Interchange-plus vs. flat rate vs. tiered: three ways to price the same payment

Interchange-plus pricing passes each card’s real cost through and adds one visible markup, flat-rate pricing charges one bundled percentage on every card, and tiered pricing sorts cards into buckets the processor defines. All three cover the same underlying costs, but only interchange-plus lets you see what the processor keeps.

If you’re weighing interchange-plus vs. flat rate vs. tiered pricing, the question isn’t which model has the lowest headline number. It’s which one shows you what you’re paying.

What every model is pricing

Every card payment carries three costs. Two of them are the same for every processor in the country:

1. Interchange, paid to the bank that issued the card. See what is interchange.
2. Card-network fees, also called assessments, paid to Visa, Mastercard, Discover or American Express.
3. The processor’s markup, which is the only part that varies from one provider to the next.

The pricing model is just packaging. It decides whether those three pieces appear separately or blended together.

That’s why two quotes with very different headline rates can end up costing about the same, and two quotes that look alike can end up far apart. A low number on page one of a proposal says little until you know which model it belongs to, which cards it covers and what other fees sit beside it. Once you know what’s being packaged, the models are much easier to compare on equal terms.

The three models side by side

	Interchange-Plus	Flat rate	Tiered
How it works	Actual interchange and network fees, plus a fixed markup	One percentage (often plus a per-sale fee) on every card	Cards sorted into qualified, mid-qualified and non-qualified rates
Can you see the markup?	Yes, on its own line	No, it is bundled	No, it is bundled
Low-cost cards like debit	You pay their lower cost	You pay the same rate as premium cards	Depends on the bucket
Who sets the rules	Card networks	Provider	Processor defines the buckets
Easiest to audit	Yes	Simple, but not auditable	Hardest

Interchange-Plus

Sometimes called cost-plus or pass-through pricing. You pay whatever interchange and network fees each card actually costs, plus a markup that is stated as a percentage, a per-transaction fee or both. When a customer uses a low-cost debit card, you get the benefit. When the card networks change their rates, you see the change pass through rather than being folded into a new bundled number.

Flat rate

Flat-rate providers charge one percentage on every card, sometimes with a small per-transaction fee. It’s easy to understand and easy to predict. The trade-off is that you pay the same rate on a basic debit card as on a premium rewards card, so the provider’s margin is widest on your lowest-cost cards. Flat rate tends to suit very small or occasional sellers more than growing businesses.

Tiered

Tiered pricing groups transactions into two or three buckets, usually called qualified, mid-qualified and non-qualified. The processor decides which cards land where. Quotes often feature the low qualified rate, while rewards cards, business cards and keyed-in sales fall into the higher buckets. Because each processor writes its own bucket rules, tiered quotes are hard to compare.

A worked example

Here is a simple, hypothetical illustration with round numbers. It is not a quote and not PayZoom data. Say a business processes $50,000 in a month, and the underlying interchange and network fees on its card mix come to $900.

• On Interchange-Plus with a hypothetical markup of 0.20% plus a small per-sale fee, the markup on $50,000 is $100 plus the per-sale fees. Total: $900 in pass-through costs plus a visible markup.
• On a hypothetical flat rate of 2.9%, the total is $1,450. The $900 in underlying costs is still in there. The rest is the provider’s margin, but the statement won’t show the split.
• On tiered, the total depends on how many sales land in each bucket. If many cards fall into mid- or non-qualified, the total can climb above the flat-rate number.

The point of the example is not the exact figures. It is that the underlying cost is the same in all three cases, and only one model shows you the difference. Our guide to the effective rate shows how to compare any of them using your own statement.

Which model fits your business

• Steady card volume, mixed card types: Interchange-Plus usually gives the clearest picture and rewards low-cost cards.
• Very low or seasonal volume: a flat rate may be simpler, as long as you check the effective rate now and then.
• Already on tiered: pull a statement and look at how much volume lands in the mid- and non-qualified buckets. That number tells you a lot.
• B2B sales: Interchange-Plus lets you capture the lower rates that come from sending Level 2 and Level 3 data on business cards.

Whatever model you choose, ask whether the markup can change over the life of the agreement, and get the answer in writing. A low markup that can rise later is not the same as a fixed one. See processor markup explained.

What PayZoom does

PayZoom recommends Interchange-Plus. Interchange and card-network fees pass through at cost, and our margin is on its own line, as low as 0.05% + $0.22 per transaction, depending on your setup. For Interchange-Plus merchants, our margin above interchange never increases, in writing. There are no early termination fees and no non-compliance fees. See how we price on our pricing page, or send one statement for a free statement analysis.