Is Flat Fee Processing Right for Your Business? Here’s What You Need to Know.


While looking for a credit card processor you’ve probably come across companies offering “flat fee processing” and now you’re wondering if it’s the right choice for your business.

What is flat fee processing?

Flat rate is a popular pricing model for credit card processing and typically involves one of the following two options: a flat fee percentage or flat fee subscription.

Flat-rate percentage

A flat rate percentage is a fixed percentage that you pay for each transaction and it’s based on volume. Common flat rates are currently around 2.75% – 2.9% for swiped transactions. You may also find some flat rate pricing models that also include a per-transaction fee, often in the range of 20 – 30 cents per transaction.

Many business owners will be lured in by the convenience of a flat rate percentage pricing model — after all, it seems remarkably simple. While it may be an okay option for smaller businesses that only accept credit cards on occasion, it can end up being very costly if you are processing a larger volume of transactions. You’ll always end up paying above and beyond the interchange rate.

Interchange fees are fixed costs that remain the same regardless of which credit card processing company a merchant uses. With flat rate percentage pricing, a payment processor doesn’t have to be transparent about interchange costs because they’re paying them on your behalf. Because of this, they’re at liberty to charge whatever percentage they want for the convenience, pocketing the rest in the process.

The percentage is also calculated based on your sales volume. The more you sell, the more transactions you process, the more you’ll pay — which, isn’t exactly a great deal for businesses that are hoping to expand and grow.

Flat-rate subscription

On the other hand, flat-rate subscription pricing is a fixed dollar amount that you pay the payment processor, usually monthly. With this kind of pricing model, a processor’s markup is applied as a flat monthly fee and per-transaction fee instead of a percentage of sales volume. The business pays exact interchange fees in addition to a flat monthly or annual fee to the processor. In most cases, there is also a per-transaction fee, which means that a merchant may also pay a fixed amount on every transaction.

As far as flat-rate pricing goes, a flat rate subscription model is a lot more transparent because you’re able to see the actual cost of processing (interchange fees). Another advantage of this kind of pricing model is its simplicity. You’ll always pay the same fees regardless of sales volume. If you’re a new business and overwhelmed by all the different fees on your monthly statement but are still looking to grow your sales, a flat fee subscription might be a great option for you.

However, keep in mind that convenience comes at a price. While a subscription model is likely going to cost your business less than a percentage model, it still might not be the most competitive pricing available to you. So, do your research. Which processing fee model is right for you all depends on your specific business needs.