Flat Rate Pricing vs. Interchange Plus Pricing

Merchant account fees might seem very intimidating to the average small business owner. Along with trying to calculate the fees for items like credit card processing equipment, you also have to project how much you will pay to your merchant bank in fees each month. One area that is particularly confusing to some people is the idea of flat rate fees versus interchange plus pricing. While it might seem reasonable that a flat rate would be the simplest and most convenient, the reality is that in most cases interchange plus pricing offers a better option for small businesses.

Flat rate pricing means that a person is charged the same amount by the bank that handles their retail merchant accounts every month, regardless of the number of transactions they do. While this might make it easier to project expenses on a monthly basis, it also means that they might be spending more on average throughout the course of a year because they aren’t receiving a discount for months when they are doing a lower volume of business.

Interchange plus pricing (also known as cost plus pricing) allows merchants to pay the exact interchange fee plus a flat mark-up to their merchant service provider. This means that a person might pay 0.35 percent on each transaction plus a flat authorization fee to their merchant provider such as Total Merchant Services. The benefit this provides is that the customer pays based on volume — meaning a potential savings in lean months with less business.