Merchant Fees, Rates, and Pricing Models
Is interchange-plus always cheaper than flat-rate pricing?
When choosing a merchant processing pricing model, many businesses wonder if interchange-plus pricing is always cheaper than flat-rate pricing. The short answer is: not necessarily. Each pricing model has its advantages and can be more cost-effective depending on your business type, transaction volume, and average ticket size.
Understanding Interchange-Plus vs. Flat-Rate Pricing
Interchange-plus pricing breaks down your fees into the actual interchange fees set by card networks plus a fixed markup from your processor. This model offers transparency and can save money for businesses with higher transaction volumes or larger ticket sizes. Flat-rate pricing, on the other hand, charges a single fixed percentage plus a per-transaction fee regardless of card type or transaction size, providing simplicity and predictability.
When Interchange-Plus May Not Be Cheaper
For small businesses with low monthly sales or mostly small transactions, flat-rate pricing might be more cost-effective. The fixed markup in interchange-plus pricing can add up, especially if your transactions are mostly low-value or if you have a limited number of sales. Additionally, businesses that prefer simplicity and predictable monthly fees might lean toward flat-rate pricing despite potentially higher costs.
- High transaction volume and large average ticket size typically benefit from interchange-plus pricing.
- Small businesses with low sales and small transactions may save with flat-rate pricing.
- Flat-rate pricing offers predictable fees and easier budgeting.
- Interchange-plus pricing provides detailed fee transparency.
To determine which pricing model is best for your business, consider analyzing your merchant processing statements. Using a tool like Merchant Statement Scanner, you can upload and scan your PDF statements to identify your current fees and compare pricing models effectively.
Next Steps to Optimize Your Processing Fees
Start by gathering your recent merchant statements and scanning them with Merchant Statement Scanner to understand your current fee structure. Evaluate your transaction volume and average ticket size to see which pricing model aligns with your business needs. You may also want to consult with your payment processor or a payment consultant to explore customized pricing options.
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