First, a quick refresher on how processing fees work
Every time a customer pays with a credit or debit card, three parties take a cut before the money reaches your bank account:
The card-issuing bank (the bank that gave your customer their card) collects an interchange fee. This is the largest portion, typically 1.5% to 2.5% of the transaction, and is set by Visa and Mastercard. Your processor has no control over this.
The card network (Visa, Mastercard, Discover, Amex) collects an assessment fee. This is a small percentage, usually around 0.13% to 0.15%. Also non-negotiable.
Your processor (the company you have a merchant account with) collects a markup for handling the transaction, maintaining your account, and depositing funds to your bank. This is the only part of your processing cost that varies between providers.
The pricing model your processor uses determines how that markup is structured and what you see on your monthly statement. The two most common models are interchange-plus and flat rate.
Interchange-plus: what it is and how it works
Interchange-plus pricing (sometimes called “cost-plus” or “IC+”) is exactly what the name suggests. You pay the actual interchange cost of each transaction, plus a fixed markup from your processor.
That markup is expressed as a percentage and a per-transaction fee. For example:
| Example: Interchange + 0.20% + $0.10 If a customer pays with a Visa rewards credit card (interchange rate of 1.65% + $0.10), your total cost for that transaction would be: 1.65% + 0.20% = 1.85%, plus $0.10 + $0.10 = $0.20 per transaction. On a $100 sale, that is $1.85 + $0.20 = $2.05 in total fees. |
The critical feature of interchange-plus is transparency. Because interchange rates vary by card type (a basic debit card costs far less to process than a premium travel rewards credit card), your fees accurately reflect what each transaction actually costs. Your processor’s markup stays the same. Only the interchange portion fluctuates.
What you see on your statement
An interchange-plus statement itemizes every interchange category that appeared in your transactions for the month. You will see line items like:
- VS Credit CPS Retail: 1.51% + $0.10 (Visa credit, card-present, retail)
- VS Credit Rewards 2: 1.65% + $0.10 (Visa rewards credit, card-present)
- MC Debit: 0.05% + $0.21 (Mastercard regulated debit)
- MC World Elite: 2.05% + $0.10 (Mastercard premium credit)
Each line shows the interchange rate charged by the card network, the number of transactions in that category, the volume, and the resulting fee. Your processor’s markup is listed separately, making it easy to see exactly what you are paying to the networks versus what you are paying to your processor.
Advantages of interchange-plus
- Full transparency: You can verify every charge against the published interchange schedule.
- Lower cost at volume: Because you pay actual interchange rather than an inflated flat rate, you benefit directly when customers use lower-cost card types.
- Easy to compare: When you know a processor’s markup is 0.20% + $0.10, you can compare that directly against another processor’s 0.30% + $0.08. With flat rate, you cannot make this comparison.
- No rate manipulation: Your processor cannot quietly route transactions to more expensive categories because the interchange rates are set by the card networks, not your processor.
Disadvantages of interchange-plus
- More complex statements: Your monthly statement will have more line items because every interchange category is listed individually.
- Variable monthly costs: Because interchange rates differ by card type, your effective rate will vary slightly from month to month depending on your transaction mix.
- Requires a merchant account: Interchange-plus pricing is typically offered through traditional merchant account providers, not aggregators like Square or Stripe.
Flat rate: what it is and how it works
Flat-rate pricing charges the same percentage on every transaction, regardless of card type, card brand, or how the payment was accepted. The most well-known flat-rate providers are Square and Stripe.
| Example: 2.9% + $0.30 per transaction Whether your customer pays with a basic Visa debit card (interchange cost to the provider: roughly 0.25%) or a premium Amex rewards card (interchange cost: roughly 2.10%), you pay the same 2.9% + $0.30. On a $100 sale, that is $2.90 + $0.30 = $3.20 in total fees regardless of card type. |
The appeal is simplicity. There are no interchange categories to decode, no separate assessment fees, and no monthly account fees in most cases. One rate. Done.
What you see on your statement
A flat-rate statement is minimal. You will typically see total transactions, total volume, the flat rate applied, and the resulting fees. Some providers do not even send monthly statements; they just show fees deducted from each deposit in your dashboard.
Advantages of flat rate
- Simplicity: One rate is easy to understand and easy to predict.
- No monthly fees: Most flat-rate providers do not charge monthly account fees, statement fees, or PCI compliance fees.
- Instant setup: You can start accepting payments in minutes. No underwriting, no application process.
- No long-term contract: Most flat-rate providers operate month-to-month with no cancellation fees.
Disadvantages of flat rate
- Higher cost at volume: The flat rate is set high enough to cover the most expensive card types. When customers pay with cheaper card types (basic debit, non-rewards credit), the provider pockets the difference. You overpay on every low-cost transaction.
- No transparency: You cannot see how much of your fee goes to interchange versus the provider’s profit. You have no way to verify whether you are paying a fair rate.
- Account stability risk: Because there is no underwriting, flat-rate providers are more likely to hold funds, freeze accounts, or terminate merchants with unusual transaction patterns. This can be devastating for a business relying on daily deposits.
- Limited support: Most flat-rate providers offer email or chat support only. When something goes wrong with a transaction at 4pm on a Friday, you need someone who picks up the phone.
Side-by-side comparison
| Interchange-plus | Flat rate | |
| Pricing structure | Actual interchange + fixed markup | Same rate on every transaction |
| Transparency | Full. Every interchange category visible. | Minimal. One rate, no breakdown. |
| Best for volume | $5,000+/month (savings increase with volume) | Under $5,000-$10,000/month |
| Monthly fees | $5-$15/month typical | Usually none |
| Setup | Application and underwriting (1-3 days) | Instant or same-day |
| Contract | Varies. Payzium: month-to-month. | Month-to-month |
| Statement clarity | Detailed. Requires some learning. | Simple. Minimal detail. |
| Negotiable | Yes. Markup is negotiable. | No. Rate is fixed. |
| Support | Phone, email, dedicated rep (varies) | Chat/email. Phone support limited. |
| Account stability | High. Underwritten, dedicated account. | Risk of holds/freezes without warning. |
| Debit transactions | Much cheaper (regulated debit as low as 0.05% + $0.21) | Same rate as credit. You overpay. |
Let the numbers do the talking
Abstract comparisons only go so far. Let us look at real numbers for three different business profiles to see how the models compare in practice.
Scenario 1: Coffee shop ($8,000/month, high debit volume)
A coffee shop processes 1,200 transactions per month with an average ticket of $6.67. Approximately 60% of transactions are debit and 40% are credit.
| Interchange-plus | Flat rate | |
| Debit fees (720 txns, $4,800) | $153.60 (avg 0.05% + $0.21) | $355.20 (2.6% + $0.10) |
| Credit fees (480 txns, $3,200) | $107.20 (avg 1.75% + $0.10 + markup) | $131.20 (2.6% + $0.10) |
| Monthly account fee | $5.00 | $0.00 |
| Total monthly cost | $265.80 | $486.40 |
Interchange-plus saves $220.60 per month ($2,647 per year). The savings are dramatic because debit cards have extremely low interchange rates that flat-rate pricing completely ignores.
Scenario 2: Boutique retail ($25,000/month, mixed cards)
A retail shop processes 600 transactions per month with an average ticket of $41.67. The mix is roughly 30% debit, 50% standard credit, and 20% premium rewards credit.
| Interchange-plus | Flat rate | |
| Total processing fees | $445.00 | $590.00 |
| Assessment fees | $35.00 | Included in rate |
| Monthly fees | $10.00 | $0.00 |
| Total monthly cost | $490.00 | $590.00 |
Interchange-plus saves $100 per month ($1,200 per year). Even with the monthly account fee and separate assessment charges, the total cost is lower.
Scenario 3: Online consultant ($3,000/month, all card-not-present)
A solo consultant sends 15 invoices per month with an average of $200 each. All transactions are online (card-not-present), which carries higher interchange rates.
| Interchange-plus | Flat rate | |
| Processing fees | $64.50 | $91.50 |
| Monthly fees | $25.00 (incl. gateway) | $0.00 |
| Total monthly cost | $89.50 | $91.50 |
At this volume, the difference is marginal. The interchange-plus advantage is only about $2 per month. For a consultant processing $3,000/month with simple needs and no physical terminal, flat rate is a perfectly reasonable choice. The simplicity may be worth the extra few dollars.
| The crossover point As a general rule, interchange-plus starts saving money at around $5,000 to $10,000 in monthly volume. Below that, flat-rate simplicity and zero monthly fees may offset the per-transaction savings. Above that, the gap widens every month. |
What the rate comparison does not tell you
Processing fees are important, but they are not the only cost of doing business with a payment provider. Several factors do not show up in a rate comparison but can have a significant financial impact.
Funding speed
How quickly does money reach your bank account after a sale? Most interchange-plus providers offer next-day funding. Some flat-rate providers hold funds for 2 to 3 business days by default. For a business with tight cash flow, that difference matters more than a few basis points on processing.
Account holds and freezes
Flat-rate providers approve merchants instantly because they skip the underwriting process. The trade-off is that they monitor accounts after the fact and may freeze funds or terminate accounts if transaction patterns look unusual. A sudden spike in sales volume, a larger-than-normal transaction, or a chargeback can trigger a hold with no warning. Interchange-plus providers underwrite your account upfront, which means they already understand your business before you process a single transaction. Holds and freezes are far less common.
Chargeback handling
When a customer disputes a charge, how your provider handles it makes a real difference. Many flat-rate providers provide automated dispute tools but limited human support. With a traditional merchant account on interchange-plus, you typically have access to a dedicated support team that can walk you through the representment process and help you fight illegitimate chargebacks.
Equipment and integration
If you need a physical terminal, flat-rate providers sell or lease their own branded hardware. If you switch providers, that hardware becomes useless. With interchange-plus, many providers support standard, non-proprietary terminals that can be reprogrammed if you change processors. Your equipment investment is not locked to a single provider.
| The real cost of an account freeze If your flat-rate provider freezes your account for 7 days while reviewing a flagged transaction, and you process $1,000 per day, that is $7,000 in revenue held hostage. For a small business, that can mean missed payroll, late rent, or supplier payments. No amount of per-transaction savings compensates for that risk. |
So which model should you choose?
Flat rate is likely the better choice if:
- You process less than $5,000 per month
- You need to start accepting payments today with no setup time
- You sell at markets, pop-ups, or events and need maximum flexibility
- Your business is brand new and you do not yet have predictable volume
- You value simplicity over cost optimization
Interchange-plus is likely the better choice if:
- You process more than $10,000 per month
- A significant portion of your transactions are debit cards
- You want to see exactly what you are paying and why
- You need reliable next-day funding
- Account stability matters to your operations
- You want a provider you can call when something goes wrong
- You have an established business with predictable transaction volume
A note on tiered pricing: If your current processor uses tiered pricing (qualified / mid-qualified / non-qualified), that model is not covered in this comparison because it is not one we recommend. Tiered pricing is the least transparent option and almost always costs more than interchange-plus. If you are currently on tiered pricing, switching to interchange-plus should be your first priority, regardless of volume.
Not sure where you stand? We will show you.
If you are currently on flat-rate pricing and wondering whether interchange-plus would save you money, there is an easy way to find out. Send us your most recent processing statement (or a screenshot of your fees from your provider’s dashboard) and we will run the numbers for you.
We will calculate your current effective rate, model what your costs would look like on interchange-plus, and tell you the difference. If interchange-plus does not save you money, we will tell you that too. No pitch, no pressure, just math.
| Get your free pricing comparison Email your most recent statement or fee summary to sales@payzium.com or call us at 888-546-4919 |
Transparent, reliable payment processing with clear pricing, consistent deposits, and responsive support.