Start with what a card actually costs
Every card transaction has three cost components, and only one of them is negotiable.
Interchange is set by the card-issuing bank and published openly by Visa and Mastercard. It varies by card type, business category, and how the card was accepted, a tapped debit card in a grocery store and a keyed premium rewards card in an online store sit in completely different categories. Assessments are charged by the card network itself and are small and fixed. The processor markup is the third piece, and it is the only part any processor controls.
Every processor pays exactly the same interchange and the same assessments. When one is cheaper than another, it is because the markup is smaller, or because it is hidden.
Flat-rate pricing
Flat-rate means one blended number on everything: a familiar example is 2.9% plus 30 cents per transaction, regardless of what card was used or how.
It is genuinely simpler, and for a very small or brand-new business the simplicity has real value. But the mechanism is worth understanding. The processor still pays true interchange on every transaction. If a customer pays with a basic debit card whose true cost is well under 1%, the processor keeps the difference. If someone pays with a premium rewards card that costs more, the processor absorbs it. Across a typical merchant's card mix, the blended rate is set comfortably above the average true cost. That spread is the business model.
Interchange-plus pricing
Interchange-plus separates the components. You pay true interchange, plus assessments, plus a disclosed markup, quoted as something like interchange + 0.30% + 10 cents.
The statement is longer and more detailed, which is the main honest complaint about it. But the processor's margin is visible on every single statement, it does not change when your card mix changes, and you can compare two processors on the only number that actually differs between them.
Which one costs you less
This is arithmetic, not opinion. Three factors decide it.
Your card mix
Businesses whose customers pay predominantly on debit and basic credit cards are structurally overcharged by flat-rate pricing, because their true cost sits far below the blended rate. Businesses with heavy premium-rewards volume are closer to break-even.
How you accept cards
A card physically tapped or dipped carries meaningfully lower interchange than one keyed in or entered online. Card-present businesses give up more under flat-rate pricing than card-not-present ones.
Your volume
The spread is a percentage, so it scales linearly. At $10,000 a month the difference is a rounding error. At $150,000 a month it is often a five-figure annual number.
The only number worth comparing
Ignore every rate you have been quoted. Take your last statement, add up every fee on it, discount rate, per-item fees, monthly fees, statement fees, PCI fees, batch fees, all of it, and divide by your total card volume for the month.
That is your effective rate, and it is the only figure that can be honestly compared between two processors. A merchant quoted 2.6% who is actually paying 3.3% is a very common situation, and it is invisible until you do this division.
Where the money actually hides
Downgrades
A transaction missing address data, settled late, or submitted without full detail can fall into a more expensive interchange category. Under flat-rate you never see it. Under interchange-plus it appears on the statement, which is how you find out it is happening.
Padded interchange
Some processors quote interchange-plus and then quietly inflate the interchange line itself. This is why a statement review by someone who reads them for a living is worth more than any quote.
Junk fees
Annual fees, PCI non-compliance fees, statement fees, batch fees, gateway fees, monthly minimums. Individually small, collectively they can move an effective rate by half a point.
Tiered pricing
Worth naming separately: qualified, mid-qualified, and non-qualified tiers, where the processor decides which bucket each transaction falls into. It is the least transparent model in the industry and it should generally be a hard no.
The honest summary
If you are very small, brand new, or process irregularly, flat-rate simplicity has genuine value and the spread is not costing you much in absolute terms.
If you are established, processing consistently, and especially if you take cards in person, interchange-plus almost certainly costs you less, and more importantly, it lets you verify that it does. That verification is the real product.
Common questions
Is interchange-plus actually cheaper than flat-rate pricing?+
Usually, especially on card-present sales and a debit-heavy card mix, because you pay real interchange plus a fixed markup instead of one blended rate padded for the processor. On a poor card mix the gap narrows, so compare against your actual statement.
What is interchange and who sets it?+
Interchange is the wholesale cost of a card transaction, set by Visa, Mastercard, and the other networks, and kept by the cardholder's bank. Every processor pays the identical published rate, so interchange itself is never where one processor beats another.
Why does flat-rate pricing feel simpler but cost more?+
A flat rate bundles interchange, assessments, and markup into one number, so you never see the markup. The blended rate is set high enough to protect the processor across every card type, and you pay that cushion on every sale.
What is a tiered pricing statement and why avoid it?+
Tiered pricing sorts transactions into qualified, mid-qualified, and non-qualified buckets, and the processor decides which bucket each sale lands in. You cannot audit those decisions, which makes it the least transparent model available.
How do I compare two processors fairly?+
Ignore the headline rate and use your effective rate: total fees divided by total volume, across a few months. Then ask each processor to beat that specific number on your actual card mix. A quote on a sample transaction tells you little.
See your effective rate on your own statement.
Send us two or three months and we'll show you what you're actually paying, line by line. No cost, no switch required.
More on merchant services and credit card processing, or read the payments glossary.