Interchange-plus vs flat rate
Both can be honest. Only one is auditable, and the cheaper one depends on numbers you already have.
The three structures
Flat rate
One published rate per transaction type — say 2.6% + $0.10 in person, 2.9% + $0.30 online. Simple, predictable, and you can forecast it without a spreadsheet. You are also paying an averaged price, which means debit transactions subsidise rewards cards.
Interchange-plus
Interchange and assessments pass straight through at cost, with a fixed markup on top — for example interchange + 0.20% + $0.08. Every transaction can be verified against the card brands' published tables. Your statement gets longer and more honest at the same time.
Tiered
Transactions are sorted into "qualified", "mid-qualified" and "non-qualified" buckets. The definitions are written by your processor. Nothing stops them moving a transaction type from one bucket to a costlier one, and no published rate has to change for your bill to rise. Avoid.
Worked example: $30,000 a month, $45 average ticket
667 transactions monthly, typical Canadian or US retail card mix.
| Structure | Monthly cost | Effective rate |
|---|---|---|
| Flat rate 2.6% + $0.10 | $847 | 2.82% |
| Interchange-plus (IC + 0.25% + $0.08) | $792 | 2.64% |
| Tiered (1.79% qualified headline) | $1,014 | 3.38% |
Interchange-plus wins by $55 a month here — real, but not dramatic. The tiered plan with the best-looking headline rate costs $222 more than the winner. That gap is the entire business model of tiered pricing.
Worked example: $120,000 a month, $95 average ticket
| Structure | Monthly cost | Effective rate |
|---|---|---|
| Flat rate 2.6% + $0.10 | $3,246 | 2.71% |
| Interchange-plus (IC + 0.18% + $0.07) | $2,808 | 2.34% |
| Difference | $438 / month | $5,256 / year |
At this volume the structure decision is worth more than most merchants' annual software budget, and it takes one conversation to change.
Where the crossover sits
- Under $10,000/month: flat rate usually wins on total cost once you value the simplicity, especially with no monthly fees attached.
- $10,000-$15,000/month: the toss-up zone. Card mix decides it. Heavy debit volume favours interchange-plus immediately.
- Above $15,000/month: interchange-plus is almost always cheaper, and the gap widens with volume.
- Any volume, sub-$15 tickets: judge on the per-item fee. On a $9 coffee, $0.10 per transaction is 1.1% before any percentage applies.
- Any volume, B2B commercial cards: interchange-plus, always — it is the only structure that lets Level II and III data reduce what you pay.
The questions that reveal a bad deal
- "What is my markup in basis points?" A flat-rate provider can answer approximately; a tiered provider usually cannot answer at all.
- "What percentage of my transactions downgraded last month?" If the answer is unavailable, your pricing is hiding it.
- "What is my effective rate for the last three months?" Three numbers, ten seconds. Refusal or delay is the answer.
- "Is there a term, and what are the liquidated damages?" A structure that is genuinely competitive does not need a cancellation penalty to survive.
What we do
We model both structures against your actual statement and recommend the cheaper one, including when that means leaving you where you are. Below the crossover we will put you on flat rate and say so; above it we move you to interchange-plus and show the arithmetic.
Estimate the difference in 60 seconds, or send a statement for the exact figure.
Related questions
Usually somewhere between $10,000 and $15,000 in monthly card volume. Larger average tickets pull the crossover point lower; very small tickets push it higher because per-item fees dominate.
Practically never for the merchant. Tier definitions are written by the processor and can be changed without changing any published rate, which makes the pricing unauditable.
Yes, and it should not require a new application or new hardware. If your provider says it does, that is a retention tactic rather than a technical constraint.
Every fee named in 4 hours. Or call now and we quote you on the spot.
Everyone else in this industry says twenty-four hours. We say four — and if that is still too slow, pick up the phone and get your numbers while you are on the call. No contract, nothing to cancel, no pressure.