Every processor pays the same underlying cost for a card transaction: interchange to the issuing bank, plus small network fees. What differs is how the processor packages that cost with its own margin. There are three common packages: flat rate, tiered, and interchange-plus. The package decides not just what you pay, but whether you can see what you’re paying for.
The three models at a glance
| Flat rate | Tiered | Interchange-plus | |
|---|---|---|---|
| How it’s quoted | One rate for every card, e.g. 2.6%–2.9% + 10–30¢ | Two or three “buckets”, each with its own rate | Card cost at cost, plus the processor’s markup and fees as separate lines |
| Can you see the markup? | No | No | Yes |
| Who decides your rate per card | Nobody; it’s all the same | The processor | The card networks (cost) + your agreement (markup) |
| Statement complexity | Very simple | Medium, with confusing labels | Longer, but every line can be checked |
| Do interchange cuts reach you? | Only if the processor lowers your rate | Only if the processor lowers your buckets | Automatically |
| Typically suits | Very small, new or seasonal businesses | Rarely the best choice | Most established businesses |
| Main risk | Overpaying on cheap cards as you grow | Downgrades hiding most of the margin | Monthly fees padding a low markup |
Flat rate
You pay one percentage and one per-transaction fee on every card, whether it’s a cheap debit tap or an expensive rewards card keyed in by phone. Many payment-facilitator platforms and some POS bundles price this way.
Why owners like it: it’s simple. You can do the math on a napkin, and your fees move in a straight line with your sales.
What it costs you: the processor sets the rate high enough to cover its most expensive transactions. Every cheaper transaction, such as debit or standard credit, carries extra margin. As your volume grows, that extra margin grows with it. You also can’t see how big it is.
Who it suits: businesses just getting started, very low-volume sellers, or very seasonal ones, where simplicity is worth more than a few dollars a month. Once you’re processing steadily, it’s worth getting a cost-plus quote to compare.
Tiered pricing
The processor sorts each transaction into a bucket, usually called qualified, mid-qualified and non-qualified. Each bucket has its own rate. The sales pitch quotes the qualified rate, which looks low.
How the buckets hide markup
The card networks have hundreds of interchange categories. A tiered processor collapses them into two or three buckets of its own design. That creates several places to hide margin:
- The processor decides which card goes where. A standard rewards card might go to mid-qualified. Business cards and keyed sales often go to non-qualified.
- Bucket rates aren’t tied to cost. The non-qualified rate might be 1.5 points higher than qualified, even when the actual interchange difference is much smaller.
- “Downgrade” or “surcharge” lines stack on top. Some tiered statements charge the qualified rate and then add a separate per-transaction penalty for anything that didn’t qualify.
- You can’t check any of it. Because the buckets don’t correspond to published interchange categories, there’s no table to compare against.
Here’s a simplified illustration. Suppose a processor quotes 1.69% qualified, 2.49% mid-qualified and 3.49% non-qualified. A customer pays with a rewards card whose actual interchange is around 2.1%. If the processor sorts it as non-qualified, you pay 3.49%, and roughly 1.3 points of that is margin. On a $1,000 sale, that’s $13 the processor kept on a single transaction, with nothing on your statement to tell you.
As more customers carry rewards and business cards, more of your volume drifts out of the qualified bucket. Your effective rate climbs, even though no one changed your “rates”.
Who it suits: honestly, almost nobody. If you’re on tiered pricing, ask for interchange-plus. If your processor won’t offer it, that tells you something.
Interchange-plus
You pay the actual interchange and network fees for each transaction, passed through at cost, plus the processor’s markup, typically a small percentage and a few cents per transaction, along with any other processor fees. The cost and the markup appear separately on your statement.
Why it’s the most transparent: the cost of the card and the processor’s margin are never blended. You can see exactly what the processor earns, and you can compare two quotes by adding up everything each one charges above cost on your own card mix.
What to watch: your total still moves with your card mix, because interchange is real cost. And a low markup can be offset by monthly fees, so add those in. Interchange-plus pricing explained works through a full example.
Who it suits: most businesses processing more than about $10,000 a month, businesses with a lot of debit or standard credit, and anyone who sells to other businesses and wants Level 3 savings on corporate cards to actually reach them.
The same month, three ways
A business does $25,000 a month, 625 transactions at a $40 average ticket. Assume the actual card cost (interchange plus network fees) works out to about $500. These are illustrative numbers.
| Model | Assumed terms | Monthly cost | Processor’s share |
|---|---|---|---|
| Flat rate | 2.9% + $0.30 | ~$913 | ~$413 (hidden) |
| Tiered | Mix of 1.69% / 2.49% / 3.49% plus downgrades | Often $700–$900+ | Unknown |
| Interchange-plus | Cost + 0.30% + $0.10 | ~$638 | ~$138 (visible) |
The card cost is the same in every row. The pricing model decides how much margin sits on top, and whether you can see it.
How to tell which model you’re on
Check your latest statement:
- One rate on everything, no category names? Flat rate.
- Words like qualified, mid-qual, non-qual or downgrade? Tiered.
- A section listing interchange categories (names like “CPS Retail” or “Merit”) with a separate markup line? Interchange-plus.
If you’re not sure, how to read a merchant statement walks through it section by section.
Making the switch
Moving from flat or tiered to interchange-plus is usually a pricing change, not an equipment change. Before you do:
- Work out your current effective rate from 2–3 statements.
- Ask for every fee above cost in writing: percentage, per-transaction, authorization, batch and every monthly fee.
- Check your contract for a term, auto-renewal and cancellation fee.
- Compare in dollars per month on your own volume.
How to switch payment processors has the full checklist.
Mojo’s approach: a program built on cost-plus
Mojo Payments doesn’t offer flat-rate or tiered pricing. Every account runs on cost-plus pricing underneath: interchange and card-brand fees pass through at cost, with no tiers, no “non-qualified” surcharges, month-to-month and no cancellation fee.
On top of cost-plus, we build a pricing program from your own statement instead of quoting a rate card:
- Each part of the bill is priced separately: card markups, per-transaction and authorization fees, PIN debit, batch, monthly, gateway, PCI and equipment.
- The lowest price goes to the payments you run most, whether that’s small debit tickets at the counter or keyed invoices.
- Tools lower the cost of everything else: Level 3 data for business cards, PIN debit prompts so debit isn’t run as credit, card-present terminals instead of keyed entry, CVV and ZIP prompts on keyed payments, secure hosted pay links, tokenization and diagnostics.
The quote shows all the math: every fee line, what you pay today next to what you’d pay with Mojo, and the card mix it’s based on. The combined total is lower than today’s, or we tell you we can’t beat it. Apply online and upload your statements, and we’ll return it within 24 hours. Get your free statement review.
Frequently asked questions
Which credit card pricing model is cheapest?
For most businesses processing more than about $10,000 a month, interchange-plus with reasonable fees above cost costs the least. Flat rate can suit very small or brand-new businesses that value simplicity. Tiered is usually the most expensive and the hardest to check.
How do I know if I am on tiered pricing?
Look on your statement for the words qualified, mid-qualified, non-qualified or downgrade. Those labels mean your processor is sorting transactions into its own rate buckets.
Why is tiered pricing hard to compare?
Because the processor decides which cards land in which bucket, and the buckets don't match the card networks' actual categories. You can't check the rates against published interchange, so you can't tell how much of each charge is markup.
Can I switch from flat rate to interchange-plus without new equipment?
Often, yes. Pricing is part of your merchant agreement, not your terminal. Many Clover and other terminals can stay in place when you change pricing or processors. Confirm compatibility before you switch.
This guide is general information, not legal or financial advice. Card-brand rules and state laws change, so confirm specifics for your business.