The four pricing models compared
Every processing quote you'll see fits one of four models. Most comparison articles cover two. All four:
| Model | How it works | Best for | Biggest drawback |
|---|---|---|---|
| Flat-rate | One blended rate + per-txn fee across all card types | Under $5K/mo; event-based; brand-new businesses | Silently absorbs interchange differences on premium cards |
| Interchange-plus | Actual interchange + fixed markup, both shown | $10K+/mo; card-present majority; transparency | Statements take getting used to |
| Tiered | Qualified / mid / non-qualified tiers at processor-set rates | Almost nobody (legacy) | Most rewards + keyed cards get bumped to the highest tier |
| Subscription / membership | Monthly subscription + interchange at cost + small per-txn | Steady $25K+/mo merchants | Seasonal businesses pay the subscription in slow months |
The rest of this guide focuses on the two most common models (flat-rate vs interchange-plus) with the subscription and tiered models covered at the end.
Cost example at $10K/mo and $40K/mo
Same assumptions both sides. Card-present majority, mixed card mix (60% rewards credit, 30% regulated debit, 10% keyed). Average ticket $35. Flat-rate at Square's headline 2.6% + 10¢. Interchange-plus assuming a blended 1.65% interchange + 0.35% markup + 5¢ per-transaction + $15/mo statement fee.
| Line | Flat-rate @ $10K | IC+ @ $10K | Flat-rate @ $40K | IC+ @ $40K |
|---|---|---|---|---|
| Percentage | $260 | $200 | $1,040 | $800 |
| Per-transaction | $28.60 | $14.30 | $114.40 | $57.20 |
| Monthly statement | $0 | $15 | $0 | $15 |
| Monthly total | ~$289 | ~$229 | ~$1,154 | ~$872 |
| Difference | ~$60 (IC+ wins) | — | ~$282 (IC+ wins) | — |
Illustrative calculations on published rates, not quotes. Your actual cost depends on your specific card mix, average ticket, and interchange-plus markup.
At $10K/mo the difference is about $60/month or $720/yr. At $40K/mo it's about $282/month or $3,384/yr. The gap isn't about the pricing model alone; it compounds with volume.
The break-even formula
The exact threshold where interchange-plus beats flat-rate, written as a formula instead of a rule-of-thumb:
Plug in a realistic example: flat-rate 2.6%, interchange 1.65%, markup 0.35%. The difference is 0.60%. Apply to volume, subtract the statement fee:
- At $5,000/mo: (0.60% × $5,000) − $15 = $15/mo savings. Close to break-even.
- At $10,000/mo: (0.60% × $10,000) − $15 = $45/mo savings. Clear win for IC+.
- At $25,000/mo: (0.60% × $25,000) − $15 = $135/mo savings. Strong win.
- At $50,000/mo: (0.60% × $50,000) − $15 = $285/mo savings. Large win.
The formula only works if you know your real interchange blend, which depends on card mix. That's the next section.
Three card-mix scenarios that flip the answer
Same merchant, same volume ($15K/mo). Three different card mixes. Same two pricing models. The winner changes.
| Scenario | Card mix | Blended interchange | IC+ savings vs flat-rate |
|---|---|---|---|
| Regulated-debit-heavy | 60% debit, 30% standard credit, 10% rewards | ~1.05% | ~$180/mo IC+ wins (large) |
| Rewards-heavy (tourism / hospitality) | 20% debit, 30% standard, 40% rewards, 10% corp | ~1.95% | ~$45/mo IC+ wins (modest) |
| Card-not-present-heavy | 10% debit, 20% standard, 30% rewards, 40% keyed/online | ~2.25% | ~$15/mo IC+ wins (near break-even) |
Illustrative scenarios with rough interchange blends. Actual interchange depends on MCC, specific cards used, and transaction method.
The cleaner your card mix (regulated debit, card-present, simple ticket), the more interchange-plus saves. The more your mix tilts toward expensive interchange (premium rewards, keyed transactions, commercial cards), the closer the two models run. To see your actual card mix, upload a statement to the statement analyzer.
When flat-rate actually wins
Flat-rate isn't a scam; it's just priced for a different use case. Specific scenarios where it genuinely wins:
- Under $5,000/mo in card volume. The $0 monthly base fee outweighs the higher per-transaction rate.
- Mobile, event, or pop-up sellers. The Square Reader and Stripe Terminal are built for this; pay-as-you-go fits irregular schedules.
- Brand-new businesses with no processing history. Underwriting for a merchant account requires some history or strong personal credit. Square onboards in minutes.
- Merchants who value ecosystem integration. Square Online, Square Payroll, Square Appointments. If you're using three or more, switching costs operational friction.
When interchange-plus wins
The inverse. Scenarios where the cost math clearly favors interchange-plus:
- $10K+/mo in card volume. The crossover point where the flat-rate markup compounds into real money.
- Card-present majority. Card-present interchange is significantly lower than CNP; a flat rate hides that advantage.
- High regulated-debit share. Grocery, convenience, QSR, anywhere small-ticket debit dominates. Debit interchange is capped at ~0.05% + 22¢ under Durbin.
- Premium rewards card exposure. Tourism, hospitality, high-ticket professional services. Those cards carry 2.1%–2.95% interchange and a flat rate absorbs the entire gap.
- You want transparency. Interchange-plus statements are longer, but every line is defensible. That matters when it's time to renegotiate or switch.
Subscription / membership: the model most guides skip
Subscription pricing (Helcim, Payment Depot, Stax, some regional ISOs) charges a flat monthly subscription fee (typically $99–$199) plus interchange at true cost plus a per-transaction fee (typically 8¢–15¢). The percentage markup is effectively zero.
The economics:
- Wins above ~$25K/mo. At that volume, standard interchange-plus markup (0.35% on $25K = $87.50) starts to exceed the subscription fee. Above $50K/mo the subscription model saves meaningful money.
- Loses for seasonal businesses. You pay the $99–$199 subscription every month regardless of volume. A tourism-exposed operator who spikes to $60K/mo for peak season but sits at $8K/mo in summer pays the subscription in slow months.
- Loses for low-volume merchants. Under $15K/mo the subscription fee exceeds what a standard IC+ markup would cost.
- Watch for lock-in and fees. Some subscription processors tack on separate platform fees, gateway fees, or hardware financing that changes the math. Read the full fee schedule before signing.
Subscription pricing isn't inherently better or worse than interchange-plus — it's just a different structure. For the right operator profile (high volume, steady month-over-month), it can save money. For the wrong profile (seasonal, low volume), it costs more. Worth considering; not worth defaulting to.
Tiered: why it exists and why to avoid it
Tiered pricing (also called "bundled" or "qualified" pricing) assigns every transaction to a tier — qualified, mid-qualified, or non-qualified — with a different rate per tier. Sounds reasonable until you see which transactions land in each tier.
The processor decides the tier assignment. Almost every transaction that carries elevated interchange (rewards cards, corporate cards, keyed transactions, international cards) gets bumped to non-qualified at the highest rate. The low-tier "qualified" rate is the marketing rate you'll see in a sales pitch; the non-qualified rate is what you actually pay on most transactions.
Tiered pricing persists mostly on merchants who signed years ago and never audited. At the same volume and card mix, almost every tiered account is cheaper on interchange-plus.
What comparison guides get wrong
Most guides cite a simple "$10K/mo threshold" with no math behind it. The threshold is a rule of thumb; the real answer depends on card mix, average ticket, and your specific interchange-plus markup. Guides that say interchange-plus is "20–30% cheaper" without sourcing the number are extrapolating best-case scenarios. The only defensible savings number is the one from your own statement.
Run your real numbers
Upload your current processor statement. We calculate your effective rate, identify your card mix, and show what the same merchant would pay on interchange-plus with a competitive markup. No signup.