Flat Rate vs. Interchange Plus Pricing: What Merchants Need to Know

Know The Difference

When evaluating your credit card processing costs, understanding the structure behind your pricing model is essential. Most merchants are on one of two common pricing structures: Flat Rate Pricing or Interchange Plus (also called Interchange Pass Through).

At first glance, the difference may seem subtle. But in practice, it can mean the difference between transparency and hidden fees, or cost-efficiency and unnecessary markups. Here’s what every business owner should understand about these models—and how to determine which is best for your business.

What Is Flat Rate Pricing?

Flat rate pricing means you’re charged the same fixed percentage for every transaction, regardless of the card type. For example, you might pay 2.9% + $0.30 on all card transactions, whether it's a basic debit card or a premium rewards credit card.

On the surface, this model is simple and predictable.

But that predictability often comes at a premium.

Card networks (Visa, Mastercard, etc.) don’t charge a flat rate behind the scenes—they charge interchange fees, which vary based on the card, the method of acceptance, and other factors. When you're on a flat rate plan, your processor is blending those varying costs and charging you a single rate designed to cover all scenarios—and then some.

Translation: You're often paying more than necessary, especially for debit and standard credit card transactions that carry lower underlying costs.

When Flat Rate Does Make Sense

Flat rate pricing isn’t inherently bad—and for some merchants, it’s actually the most practical option.

It works particularly well for businesses that are implementing a surcharge and need a simple, predictable pricing model to remain compliant with card brand rules. Because flat rate pricing bundles all card types into a single rate, it simplifies surcharge calculations and helps ensure you don’t exceed the allowable surcharge cap, which must not exceed your cost of acceptance.

That said, surcharge compliance involves more than just pricing—you’ll also need to meet specific technology, disclosure, and registration requirements to stay within the rules. We cover those in detail in a separate article on surcharge compliance.

Flat rate can also be a smart choice for smaller businesses or low-volume merchants, where the savings from interchange optimization are minimal and simplicity is a higher priority than marginal cost reductions.

In short, while flat rate pricing may not offer the lowest effective rate, it can be the right fit when ease of use, billing predictability, and compliant surcharging matter more than line-item transparency.

What Is Interchange Plus Pricing?

Interchange Plus pricing separates the actual card network costs (interchange and assessments) from the processor’s markup. You pay the true cost of each transaction based on the card type, plus a small, transparent fee (e.g., 0.35% + $0.10).

This model is preferred by larger merchants, multi-location businesses, and anyone seeking full visibility into what they’re paying and why.

Key Advantages:

• Transparent: You see the actual cost breakdown on your statements.

• Fair: You’re not overpaying for lower-cost debit or basic credit transactions.

• Scalable: As your volume grows, the savings can become substantial.

Quick Example:

Let’s say a business processes $30,000/month across 500 transactions:

• Flat Rate at 2.9% + $0.30 per transaction

  • 2.9% of $30,000 = $870

  • 500 Transactions × $0.30 = $150

  • Total = $1,020 in Fees

• Interchange Plus

  • 2.25% (Average Interchange Blend - Realistic for Typical Mix) of $30,000 = $675

  • Modest Markup (e.g., 0.35% + $0.10 per transaction) = $105 + $50 = $155

  • Total = $830 in Fees

That’s a $190/month difference—or $2,280/year—simply by using a more transparent and cost-efficient pricing model.

Which One Is Right for Your Business?

If you value simplicity, surcharge compliance, or have a lower volume of card transactions, flat rate pricing may be the right fit.

If you value transparency, cost control, and long-term savings, Interchange Plus is the smarter choice—especially if you're processing higher volume or want clarity in your statements.

At Virtue Payments, we specialize in helping business owners understand their effective rate, uncover hidden fees, and implement pricing models that actually benefit their bottom line—not just the processor’s.

Still Not Sure What You're On?

We offer a complimentary statement review—no pressure, no obligation. We’ll break down your fees, show you what you’re really paying, and help you determine if a change would be worth it.

Schedule a Free Statement Review and find out how your business could benefit.