Flat-Rate vs Interchange-Plus: The $25K/Month Breakeven (With Real Math)
We ran the numbers on both pricing models at 5 different volumes. Below $25K/month? Flat-rate wins. Above? You're leaving money on the table. See the exact math for your business.
The Two Models That Matter
When choosing a payment processor, the pricing model matters more than the advertised rate. The two models worth considering are flat-rate and interchange-plus. (We generally recommend avoiding tiered pricing, which is a third model designed to obscure costs.)
Let's break down exactly how each works and run real numbers.
Flat-Rate Pricing
With flat-rate pricing, you pay the same rate on every transaction regardless of card type. Stripe charges 2.9% + $0.30 for online transactions. Square charges 2.6% + $0.10 for in-person.
Example: $100 online transaction on Stripe
- Fee: $100 × 2.9% + $0.30 = $3.20
- Same whether the customer uses a debit card or an Amex Platinum
The Hidden Math
On that $100 transaction, the actual interchange fee might be:
- Regulated debit: ~$0.27 (Stripe keeps ~$2.93)
- Basic Visa credit: ~$1.61 (Stripe keeps ~$1.59)
- Visa Signature Preferred: ~$2.50 (Stripe keeps ~$0.70)
Stripe makes significantly more profit on debit transactions. But you pay the same flat rate every time.
Interchange-Plus Pricing
With interchange-plus, you pay the actual interchange fee (set by Visa/Mastercard) plus a fixed markup from your processor.
Example: $100 online transaction at "interchange + 0.3% + $0.10"
- Regulated debit: $0.27 + $0.30 + $0.10 = $0.67
- Basic Visa credit: $1.61 + $0.30 + $0.10 = $2.01
- Visa Signature Preferred: $2.50 + $0.30 + $0.10 = $2.90
Your cost varies per transaction, but it's always the true cost plus a small, transparent markup.
Running the Numbers
Let's model a business processing $50,000/month with a typical card mix:
| Card Type | % of Volume | Avg Interchange | Flat-Rate Cost | IC+ Cost (0.3% + $0.10) | |-----------|-------------|-----------------|----------------|------------------------| | Debit | 30% | 0.5% | $435 | $270 | | Basic Credit | 40% | 1.65% | $580 | $510 | | Rewards/Premium | 30% | 2.3% | $435 | $420 | | Totals | 100% | | $1,450 | $1,200 |
Assumes flat-rate of 2.9% + $0.30, average transaction $50, 1000 transactions/month
Interchange-plus saves ~$250/month ($3,000/year) in this scenario. The savings come almost entirely from the debit card transactions, where flat-rate processors make their biggest margins.
When Flat-Rate Wins
Flat-rate isn't always worse. It's the better choice when:
- You're processing under $10K/month — The simplicity is worth the premium at low volumes
- You value predictability — Budget-conscious businesses appreciate knowing the exact rate
- You accept mostly premium credit cards — If your average interchange is already close to the flat rate, the difference is minimal
- You need the ecosystem — Stripe's developer tools, Square's POS hardware, and PayPal's buyer trust have real value
When Interchange-Plus Wins
Switch to interchange-plus when:
- Processing $25K+/month — The savings become significant
- High debit card volume — Retail, restaurants, and service businesses where customers use debit
- You can read a processing statement — IC+ statements are more complex but more transparent
- You're willing to negotiate — IC+ markup is negotiable, especially as your volume grows
Our Recommendation
For businesses processing over $25,000/month, interchange-plus is almost always the better deal. Below that threshold, the convenience and simplicity of flat-rate processors like Stripe and Square is a reasonable trade-off.
Either way, know what you're paying. Request a processing statement review from a transparent broker or use our rate comparison tool to see how your current rates stack up.