You've probably noticed that two businesses down the same street can pay wildly different rates to accept the exact same Visa card. Part of that is the deal each owner negotiated. But a bigger part is the pricing model sitting underneath the deal — the structure that decides how your processor turns raw card costs into the number on your monthly statement.
There are three common models: interchange-plus, flat rate, and tiered. None of them is universally "cheapest." The right one depends on how your customers pay, what they buy, and where the sale happens. This guide walks through all three, then helps you match your own business profile to the model that usually costs the least — with a few worked examples so you can see the math.
The three pricing models, in plain English
Every card transaction has a wholesale cost baked in that no processor can remove. It's called interchange — a fee the card networks (Visa, Mastercard, Discover, American Express) set and pass to the bank that issued your customer's card. A basic debit card carries a small interchange fee; a premium travel-rewards card carries a much larger one. On top of interchange sit small network assessment fees, and on top of that sits your processor's markup. The three models differ only in how that markup is presented.
Interchange-plus (also called cost-plus)
Your processor passes interchange straight through at cost, then adds a fixed, disclosed markup — for example "interchange + 0.30% + $0.10 per transaction." The wholesale part rises and falls with the actual cards your customers use, but your processor's cut is always the same and always visible. It's the most transparent model, which is exactly why some rooms don't lead with it.
Flat rate
One blended percentage (sometimes with a small per-transaction fee) covers everything — interchange, assessments, and markup — no matter which card gets swiped. A customer paying with a plain debit card and a customer paying with a premium rewards card cost you the identical rate. It's simple and predictable, which many owners value, but on cheap cards you're subsidizing the processor's margin.
Tiered (bundled)
Transactions are sorted into buckets — usually "qualified," "mid-qualified," and "non-qualified" — each with its own rate. The pitch quotes the low "qualified" rate. The catch is that the processor decides which transactions fall into which tier, and rewards cards, keyed-in sales, and business cards routinely get downgraded into the pricier tiers. This is the model most likely to produce a quoted rate that doesn't match your actual bill. We break down exactly how that happens in how the quote-vs-bill gap works.
Which model fits your business?
The deciding factors are almost always the same three things: your card mix, your average ticket, and whether you're card-present or online. Here's how each lever pushes the decision.
Debit-heavy vs. rewards-heavy
Debit interchange is cheap. If a large share of your sales are debit — common for grocery, convenience, gas, and everyday-essential retail — interchange-plus tends to win, because you pay that low wholesale cost directly instead of a blended rate that averages debit in with expensive cards. If your customers lean heavily on premium rewards and travel cards (think fine dining, boutique retail, luxury services), the wholesale cost is high no matter what, so the model matters less — but a flat rate can occasionally cap your exposure, and tiered will almost always downgrade those rewards cards into a costlier tier.
Low vs. high average ticket
Per-transaction fees (the "+ $0.10" type) hurt most when tickets are small. A coffee shop averaging $6 feels a dime far more than a furniture store averaging $1,200. Low average ticket businesses should scrutinize per-transaction fees and often do better on interchange-plus with a small fixed component. High average ticket businesses are dominated by the percentage, so shaving the percentage markup matters more than the per-transaction fee.
Card-present vs. online / card-not-present
When the card is physically swiped, dipped, or tapped, interchange is lower because fraud risk is lower. Online and keyed-in transactions ("card-not-present") carry higher interchange. On a tiered plan, nearly every card-not-present sale gets pushed to the non-qualified (most expensive) tier — a quiet penalty for e-commerce and phone-order businesses. Interchange-plus exposes the real higher cost too, but without the extra tier-downgrade padding on top. If you sell online, the transparency of interchange-plus usually pays for itself.
Three worked examples
The numbers below are illustrative only, chosen to show how the models compare — they are not Flat Rate Processing's rates and your actual costs depend on your real card mix and volume. To see your true blended cost, run your own statement through our effective rate calculator / free statement analysis.
Example 1 — Neighborhood coffee shop
High volume, tiny tickets (~$6 average), mostly tapped debit and basic credit, all card-present. Here per-transaction fees dominate and the card mix is cheap, so passing interchange through directly is a real advantage.
| Model | Illustrative structure | Cost on a $6 sale |
|---|---|---|
| Interchange-plus | ~0.30% + $0.10 markup over low debit interchange | Lowest — you pay cheap debit cost directly |
| Flat rate | ~2.6% + $0.10 on everything | Higher — debit sales subsidize the blended rate |
| Tiered | Low "qualified" quote, but taps/rewards downgrade | Unpredictable — often the highest in practice |
Best fit: interchange-plus. A debit-heavy, low-ticket shop overpays most on a blended flat rate.
Example 2 — Online specialty retailer
All card-not-present, mid-size tickets (~$85), a healthy share of rewards cards. Every sale is the "expensive" kind of transaction, so a model that pads card-not-present costs hurts the most.
- Tiered: nearly every order lands in the non-qualified tier — the worst outcome for pure e-commerce.
- Flat rate: predictable and simple; a reasonable choice if you value one clean number and don't want to manage a statement.
- Interchange-plus: usually cheapest overall because it doesn't add a downgrade penalty on top of the already-higher online interchange.
Best fit: interchange-plus, with flat rate as a defensible runner-up. Tiered is the one to avoid here.
Example 3 — Home-services contractor
Low volume, large tickets (~$1,500), a mix of swiped and phoned-in cards. Because tickets are big, the percentage markup drives the bill and the per-transaction fee is almost noise.
Best fit: interchange-plus. On a $1,500 job, even a fraction of a percent of markup difference is real money, so transparency into that markup matters more than anything else. A flat rate can quietly cost hundreds a month more on high tickets.
How to actually decide (and verify)
You don't have to guess. Follow this short checklist:
- Find your effective rate. Take total fees for a month, divide by total card sales. That single percentage is your real cost — ignore the headline quote.
- Look at your card mix. Debit-heavy and card-present pushes you toward interchange-plus. Rewards-heavy narrows the gap between models.
- Check your average ticket. Small tickets = watch per-transaction fees. Large tickets = watch the percentage markup.
- Count your card-not-present sales. The more you sell online or by phone, the more a tiered plan quietly costs you.
- Ask for the markup in writing. A processor comfortable with interchange-plus will show you interchange at cost and a flat, disclosed markup. If nobody will put the markup in plain numbers, that tells you something.
Still unsure which model your current statement even uses? That's common — and it's exactly what a free review is for. We'll read your real statement, calculate your true effective rate, and show you which model would actually cost your business less. Start with our free statement analysis, browse our solutions, or get quick answers in the processing rates FAQ. No jargon, no pressure — just the real math on what you're paying.