Every processor pays the same interchange and network fees on your transactions. What differs is how those costs, plus the processor's own markup, are packaged and billed to you. There are five common models. This guide describes each one factually and shows how to recognize it on a statement. It does not rank them; which one costs least depends on your card mix, ticket size and volume.
Interchange-plus (also called cost-plus or pass-through)
How it is priced. Interchange and assessments pass through at the network's published cost. The processor adds a fixed markup, usually a small percentage plus cents per transaction, and often a monthly fee.
On the statement. You see interchange listed by category (for example, retail credit, rewards, regulated debit), assessments as separate network lines, and the markup as its own percentage and per-item line. Toast offers a Cost Breakdown report to its interchange-plus customers that lists interchange by card type.
What to check. Add the markup percentage, per-item fees and monthly fees, then divide by volume to get the markup as a percentage. Confirm that interchange lines match the networks' published categories for your industry. Look for pass-through items that are not actually network fees.
Flat rate
How it is priced. One rate per payment method covers interchange, assessments and markup together. Published examples (standard U.S. pricing at time of writing; see Sources):
| Processor | In person | Online | Keyed |
|---|---|---|---|
| Square (free plan) | 2.6% + 15 cents | 2.9% + 30 cents | 3.5% + 15 cents |
| Stripe (standard) | 2.7% + 5 cents | 2.9% + 30 cents | online rate plus 0.5% |
| Clover | advertised as low as 2.3% + 10 cents on clover.com |
Add-ons apply: Square and Stripe both charge 1.5% more for cards issued outside the United States.
On the statement. Flat-rate processors typically do not issue a classic statement. Fees show per transaction in a dashboard report, with totals by payment method. There are no interchange lines, so you cannot see the processor's share.
What to check. The split between card-present and keyed or online transactions, since keyed rates are higher at every flat-rate processor. The share of debit and basic credit cards in your mix, because flat rate charges them the same as premium rewards cards. Subscription fees that change the rate (Square's paid plans carry lower in-person rates than its free plan).
Tiered (qualified, mid-qualified, non-qualified)
How it is priced. The processor groups interchange categories into a few tiers and charges one rate per tier. Industry reference CardFellow describes the qualified rate as the lowest a business pays, with rewards and keyed consumer transactions commonly routed to mid-qualified and commercial and premium rewards cards to non-qualified. The processor, not the network, controls which tier each transaction lands in.
On the statement. Three or four rate lines with volume beside each, sometimes labeled qualified, mid-qual, non-qual, or with a code. "Downgrade" lines are transactions that failed to meet a better interchange category and were charged more.
What to check. The share of volume in the top tiers. A quoted "qualified" rate means little if most of your transactions land elsewhere. Compare the blended total with what the same transactions would cost on other models.
Subscription or membership
How it is priced. A fixed monthly or annual membership fee, interchange and assessments at cost, and a small per-transaction fee, usually cents rather than a percentage.
On the statement. A membership line, interchange pass-through lines, and a per-item line. The processor's percentage markup is zero or near zero.
What to check. Divide the membership fee by your monthly volume. A fixed fee is a large percentage on low volume and a small one on high volume, so the math changes with your sales.
Cash discount and surcharging
How it is priced. The customer, not the merchant, covers some or all of the processing cost. With a cash discount, the posted price is the card price and cash customers get a discount. With a surcharge, a fee is added to credit card transactions only, within network caps and where state law allows.
On the statement. Processing fees still appear in full. A separate line or report shows the discount program or surcharge amounts collected from customers. Your net cost is the fees minus what customers paid toward them. Any amount collected above your processing cost is a price increase to customers, not a processing cost reduction.
What to check. That the program is set up as its rules require (signage, pricing, receipts, terminal settings). The full rules and state landscape are in Cash Discount vs Surcharging: Rules, Caps and State Limits.
Quick identification table
| If the statement shows | You are probably on |
|---|---|
| Dozens of interchange category lines plus a separate markup line | Interchange-plus |
| One rate per payment method, no interchange lines | Flat rate |
| Three or four rate buckets, downgrade lines | Tiered |
| A membership fee plus interchange and cents per item | Subscription |
| Customer-paid amounts offsetting fees | Cash discount or surcharge |
FAQ
Which pricing model is cheapest?
It depends on your numbers. A model that costs less for a high-ticket retailer with many debit cards can cost more for a coffee shop with small rewards-card tickets. Run your own statement through each model before deciding.
Can I be on more than one model at once?
Yes. A merchant can be on interchange-plus for processing and also run a cash discount program, or on flat rate with a subscription plan.
Why does my tiered statement show a rate I was never quoted?
Quotes often cover the qualified tier only. The other tiers are in the fee schedule or contract.
Do flat-rate processors ever offer interchange-plus?
Published standard rates are flat. Any other arrangement is by negotiation, so ask the processor directly.
See every model priced on your own statement
Merchant Statement Analyzer is free. Upload last month's statement to the analyzer and see what each pricing model would have cost on your exact transactions, side by side.
Sources
- Square, Learn about Square fees: https://squareup.com/help/us/en/article/5068
- Stripe, Pricing: https://stripe.com/pricing
- Clover, Pricing: https://www.clover.com/pricing
- Toast, Payments reports overview (Cost Breakdown report for interchange-plus customers): https://support.toasttab.com/en/article/Finance-Reports
- CardFellow, Qualified, mid-qualified and non-qualified rates (industry reference): https://www.cardfellow.com/blog/qualified-mid-qualified-non-qualified-credit-card-processing-rates
- Mastercard, Interchange rates and fees: https://www.mastercard.com/us/en/business/support/merchant-interchange-rates.html
- Visa, Regulations and fees for small business: https://usa.visa.com/support/small-business/regulations-fees.html