Payment Gateways
8 min read
Interchange-Plus vs Flat-Rate Pricing: Which Saves You More?
By VendorCalcs Research Team •
Executive Summary & Key Takeaways
- ✓ The Three Cost Layers: Every card swipe has 3 parts: Interchange (to the cardholder's bank), Card Brand Assessment (~0.14% to Visa/Mastercard), and Processor Markup.
- ✓ The Debit Card Profit Center: On regulated debit cards, interchange is capped at 0.05% + $0.22. On flat-rate providers (Stripe/PayPal), they charge you 2.9% + $0.30 and pocket the huge difference as pure profit!
- ✓ The Volume Break-Even Rule: Businesses processing over $10,000 to $15,000/month will almost always save hundreds of dollars a month on Interchange-Plus.
How Card Processing Pricing Works
1. Flat-Rate Pricing (Stripe, Square, PayPal)
Under a flat-rate model, you pay one predictable rate regardless of the card type used by the customer. Whether the customer pays with an unrewarded debit card or an ultra-premium American Express Platinum rewards card, your rate is always 2.9% + $0.30.
Advantage: Simplicity. No monthly account fees, zero PCI compliance charges, and simple accounting.
Disadvantage: You overpay dramatically whenever a customer pays with a low-cost debit card.
2. Interchange-Plus Pricing
Interchange-Plus separates wholesale interchange costs from the processor's markup. For example, your fee quote might be Interchange + 0.20% + $0.10.
The Real Math: $100 Debit Card Transaction
| Metric | Flat Rate (2.9% + $0.30) | Interchange-Plus (IC + 0.20% + $0.10) |
|---|---|---|
| Wholesale Interchange | $0.27 (0.05% + $0.22) | $0.27 |
| Brand Assessment | $0.14 | $0.14 |
| Processor Fee | $2.79 (Pocketed by Stripe) | $0.30 (Markup) |
| Total Fee Charged | $3.20 | $0.71 |
| Your Net Payout | $96.80 | $99.29 (+$2.49 saved!) |
Summary: When to Switch
- If your processing volume is under $10,000 per month, stay with flat-rate processors (like Stripe or Square) to avoid monthly account maintenance fees.
- If your monthly volume is above $15,000 and a substantial portion of your sales are debit cards or standard consumer credit cards, switching to Interchange-Plus can easily save your business $3,000 to $10,000+ per year.