Flat Rate vs Interchange Pricing

Flat rate or wholesale, which one is best for your business model?

Flate rate, interchange pricing, tiered pricing, and cash discount are the most common types of rate plans available for payment processing. The impact and how it affecs your bottom line can vary depending on your specific business model and how you accept cards.

Tiered Pricing

We will briefly touch on tiered pricing, but this plan is usually the most expensive and usually impossible to calculate cost projections. Tiered pricing bundles transactions into three different tiers, Qualified, Mid-Qualified, and Non-Qualified, based on certain criteria. Typically, the tier of a transaction depends on the level of risk associated with the Card. Since Tiered plans are unregulated most payment processing providers take advantage of this setup and markup most transactions.


Flat Rate Pricing

Flat rate pricing became increasingly popular when Square was first introduced in 2009. The premise of this plan is that you pay a flat rate for all transactions plus an additional transaction fee. Because of how simple this pricing structure is, most people assume it's the best credit cards credit card processing plan. This plan can be beneficial to a new business with no processing history or high risk merchants. However, this payment processing plan is not the best credit card processing plan for businesses processing high volume. Flat pricing is unregulated and often increases processing costs, especially for debit card transactions. The usual cost for a debit card for example, is 1.75%, if you are on Flat Rate at 2.9&, you are overpaying by 1.15%!


Cash Discount Program

The Cash Discount Program is a way for you as a merchant to defer most of your current credit card processing fees. It is a method of implementing a non-cash adjustment to all customers, while giving a discount to those who pay with cash. Customers who pay with cash take advantage of a cash discount and all others will see a line item added to their receipt as a non-cash adjustment. Additionally, for many businesses, the cash discount program, when marketed properly, can function as a tool to attract new customers. Most customers like the idea of a discount, hence why most stores have a SALE sign displayed on their stores throughout the year.


Interchange Pricing

Refered to as the most transparent credit card procesisng plan due to its clearly outlined fees and terms. Interchange pricing enables merchant to have access to wholesale cost plus a small markup from your provider (ISO, MSP). Since interchange offers the most transparency, your statement may seem more complicated since it lists all transaction types with its own interchange rate. Not only does this plan provide you with complete transparency, you will take advantage of wholesale costs usually avaiable to major businesses.


Regardless of your business type of business model, we all strive to save as much money as we can. Our team of experts have found erroneous hidden fees, surcharges, and extra costs saving some merchants thousands of dollars per year. If want to learn what pricing model you are on or want to take advantage of the best pricing structure for your business reach out to us.

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