Short answer
A flat rate costs the same percentage at any turnover, while interchange plus has a lower percentage plus fixed monthly fees. The break-even turnover is the fixed monthly fee divided by the percentage gap between the two. Below it, flat rate is cheaper. Above it, interchange plus is.
Part of Fees and pricing models. Start with the main guide: Interchange plus vs blended vs flat rate: which pricing model costs less?
Key takeaways
- Break-even turnover = monthly fixed fees ÷ (flat rate % minus interchange plus variable %).
- Below break-even, a flat rate wins. Above it, interchange plus wins, and the gap widens with turnover.
- A smaller average sale raises the break-even, because per-transaction fees weigh more.
- The calculation is easy to repeat with your own figures from any two quotes.
- Check the contract term and exit fee before moving, because a saving can disappear if the contract is long.
"Which is cheaper, flat rate or interchange plus?" is the question that sits behind most pricing conversations. The honest answer is: it depends on how much you take and how big your sales are. That is not an evasion. It is something you can work out with arithmetic, and this guide shows you how.
We take two example offers, calculate where they cross, draw the curve and then show how the answer shifts when the average sale gets smaller or larger. You can then repeat the exercise with your own quotes.
What are the two offers?
Offer F is a flat rate: 1.50% on every card payment, with no monthly fee and no per-transaction fee.
Offer I is interchange plus. After adding the interchange, scheme fees and the provider's markup, the variable cost averages 0.80% of turnover for this business's card mix. On top of that it charges 5p per transaction and a £20.00 monthly fee.
These figures are illustrative. Use quotes from your own providers to repeat the maths.
Step 1: Put both offers in the same terms
A flat rate is one number. Interchange plus has three parts: a percentage, a per-transaction fee and a fixed fee. To compare them, turn the per-transaction fee into a percentage by dividing it by the average sale.
With an average sale of £25, 5p is 0.05 ÷ 25 = 0.20%. So Offer I's variable cost is 0.80% + 0.20% = 1.00% of turnover, plus £20.00 a month.
Step 2: Find the gap
The gap is the difference between the two variable percentages: 1.50% − 1.00% = 0.50 percentage points. That is the amount Offer I saves on every £1,000 of turnover, which is £5.00. The £20.00 monthly fee is what Offer I costs that Offer F does not.
Step 3: Divide the fixed fee by the gap
Break-even = £20.00 ÷ 0.005 = £4,000.00 a month.
At £4,000 of monthly turnover both offers cost £60.00. Below that, the flat rate is cheaper. Above it, interchange plus is cheaper.
What does the break-even curve show?
The best way to see it is to plot the effective rate of each offer at different turnovers.
- Flat rate 1.50%
- Interchange plus
View the data as a table
| Flat rate 1.50% | Interchange plus | |
|---|---|---|
| £1,000 | 1.50% | 3% |
| £2,000 | 1.50% | 2% |
| £4,000 | 1.50% | 1.50% |
| £8,000 | 1.50% | 1.25% |
| £16,000 | 1.50% | 1.13% |
| £32,000 | 1.50% | 1.06% |
Average sale £25. Flat rate is 1.50% at every turnover. Interchange plus is 1.00% plus £20.00 a month. They cross at £4,000.
The flat rate line is level. The interchange plus line starts high because the £20.00 fixed fee is spread over very little turnover, then falls toward 1.00% as turnover grows. At £1,000 a month, interchange plus costs 3.00% against 1.50%. At £32,000 it costs about 1.06% against 1.50%.
What does the break-even mean in pounds?
Here are the monthly bills at the same turnovers.
| Monthly turnover | Flat rate (Offer F) | Interchange plus (Offer I) | Cheaper |
|---|---|---|---|
| £1,000 | £15.00 | £30.00 | Flat rate by £15.00 |
| £2,000 | £30.00 | £40.00 | Flat rate by £10.00 |
| £4,000 | £60.00 | £60.00 | Level |
| £8,000 | £120.00 | £100.00 | Interchange plus by £20.00 |
| £16,000 | £240.00 | £180.00 | Interchange plus by £60.00 |
| £32,000 | £480.00 | £340.00 | Interchange plus by £140.00 |
At £32,000 a month, the gap is £140.00, or £1,680 a year. For a business well above the break-even point, staying on a flat rate is an expensive habit.
How does average sale size move the break-even?
The break-even is not fixed. It depends on the per-transaction fee relative to the average sale. A smaller average sale means the per-transaction fee is a bigger percentage, which narrows the gap and pushes the break-even higher.
Using the same two offers:
| Average sale | 5p as % of sale | Offer I variable % | Gap to flat rate | Break-even turnover |
|---|---|---|---|---|
| £10 | 0.50% | 1.30% | 0.20 points | £10,000 |
| £25 | 0.20% | 1.00% | 0.50 points | £4,000 |
| £50 | 0.10% | 0.90% | 0.60 points | £3,333 |
| £100 | 0.05% | 0.85% | 0.65 points | £3,077 |
Below the figure, flat rate is cheaper. Above it, interchange plus is. Same two offers.
A business with a £10 average sale needs £10,000 a month before interchange plus comes out ahead. A business with a £100 average sale crosses at about £3,077. If you take lots of small payments, a per-transaction fee is a real cost. If you take fewer large payments, it hardly matters.
What does the break-even model leave out?
For how card type changes the variable cost, see debit, credit and commercial card fees. To understand the cost of the per-transaction part, read authorisation and per-transaction fees.
The break-even calculation is a guide, not the final answer. Several things can change the result.
- Card mix. If you take many premium, commercial or international cards, the real interchange is higher and the variable percentage of interchange plus rises. The gap narrows or vanishes. If you take mostly consumer debit, it widens.
- Contract terms. A flat rate with no contract can be left at any time. An interchange plus deal may bind you for a fixed term with an exit fee.
- Hardware. The £20.00 fixed fee in this example is assumed to include the terminal. If a terminal costs extra, add it.
- Seasonality. A business that earns most of its money in a few months should compare the busy and the quiet months, not only the average.
- Growth. If you expect to grow, check the offer at next year's turnover as well as this year's.
How do you run it with your own numbers?
The method works with any two quotes.
- Write each quote as a variable percentage plus a fixed monthly fee. Convert per-transaction fees to a percentage using your average sale.
- Find the gap between the two variable percentages.
- Divide the difference in fixed fees by the gap to get the break-even turnover.
- Compare it with your turnover. Above break-even, the lower-variable offer wins. Below it, the lower-fixed offer wins.
- Test the worst month and the best month. Make sure the answer holds across the year.
If one offer has a lower variable percentage and a lower fixed fee, there is no break-even: it wins at every turnover. The calculation matters only when one offer is cheaper on one measure and dearer on the other.
The checkmyrates calculator does this comparison for you with a full statement, including savings over one to ten years. The related guide on whether switching is worth it adds the cost of leaving a contract to the calculation.
For consultants
When you present a comparison, show the merchant the curve and mark where they sit. A merchant just above break-even should hear that the saving is modest and will grow with turnover. A merchant well below it should hear that a flat rate may be the right answer for now. Being willing to say that is what makes the rest of your advice credible.
Frequently asked questions
How do I calculate the break-even between flat rate and interchange plus?
Divide the monthly fixed fee of the interchange plus offer by the difference between the flat rate and the interchange plus variable rate. Remember to convert any per-transaction fee into a percentage first.
At what turnover does interchange plus become cheaper?
It depends on the offers and your average sale. In our example it is £4,000 a month at a £25 average sale, and £10,000 at a £10 average sale. Use the method above with your own quotes.
Does card mix change the answer?
Yes. Premium, commercial and international cards raise the real interchange, which narrows the advantage of interchange plus. A mostly consumer debit mix widens it.
Is a flat rate ever the best option?
Yes, for small, new or seasonal businesses, and for anyone who values having no fixed fees or contract. It stops being the best option as turnover grows.
Should I switch if I am only a little above break-even?
Only if the exit cost and the effort are small compared with the saving. A saving of £10 a month does not justify a large exit fee.
What if I do not know my average sale?
Divide your card turnover by the number of card transactions on your statement. If the statement does not show the count, ask your provider for it.
Sources and further reading
Figures in this guide are examples to show the method. Fees, rules and rates change, so check your own statement, contract and current rules before you decide. This is general information, not financial or legal advice.