By Rinki Pandey January 6, 2026
Selecting a good credit card processing plan could make a huge difference when it comes to affecting how much a small business will pay each month. The flat-rate model and the interchange-plus model are two of the most popular plans, but these two are actually quite different from each other. Although flat-rate plans are simple and fixed, Interchange fees are transparent and could offer a lower rate when sales increase.
Understanding Flat Rate Pricing
Flat-rate pricing is definitely the simplest pricing model for payment transactions to comprehend. Under the flat-rate pricing model, the same amount of fee is levied for every type of transaction, and it does not matter which card the customer uses, for instance, the debit card, the reward card, or the business credit card.
For instance, if your service provider rates a flat fee of 2.9 percent plus a nominal fee for each transaction, you will be charged exactly that amount every time a customer makes a purchase. When a customer buys a $100 item, you will always be charged the same fee, no matter how many times an item is sold.
Flat rate pricing is typically offered by the payment aggregators. Instead of having your own dedicated merchant account, your business is grouped under a larger shared account. Although it’s not the cheapest option for high-volume merchants, flat-rate pricing remains well-liked for the ease of use.
Pros & Cons
The pricing structure is quite easy to understand and budget because the same rate applies to every transaction. The process of signing up is very fast, allowing you to begin operations almost instantly, and no ongoing fees are charged by the providers, which is highly convenient when you are operating a small business. It might, however, prove costly as your business generates more revenue because the same rate applies to all transactions.
Understanding Interchange Plus Pricing
Interchange Plus is a more transparent fee system for card transactions. Under this system, there are interchange fees that are set by the card associations, such as Visa or Mastercard, in addition to a nominal fee that the payment provider charges. There is no hidden commission that the payment provider takes; it provides a clear structure of how the costs are split.
An example might be where the cost of the interchange is 1.81% with a fee of 0.25% plus a minimum fee of 0.15. This means your total cost for a sale of 100 will be 2.21.
With flat rate pricing, on the other hand, you have to rely on your own merchant account, which is not the case when it comes to Interchange Plus. This allows for more flexibility, quicker access to your money, as well as much better customer service. Most merchant accounts will cost about $10 to $20 per month; however, the benefits far outweigh the cost.
Pros & Cons
In interchange-plus pricing, the process is very transparent and does not have any sort of hidden charges because it clearly shows what you are paying to the card networks as well as what you are paying to your processor. In most cases, interchange-plus pricing becomes cheaper as your volume of sales increases.
On the negative side, the structure of the rates and fees is a tad more complicated than in flat-rate processing, requiring a minimal amount of extra consideration to fully comprehend. There will be a nominal fee associated with the account every month, and the application procedure will, in most cases, require a day or two longer, usually about a day to three days.
What Small Businesses Actually Pay Over Time
When the cost that small businesses pay is taken into consideration, the difference in cost between Flat Rate pricing and Interchange Plus pricing becomes evident when the sales volume increases. For instance, flat rate pricing provides the same fee on all transactions, but the cost becomes expensive when the sales volume increases. On the other hand, Interchange Plus pricing takes the fees on the credit card networks as well as charges a small processing fee.
For instance, with a sale of 1,000 dollars a month, a flat rate will cost 32 dollars compared to 36.60 dollars for Interchange Plus. At a sale of 5,000 dollars a month, the flat rate will be 160 dollars compared to 123 dollars for Interchange Plus. Finally, at a sale of 10,000 dollars a month, the costs go down to 320 dollars for a flat rate as opposed to 231 dollars for Interchange Plus, indicating a savings of almost 90 dollars. This will increase with larger volumes of sales. For example, with a sale of 25,000 dollars a month, the cost will be 800 dollars compared to 555 dollars for Interchange Plus.
How to Pick the Best Pricing Model for Your Company
When making a choice between flat rate pricing and interchange pricing, it might be helpful to pose a few easy questions about your business. If you want the option of simplicity and an easy-to-understand pricing structure, flat rate pricing might be the best for you. Flat rate pricing is best for merchants who sell low-priced merchandise or don’t have the resources available to analyze transactions down to the smallest detail.
On the other hand, if you are seeking complete transparency and control over your processing rates, Interchange Plus might be a better option for you. This might be beneficial for merchants who are able to monitor transactions, understand the concept of an Interchange rate, and utilize cheaper forms of cards, such as debit cards. Sectors with lower risk profiles, like the government or non-profit institutions, could also utilize Interchange Plus. After examining your sales figures and having knowledge of your consumers’ transaction behavior, you could make an informed decision regarding which plan is cheaper and where you need control.
Factors that Influence Credit Card Processing Fees
Credit card processing fees are not fixed fees. They can vary based on a number of factors that might include your business model as well as the type of cards that your customers use.
Firstly, the cards most commonly used by your customers can be a major consideration. Interchange fees for regular debit and credit cards tend to be lower, but fees related to reward or premium cards tend to be higher, as reward benefits cost more for the card networks. Identifying the type of cards your customers use most would help you estimate the correct costs.
The business type and industry can also be a factor. There may be certain industries that can be rated as comparatively higher risk. This can include industries like travel, entertainment, hospitality, and so on. Higher fees may be charged by payment processors for these merchants to cover risks of chargebacks and fraud.
The size and volume of transactions also affect the fees. Merchants who have a large volume of transactions may qualify for a cheaper rate per transaction. This is because payment processors usually reward merchants who have a high volume of transactions with a cheaper transaction rate.
Another factor to consider is the method of the actual transaction. Hand-swiped transactions in person will normally require less costly transactions because they will be less susceptible to fraud. Manual, online, or telephonic transactions will normally require higher fees because of the possible risk of fraud.
A business’s processing history may also impact the cost of fees. The payment processor takes into account chargebacks, PCI compliance, and overall transaction integrity. A business with a clean history and fewer problems can assist with obtaining a better rate on fees.
Finally, location matters too. The cost of processing a card transaction varies between regions and countries. Some regions have a higher cost of interchange or a Network Fee, which may vary based on your location.
How to Minimize the Cost of Credit Card Transactions
Lowering credit card processing fees is possible whether you are new to a payment processor or have been using the same one for years.
First, negotiate with your payment processor. As your business grows, so does your value as a merchant. Higher transaction volumes, good security practices, and a low chargeback rate put you in an increasingly strong position to ask for better rates. Many never renegotiate, but scheduling a yearly review and asking for better pricing based on your history can make a real difference.
Next, give your pricing model a second look. Flat rate pricing is straightforward, but it’s often not the best value as your volume goes up. In many instances, interchange plus pricing provides superior overall transparency to actual fees and can be much lower overall. Knowing your monthly statements and understanding where most of your fees are coming from will go a long way in helping to determine if switching models makes sense.
Thirdly, reducing risk can also drive down your fees. For example, using an address verification service checks a customer’s address information against the billing address on record and helps to reduce fraud. It results in fewer high-risk transactions, eventually reducing processing costs and chargebacks. Similarly, promoting debit card payments can help to reduce fees because debit transactions are typically cheaper than credit card transactions.
Fee management can also be achieved through the application of smart transaction fees. There has to be a minimum amount for credit card transactions to prevent the low amount of sales from being consumed entirely by fees. This has to be done within the framework of the card network and the laws that govern the particular regions.
Finally, make sure that your equipment and software are always updated. Traditional systems are prone to security problems and are often associated with higher processing fees. Newer systems are more efficient in processing transactions and are qualified for lower rates and fewer errors. It may cost more to modernize your systems today, but they often pay back in the long run with savings and an easier payment process.
Can You Switch from Flat Rate to Interchange Plus?
Yes, there can be a transition from flat-rate pricing to interchange plus, and this will often be simpler than one expects. Business owners may fear that changes to pricing options mean new equipment, long contracts, or downtime at the counter, but that is usually not the case today.
Most modern payment providers handle the switch in the background. If you are currently using one of the popular systems, you can often update the pricing model on the back end without changing your device or interrupting day-to-day sales. Your payments just keep running as usual, only at a different and often lower cost.
In fact, if you’re on an older terminal, switching can be a good opportunity to upgrade to a newer POS system that’ll serve you better in terms of reporting, speed up checkout, and help you lower your processing fees at the same time. All said, switching pricing models is generally pretty smooth, low-risk, and therefore worth considering as your business grows.
Conclusion
Flat-rate and interchange-plus pricing both have their own benefit, but which one is right for your business depends on how it operates. Flat-rate pricing is ideal in new or low-volume businesses where simplicity and predictable costs are valued. Interchange-plus pricing becomes more cost-effective with volume, affording greater transparency and offering long-term savings.
You can achieve an appropriate pricing model that will protect the margins and support sustainable business growth by reviewing your sales patterns and understanding how fees add up over time.
FAQs
What is flat-rate pricing?
Flat-rate pricing means that the same processing fee is charged for every transaction, without regard to the type of card used and the means of payment.
What is interchange-plus pricing?
Interchange-plus pricing is the actual card network fee plus a fixed markup from the payment processor.
Which is more affordable for a small business: a flat rate or an interchange pricing model?
Flat-rate suits very small volumes of payment, but interchange-plus is usually cheaper as the monthly transaction volume grows.
Is interchange-plus pricing hard to understand?
It appears complicated at first, but the breakdown of actual costs and processor markups is clearly seen in monthly statements.
Can companies change their pricing model later?
Yes, most businesses can change pricing models as their transaction volume and needs evolve.