If you’ve ever wondered why your friend’s coffee shop pays less in processing fees than your boutique — even though you both accept cards — the answer probably comes down to how your processor prices transactions.
Pricing models are the hidden variable most business owners never think about. Two dominate the market today: flat rate and interchange-plus. Both have their merits, both have their drawbacks — and understanding how they work could be the difference between keeping or losing thousands in annual profit.
Let’s break them down.
Flat-rate pricing charges one fixed percentage for every transaction — typically between 2.6% and 2.9% plus a few cents.
It’s simple, predictable, and easy to budget for — which is exactly why many small business owners love it.
The Pros
Easy to predict and plan for.
Great for lower-volume or mixed card environments.
No need to understand interchange tables or complex fee structures.
The Cons
You pay the same rate for every transaction, regardless of cost.
Lower-cost debit transactions get charged the same as high-cost rewards cards.
Over time, this simplicity comes at a premium — especially as you scale.
Here’s a quick example:
If your average true interchange cost is 1.8%, but your processor charges a 2.9% flat rate, you’re paying an extra 1.1% in markup. That’s $1,100 in extra fees for every $100,000 in processed volume.
The simplicity that feels convenient at first can quietly become costly once your business hits steady volume.
Interchange-plus pricing, by contrast, passes through the true card network fees (Visa, Mastercard, AmEx, Discover) and simply adds a small, clearly defined markup from your processor.
It’s a more transparent and fair model — but also a bit more complex to read.
The Pros
Transparent and scalable — you can see exactly where every dollar goes.
Usually cheaper at higher volumes.
Easier to benchmark processor performance and negotiate better rates.
The Cons
Monthly statements can look intimidating.
Costs fluctuate more based on card type and transaction method.
You need to trust your processor to provide clear reporting.
If flat rate is the “easy button,” interchange-plus is the “truth serum.” It’s built for business owners who value clarity — even when it comes with a learning curve.
The right model depends less on preference and more on your business type and transaction behavior.
| Business Type | Best Fit | Why |
|---|---|---|
| Low-volume or seasonal | Flat Rate | Simplicity outweighs small savings. |
| Growing SMBs | Interchange-Plus | Lower cost and visibility as you scale. |
| Online/Digital | Interchange-Plus | Card-not-present transactions vary, so transparency matters. |
| Multi-location Retail | Interchange-Plus | Volume-based savings add up quickly. |
| Mobile/Pop-Up | Flat Rate | Predictability matters when margins are thin. |
Regardless of your pricing model, the number that truly matters is your effective rate — your total fees divided by your total processing volume.
For most small businesses, that number should fall between 1.7% and 2.5%. Anything significantly higher is a sign you’re overpaying, no matter how your plan is structured.
There’s no wrong choice — only an uninformed one.
Flat rate is great when you’re starting out and need predictability.
Interchange-plus shines when you’re ready to understand what you’re really paying for.
At Paygent.ai, our mission is to make these trade-offs crystal clear. Our upcoming transparency dashboard will show you exactly what you’re paying under any model — flat, interchange-plus, or hybrid — so you can make informed decisions with confidence.
Because curiosity costs nothing. Confusion costs plenty.