Interchange Plus vs Flat Rate Pricing: Which Is Cheaper?

Last updated July 2026.

Interchange plus and flat rate pricing are two ways a processor charges you for accepting cards, and neither is automatically cheaper. Flat rate, the model Square and Stripe use, charges one simple rate on every sale, which is easy to predict but bundles the processor's markup out of sight. Interchange plus passes the true card network cost straight through and adds a separate, visible markup, which is transparent but harder to read. Which one costs less depends on your card volume, your average ticket, and how your customers pay. The only way to know is to calculate your effective rate under each on your own statement.

The instinct to pick by simplicity is understandable, and for a small business doing modest volume it is often the right call. But past a certain volume the difference between the two models is real money, and the decision should be made on numbers rather than on which one is less annoying to set up.

What is flat rate pricing?

Flat rate pricing charges a single published rate on every transaction, often something like a percentage plus a fixed per transaction fee, with no interchange detail on the statement at all. Square, Stripe, PayPal, and similar platforms popularized it. Its appeal is predictability and a zero effort setup: you know exactly what a sale costs before it happens, and there is no contract to negotiate.

The trade off is that the processor is absorbing the interchange cost and taking whatever is left as margin. On card types where interchange is low, that margin is wide, and you have no way to see it because the statement shows only the blended rate. You are paying for simplicity, and on higher volume that premium adds up.

What is interchange plus pricing?

Interchange plus, sometimes called interchange pass through, charges you the exact interchange set by the card networks plus a stated markup, printed as two separate figures. If interchange on a sale is 1.8 percent and your processor markup is 0.3 percent, you pay 2.1 percent and you can see both halves. Network assessments, which are fixed for everyone at roughly 0.13 to 0.14 percent, pass through the same way.

The advantage is that you can audit exactly what the processor keeps, and the markup is the same small figure regardless of card type, so you benefit whenever a customer pays with a lower cost card. The cost is complexity: the statement is longer, the total varies month to month with your card mix, and you have to read it to know you are being charged correctly.

Where does tiered pricing fit in?

A third model, tiered pricing, deserves a warning. It sorts your transactions into qualified, mid qualified, and non qualified buckets and quotes a different rate for each. It looks like interchange plus because it has multiple rates, but it is the opposite of transparent: the processor decides which bucket a transaction falls into, downgrades are common and rarely explained, and the markup is blended invisibly into each tier. If your statement uses those three words, treat the quoted rates with suspicion and calculate your effective rate instead.

So which one is cheaper?

The honest answer is that it depends on your numbers, and you already hold the data to settle it. Take a recent statement, add every fee including flat monthly charges, divide by total card volume, and multiply by 100. That is your effective rate on your current model. Get a proposal from an interchange plus processor, apply its markup to the same volume and card mix, add the same flat fees, and compare the two effective rates over the same months.

As a rough guide, businesses with low or unpredictable volume often come out fine on flat rate, because the simplicity is worth the premium and there is no monthly minimum to trip over. Businesses with steady volume above a few thousand dollars a month, or a card mix heavy in debit and lower cost cards, usually save on interchange plus, because they stop overpaying the processor's margin on every low cost transaction. But rough guides do not close deals. The effective rate on your own statement does.

How to actually run the comparison

The comparison is simple arithmetic, and the only obstacle is that the statement is a PDF you cannot do arithmetic on. Get the fee lines into a spreadsheet with description, card brand, volume, and total in their own columns, and the effective rate is one division. Line up three to twelve months and you can also see whether your current rate has drifted, which is a common reason a deal that looked fine at signing quietly stops being competitive.

A merchant statement analysis converter does that extraction, turning the statement into the rows the calculation wants, and it reads statements from any processor so you can compare an incumbent against a proposal in the same layout. If you want the full walk through of what each section of the statement means before you compare, our guide on how to read a merchant processing statement covers the interchange detail and the padded line items to watch for.

What does not change between models

One thing to keep in perspective: interchange and assessments are identical no matter which model you choose. They are set by the card networks and paid to the issuing bank, and no processor can discount them. So the entire savings from switching models comes out of the markup and the flat fees, which together are usually a small fraction of your total cost. That is worth knowing before a salesperson quotes you an interchange rate as if they were doing you a favor by passing it through. Passing through interchange is not a discount. It is just honesty about where most of the money already goes.

The businesses that manage card costs well are not the ones on a particular model. They are the ones who read the statement, calculate the effective rate, and re-check it once a year. Whichever model does that for the least money on your own volume is the one to sign.