Flat-rate processors like Square and Stripe charge one number for every card: 2.6% + $0.10, 2.9% + $0.30, etc. Interchange-plus pricing breaks that into two parts — the real card-network cost (interchange), plus a fixed markup. The difference is straightforward, but the cost gap widens fast as your volume grows.
How flat-rate pricing works
Every Visa, Mastercard, Discover, and Amex transaction has a different cost to the processor depending on the card type. A basic debit card from a bank with high deposits costs the processor about 0.05% + $0.22. A high-tier rewards card costs around 2.10% + $0.10.
Flat-rate processors bundle all of that into one number. They win on simplicity and lose on margin — because the spread between the cheapest and most expensive cards is huge, they have to price the average safely above their worst-case cost.
How interchange-plus works
Interchange-plus quotes a markup over the actual interchange rate. A typical interchange-plus rate looks like "interchange + 0.25% + $0.10." Your statement shows every category of card you ran, the real interchange paid, and the fixed markup applied on top.
The benefit: when a customer pays with a low-cost debit card, you pay less. When they pay with a high-cost rewards card, you pay more — but exactly what it cost, plus your fixed markup. The processor's profit is the same on every transaction.
When does interchange-plus start saving money?
The rough breakeven is somewhere between $10,000 and $15,000 in monthly card volume, depending on your card mix. Below that, the monthly account fees on interchange-plus plans (typically $10–$25) eat the savings.
Above $25,000/month, interchange-plus almost always wins — usually saving 20–40 basis points (0.20–0.40%) on effective rate. On $50,000/month, that's $100–$200 in monthly savings. On $250,000/month, it's $500–$1,000.
When flat-rate is actually the right choice
If you process less than $5,000/month, run sporadic volume, or value pure simplicity over a few basis points, flat-rate is the right answer. The math doesn't favor switching until volume justifies it.
If your transactions are small (under $10 average), per-transaction fees can hurt more than the percentage. A processor with a low per-transaction fee — flat or interchange-plus — matters more than the rate.
Look at your last full month of processing. Total fees ÷ total volume = effective rate. If you're above 2.7% and processing more than $15,000/month, interchange-plus will almost certainly cost you less. If you're below that, the simplicity of flat-rate is probably worth keeping.