The three pricing models every merchant should understand
If you accept cards, you are paying one of three ways, and the difference between them can be thousands of dollars a year on the same sales. Understanding interchange-plus vs flat rate pricing — and where opaque tiered pricing fits between them — is the single most useful thing a business owner can learn about merchant services. The card networks charge the same wholesale cost to everyone; what changes is how your processor marks it up and how clearly they show you that markup.
Let's walk through all three honestly, with no jargon, so you can figure out which one you're on and which one you should be on.
Flat-rate pricing: simple, predictable, and pricey at volume
Flat-rate is what you get from Square, Stripe, PayPal, and similar providers. You pay one advertised rate on every sale — something like 2.6% plus 10 cents in person, or 2.9% plus 30 cents online. No statements to decode, no approval process, no monthly minimums. You sign up in ten minutes and start taking cards.
That simplicity is genuinely valuable, and for a brand-new business or a low-volume seller it's often the right call. The problem is what happens as you grow. Flat-rate providers bundle their margin into that single number, and they price it high enough to cover their most expensive transactions. A rewards credit card that costs them more still charges you the same 2.6% as a plain debit card that costs them far less. You never see the difference, so you never capture the savings.
A store doing $40,000 a month at a flat 2.9% is paying about $1,160 in fees. The true wholesale (interchange) cost on that mix might be closer to $800. That $360 monthly gap is pure convenience premium — fine when you're small, expensive when you're not.
Tiered pricing: where processors hide their margin
Tiered pricing is the model to watch out for. On the surface it looks competitive: a sales rep quotes you a "qualified" rate of 1.79% and you sign. What the quote doesn't emphasize is that transactions get sorted into three buckets — qualified, mid-qualified, and non-qualified — and the processor alone decides which sale lands where.
Rewards cards, corporate cards, keyed-in transactions, and plenty of ordinary swipes get quietly pushed into the mid- and non-qualified tiers, where rates can run 3.5% or higher. Because so much of modern card volume is rewards cards, most of your transactions end up in the expensive buckets. That teaser 1.79% becomes an effective rate of 3% or more, and the padding is invisible unless you do the math yourself.
Tiered pricing exists primarily to obscure margin. If you're on it, that's the clearest signal you're overpaying. Our free statement review most often finds savings hiding inside exactly this structure.
Interchange-plus: cost plus one honest margin
Interchange-plus (sometimes called cost-plus) is the transparent model. Your price is the true interchange cost set by Visa and Mastercard — which is public and identical for every processor — plus one clearly stated markup, such as interchange + 0.30% and 10 cents per transaction.
The power of this structure is that the two pieces are separated. You can see exactly what the card networks charged and exactly what your processor kept. When a customer pays with a low-cost debit card, you pay less. When interchange rates change, your cost moves with them instead of the processor pocketing the difference. There's nowhere to bury margin because the margin is printed right there in one line.
That same $40,000-a-month store on interchange-plus might pay roughly $800 in true interchange plus a $220 markup — about $1,020 total, versus $1,160 on flat-rate or $1,300-plus on a padded tiered plan. Same sales, materially different cost.
Who each model fits
- Just starting or under ~$8,000/month: Flat-rate is reasonable. The simplicity is worth the premium while volume is low.
- Growing, roughly $8,000–$10,000/month and up: Interchange-plus almost always wins. The fixed margin scales far better than a padded percentage.
- On tiered pricing at any volume: You're likely overpaying. Move to interchange-plus and the difference is usually immediate.
- One blended rate applied to your total volume, with a clean flat percentage — that's flat-rate.
- "Qualified / mid-qualified / non-qualified" line items — that's tiered, and it deserves a second look.
- Interchange listed separately with a stated markup on top — that's interchange-plus.
For a personalized number, our savings calculator lets you estimate the gap in a couple of minutes.
How to tell which one you're on
Pull your most recent monthly statement and look at how fees are grouped:
Then find your effective rate: total fees divided by total sales. If a Georgia retailer is quoted 1.79% but the statement shows $1,400 in fees on $40,000 in sales, the real rate is 3.5%, not 1.79%. The effective rate is the only number that tells the truth.
A cleaner path than any of the three
There's also a fourth option worth knowing about: dual pricing, which offsets up to 100% of your processing fees by building the card cost into a listed price and offering a cash discount. It isn't right for every business, but for many Georgia merchants it changes the math entirely. You can read more on our credit card processing page, and see how it pairs with modern POS systems and a virtual terminal for phone orders.
As an independent, Georgia-based agency, we're not tied to one processor's rate sheet, so we can put you on whichever model genuinely costs you the least. If our free audit can't find at least 20% in savings, we hand you $100.
The fastest way to know where you stand is to have someone read your statement line by line. Send us your latest one and we'll show you your real effective rate and exactly where the margin is hiding — start with a free statement review.