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Interchange-plus, tiered and flat-rate processing compared with the arithmetic
Three ways of charging for the same transaction. Run the same month of volume through each and the differences stop being theoretical.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
The three pricing models differ in one respect that matters: how much of your bill you can see, and therefore how much of it you can argue with.
The same month, three ways
Illustrative only. Every rate below is invented for the arithmetic. Interchange is published by the card networks and varies by card and acceptance method; nothing here should be read as a market price.
Take a month of 100,000 in card volume across 2,000 transactions, and assume the true interchange plus assessments on that mix comes to 1,750.
On these numbers the ranking is clear. What is more interesting is what happens when the month changes.
The month your card mix shifts
Still illustrative only. Same volume, but more customers pay with rewards and commercial cards, so true interchange rises from 1,750 to 1,900.
That is the substantive objection to tiered pricing. Not that the rates are always higher, but that the mechanism moving them is not visible to you.
Where flat-rate genuinely wins
At small volume, fixed monthly costs dominate everything.
Illustrative only: 2,000 of monthly volume across 40 transactions. Flat-rate at 2.9% plus 0.30 costs 58 plus 12, or 70 — an effective 3.50%. Interchange-plus on the same tiny month might be 35 of pass-through, 6 of percentage markup, 4 of per-item fees and 40 of monthly charges, or 85 — an effective 4.25%.
The crossover is not a fixed volume figure; it depends on your monthly fees, your average ticket and your card mix. Compute it with your own numbers. Flat-rate also buys same-day onboarding, no separate compliance programme and no monthly minimum, which has real value for a business that processes occasionally.
A fourth model you may be offered
Subscription or membership pricing passes interchange through at cost, adds no percentage markup, and charges a fixed monthly fee plus a small per-transaction amount.
Illustrative only: on the same 100,000 across 2,000 transactions with 1,750 of pass-through, a 99 monthly membership plus 0.08 per transaction totals 2,009, an effective 2.01%. That is the cheapest option in this example, and it is cheapest precisely because the volume is high.
Run a quiet month through it and the picture inverts. At 20,000 of volume across 400 transactions, the same structure costs 350 of pass-through plus 99 plus 32, or 481 — an effective 2.41%. A percentage markup would have shrunk with the volume; a membership fee does not. If your year has genuinely slow months, price the model across all twelve.
The charges that sit outside all four models
None of the pricing models above covers these, and on a small merchant they can exceed the processing markup entirely.
How to compare offers honestly
- Take three recent statements and compute the effective rate for each month.
- Ask each provider to quote on your actual volume, transaction count and card mix, not on a sample.
- For interchange-plus, get the markup as an explicit percentage plus per-item figure, and get every monthly charge listed.
- For tiered, ask for the written definitions of each bucket and which interchange categories fall into which. A provider unwilling to put that in writing has answered the question.
- Add every fixed fee to the comparison, including gateway, compliance and any equipment contract.
Then re-run the arithmetic above with your figures. It takes twenty minutes and it is the only version of this comparison that applies to you.
Where this applies
Related questions
What does this guide cover?
Three ways of charging for the same transaction. Run the same month of volume through each and the differences stop being theoretical.
Which funding products does this apply to?
Credit Card Processing. Each has its own page listing the funders in this directory that offer it and what each one publishes about its terms.
Is this specific to restaurants?
It is written around how a restaurant business actually generates and collects cash, which is what makes its funding problem different. The mechanics transfer; the arithmetic may not.
Who writes this?
The Find Me Funders research desk. Some drafting is AI-assisted, and every page that is says so at the top, including whether a person has checked its claims yet.
How do I know a figure here is right?
Where a page carries the green notice, its claims were checked against the sources listed at the end and a reviewer is named. Where it carries the amber one, nobody has verified it yet and you should confirm anything you plan to act on.
Are the examples real deals?
No. Every worked example is labelled illustrative and exists to show the arithmetic. What any particular lender charges is on that lender's page, where it publishes it.
Why do you never say what a typical rate is?
Because we cannot source it. A market average assembled from lenders who do not publish prices is a guess with a decimal point on it. Where a lender publishes a figure, we show that figure and say where it came from.
Is this financial or legal advice?
No. It is general information about how these products work. Outcomes depend on your contract and your state, and a lawyer or accountant licensed where you are is the person to ask about your situation.
Can I reuse this content?
Quote a paragraph with a link back. Do not republish whole articles.