Interchange-Plus vs. Flat Rate vs. Tiered Pricing: Which Saves You the Most?

One of the biggest factors determining your credit card processing costs is not the rate itself — it is the pricing model. Three models dominate the industry: interchange-plus, flat rate, and tiered. Understanding each one is critical to making an informed choice.

Interchange-Plus Pricing

With interchange-plus (also called cost-plus), you pay the actual interchange rate set by the card networks plus a fixed markup from your processor. For example, "interchange + 0.25% + $0.10" means you pay the true interchange cost for each transaction plus the processor's margin.

Pros: Most transparent model. You see exactly what the card networks charge and what your processor charges. Best for businesses processing over $10,000/month.

Cons: Monthly statements can be complex with hundreds of different interchange categories.

Flat Rate Pricing

Flat rate pricing charges the same percentage for every transaction regardless of card type. Square (2.6% + $0.10) and Stripe (2.9% + $0.30) are the most well-known flat rate processors.

Pros: Simple and predictable. Easy to understand. No monthly fees or contracts.

Cons: Expensive for established businesses. You overpay on debit card transactions (which have low interchange) and cannot negotiate rates as your volume grows.

Tiered Pricing

Tiered pricing bundles interchange rates into three or four tiers: qualified, mid-qualified, and non-qualified. Your processor decides which transactions fall into which tier.

Pros: Statements appear simpler than interchange-plus.

Cons: The least transparent model. Processors control which transactions are "downgraded" to higher tiers, and there is no way to verify whether the tier assignment is fair. This is the most expensive model for most businesses.

Which Should You Choose?

• Processing under $5,000/month: Flat rate is convenient and cost-competitive.
• Processing $5,000-$20,000/month: Interchange-plus starts to show significant savings.
• Processing over $20,000/month: Interchange-plus is almost always the best choice.
• Avoid tiered pricing: It benefits the processor, not the merchant.

Not sure which model you are on? Send your statement to Mogil Partners for a free analysis and pricing model recommendation.