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Interchange Plus Pricing v/s Fixed Rate

Price is one of the most important things to consider when choosing a merchant service provider.

However, it can be challenging to comprehend the actual payment processing cost due to the many variables involved, including interchange rates, assessment fees, markup, and tiers. Since not all MSPs set their prices the same way, merchant account fees are even more challenging.

Unfortunately, the methods used by payment processors to determine transaction costs are not always transparent. However, the more familiar you are with typical pricing models, the more prepared you'll be to select a merchant services provider for your company.

What is Interchange Plus Pricing?

The usual method of credit card processing, interchange plus pricing, commonly referred to as "cost-plus pricing," includes actual interchange rates, plus a small markup fee which may vary.

What is a Fixed Rate Merchant Account?

Today, many well-known processors promote flat rates with no fees or hassles, but this can come at a cost: Based on your business type and average transaction size, this rate can still be high for your type of business.

The attractiveness of flat-rate pricing is simple to understand. Compared to many merchant services, which have numerous fees and varied rates for various transactions, flat-rate pricing is fixed, so you know what to expect.

Processors that offer flat-rate credit card processing must pay the same rates as other processors. The flat rate pricing includes interchange + margin, in the form of a flat rate. You just won’t see an itemized breakdown of interchange fees, just the flat rate.

With an alternative pricing mechanism, there is a significant probability that most of the transactions you execute would be eligible for a much cheaper rate. For instance, if you own a small-sized to medium-sized business, most of your transactions will likely include debit cards, the cards with the lowest interchange rates. You could be paying 1-2% less with an interchange plus or cost-plus pricing model compared to flat rate pricing.

Advantages of Using Interchange Plus

Transparency: The closest approach to transparency you can find in the card payment industry is interchange plus pricing. It is more difficult for a processor to tack on hidden fees because your merchant bills will differentiate between wholesale charges and your processor's markups, and you'll typically have more understanding of how your processing expenses function.

Savings: You may keep track of all your costs and search for potential areas of savings even though interchange plus pricing isn't always the right fit for all merchants.

Disadvantages of Interchange Plus Pricing

Complexity: The monthly statements that emerge from interchange plus pricing can be difficult to understand because it is an itemized and detailed explanation of charges and markups. To understand the rate you are paying simply divide the total fees paid by the processed volume. This will give you the percentage in terms of your processing rate, or the flat rate.

Advantages of Fixed Rate Merchant Account

  • Simplicity: You won't have to go through many cryptic charges on your monthly merchant bills.
  • Consistency: You may predict your processing expenses each month by adding your processor's flat rate(s) to your predicted sales if you can accurately foresee your forthcoming sales involving card payments.

The Disadvantages of Fixed Rate Merchant account

1 ) Lack of transparency

It might be challenging to determine whether you're getting a good deal with flat rate models, much like with tiered pricing schemes, since you do not get a breakdown of the cost for each type of card accepted. It is simply one rate for all cards.

2) Higher prices

On average, if your transaction amount is more than $18, it will cost you more being on flat rate pricing. But, for merchants with transactions under $18, flat rate pricing may be advantageous since it will cost them less.

Interchange-Plus Pricing Model for Merchants

Credit card processing costs are referred to as interchange. This includes the sums owed to the issuing bank and the credit card association. The “plus” is the margin charged by the credit card processing company.

Fixed Rate Merchant Account Pricing Model for Merchants

In contrast to interchange-plus pricing schemes, which detail which fees are charged by which organizations, flat-rate billing combines the information into a single, spacious per-transaction amount.

Small business owners find services like Square enticing, because of their flat rate pricing, but not everyone benefits from that type of pricing structure as stated earlier. Merchants with quick-service restaurants and low transaction amounts will benefit most.

Which is right for your business?

It's not always simple to decide between flat rate price and interchange plus pricing. Most companies depend heavily on payment processing. As a result, you should take your time to conduct necessary research, figure out processing fees based on your typical transaction value, and comprehend the pricing structure of each processing company. Because it is often easier for all parties concerned, most contemporary processors have switched to a flat fee model.


Now that you understand both interchange plus pricing and fixed rate pricing, you can make a more informed decision as to which pricing model will suit your business best. And, if you have any additional questions or concerns, our team here at Merchantech is always available to assist you.

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