processor offers without understanding what they're agreeing to — and many overpay by hundreds or thousands of dollars a year as a result.

The Three Main Pricing Models

Interchange Plus Pricing

Interchange-plus is the most transparent pricing model available. You pay two components: the actual interchange rate (set by Visa and Mastercard and paid to the cardholder's issuing bank) plus a fixed markup charged by your processor.

For example: Interchange + 0.25% + $0.10 per transaction. The interchange portion varies by card type, transaction type, and industry — a standard Visa credit card might carry 1.51% + $0.10, while a rewards card might be 2.10% + $0.10. Your processor markup stays constant regardless of card type.

The advantage of interchange-plus is that you can see exactly what the processor is charging you versus what goes to the card networks. There's no padding or manipulation built in. For businesses processing more than $15,000/month, interchange-plus almost always produces the lowest total cost.

Flat Rate Pricing

Flat rate pricing charges the same percentage on every transaction regardless of card type. Stripe charges 2.9% + $0.30 per online transaction. Square charges 2.6% + $0.10 in person. These rates are simple, predictable, and easy to understand.

The catch: the actual interchange rate on many transactions — especially basic debit cards and standard credit cards — is well below 2.9%. The difference between what you pay and what the processor actually pays to the card networks is pure profit for them. At low volumes, the simplicity is worth the premium. At higher volumes, you're leaving significant money on the table.

Flat rate is generally best for businesses under $5,000/month in processing volume, businesses that value simplicity above cost optimization, and businesses that process mostly in-person debit transactions where the rate difference is smaller.

Tiered Pricing

Tiered pricing groups transactions into categories — typically "qualified," "mid-qualified," and "non-qualified" — each with a different rate. Qualified transactions (basic in-person debit swipes) get the best rate. Rewards cards, corporate cards, keyed-in transactions, and card-not-present transactions get pushed into mid-qualified or non-qualified tiers at significantly higher rates.

The problem: processors control which tier each transaction falls into, and the criteria are often buried in the contract. Many merchants discover that the majority of their transactions — particularly rewards cards, which most consumers use — fall into the expensive non-qualified tier. The "qualified" rate quoted in the sales pitch applies to a small fraction of actual transactions.

Tiered pricing is the most common model sold to small businesses and the least transparent. It's designed to make the quoted rate look attractive while building processor margin into the tier structure.

How to Compare These Models Side by Side

To compare pricing models accurately, you need your actual processing data: total monthly volume, average transaction size, percentage of card-present vs card-not-present transactions, and card mix (debit vs. credit, rewards vs. standard).

With that data, you can run actual interchange-plus cost estimates using published Visa and Mastercard interchange tables, compare against your flat rate or tiered costs, and identify the savings difference. For many businesses processing $25,000/month or more, switching from flat rate or tiered to interchange-plus saves $300–$600/month.

What About Surcharging and Cash Discount Programs?

Surcharging passes the credit card fee to the customer. Cash discount programs adjust pricing at the register. Both can reduce or eliminate your processing costs but come with card brand compliance requirements and customer experience tradeoffs. These are separate strategies from pricing model selection — and require their own careful evaluation before implementation.

What to Ask Your Processor

Before signing any merchant agreement, ask: What pricing model is this? Can you show me the exact interchange rates I'll pay by card type? What is your markup on top of interchange? If tiered, how do you determine which tier each transaction falls into? Can I see the full rate schedule in writing before I sign?

A processor that can't or won't answer these questions clearly is one you should walk away from.

Swipe Saver Pro provides payment operations guidance only. This is not legal, financial, or regulatory advice. All decisions remain with the business owner.