Interchange plus vs blended vs flat rate: which pricing model costs less?

This is the main guide in Fees and pricing models. Every guide in the series is listed at the end.

Three businesses can take exactly the same card payments in a month and pay three different amounts, without any of their providers doing anything unfair. The difference is the pricing model: the way the provider turns the cost of a card payment into a price.

This guide compares the three models you will meet most often, shows how each looks on a statement, runs the same month through all three with real arithmetic and explains which kind of business tends to do best on which. The tiered model, common in the United States, has its own guide: see tiered pricing: qualified, mid-qualified and non-qualified.

What are the three pricing models at a glance?

How does interchange plus pricing work?

The model is simple in principle. For each payment you pay what the issuing bank and the card network charge, then the provider adds its own fixed markup, such as 0.20% plus 3p. Because the pass-through costs are shown separately, you can see exactly what the provider earns.

Two variants exist. In interchange plus, the markup covers the provider's margin and sometimes the scheme fees. In interchange++, the interchange and the scheme fees are shown separately, and the markup is the provider's alone. The second is the most transparent. For a full explanation of what interchange and scheme fees are, see our guides to interchange fees and scheme fees.

Strengths and weaknesses

• Strength: You benefit when a card is cheap. A consumer debit card at 0.20% costs 0.20% plus the markup, not a blended rate.
• Strength: You can see the provider's markup, so you can compare it with other quotes.
• Weakness: Statements are long and hard to read without help.
• Weakness: Providers can place margin in fixed fees and per-transaction charges rather than the headline markup, so the all-in effective rate is still the number to check.

How does blended pricing work?

Blended pricing, sometimes called bundled pricing, groups card payments into a small number of categories with one rate each. A common version is one rate for standard consumer cards and a higher rate for everything else, such as commercial, international or premium cards.

The provider takes the average cost of the cards it expects you to take, adds a margin and quotes a single price. When a cheap card is used, the provider keeps the difference between the blended rate and the real cost. When an expensive card is used, it may charge the higher "non-standard" rate.

The strength is predictability. You know roughly what the month will cost. The weakness is that you cannot see what each card really costs, so you cannot tell how much of the rate is the provider's margin.

What is flat rate pricing?

Flat rate is the simplest model: one percentage, sometimes with a small fixed fee, for every card payment. Many pay-as-you-go card readers and online platforms use it. There are rarely monthly fees or contracts.

It suits businesses that value simplicity and that sell too little for a more complex model to pay off. It stops being a bargain as turnover grows, because a flat rate is set high enough to cover the most expensive card, so the average payment is overpriced. Our guide to flat rate versus interchange plus break-even shows how to find the point where it stops being the cheapest option.

What does the same month cost under all three?

To see the difference, run one month through each model. The business takes £20,000 on cards across 800 transactions, an average sale of £25. The card mix is:

• £14,000 consumer debit
• £3,000 consumer credit
• £2,000 commercial cards
• £1,000 international cards

These figures are illustrative, and the commercial and international interchange rates are assumptions for the example, not published rates.

Interchange plus in the example

The effective rate is 176 ÷ 20,000 = 0.88%.

Blended in the example

Standard cards (consumer debit and credit, £17,000) at 1.10%, and non-standard cards (commercial and international, £3,000) at 2.50%:

• £17,000 × 1.10% = £187.00
• £3,000 × 2.50% = £75.00
• Fixed monthly fees = £15.00
• Total = £277.00, an effective rate of 1.39%

Flat rate in the example

£20,000 × 1.40%, with no monthly fee: £280.00, an effective rate of 1.40%.

On these figures interchange plus costs £176.00 against £277.00 and £280.00, a saving of about £100.00 a month, or £1,200 a year. The reason is that this business takes mostly cheap consumer debit cards. Under interchange plus it pays 0.20% on most of its sales, and under the other models it pays a rate designed for the average card.

When does each pricing model win?

The result above is not universal. If the card mix were mostly premium and international cards, the pass-through costs would be much higher and the gap would shrink or reverse. If the turnover were £3,000 instead of £20,000, the fixed monthly fees would take a larger share, and a flat rate with no monthly cost could win.

Use this as a rough guide:

1. Mostly consumer debit and domestic cards, mid to high turnover: interchange plus is usually cheapest.
2. Small or very variable turnover, small average sale: flat rate often wins because there are no fixed fees.
3. Mixed cards and a wish for predictability: blended can be reasonable, if the rate is competitive.
4. Mostly commercial, premium or international cards: compare carefully, because the real costs are high and a flat rate may be near break-even.

What should you ask when you get a quote?

• Which pricing model is this, and where are the pass-through costs shown?
• What is the markup, and does it include scheme fees?
• Are there per-transaction fees, and are they on top of the percentage?
• What monthly fees apply, including terminal, gateway and PCI?
• Which cards are charged at a higher rate under this quote?
• Will you write the quote out as a month of my own statement?

The last question is the most useful. A quote presented against your own figures is a quote you can compare with what you pay today.

For consultants: choosing the model for the merchant

A consultant who understands all three models can pick the one that fits the merchant, not the one that pays the highest commission. That is the credible position, and it is also the more durable one. Check the merchant's turnover, average sale size and card mix, then run a side-by-side comparison. The checkmyrates calculator lets you enter the current bill and the proposed pricing in the same layout so the merchant can see the difference in pounds and in effective rate.

Frequently asked questions

What is interchange plus pricing?

It is a pricing model where the merchant pays the actual interchange and scheme fees on each payment, plus a separate markup set by the provider. It is the most transparent model because every cost appears on its own line.

Is interchange plus always cheaper than flat rate?

No. It is usually cheaper for businesses with mid to high turnover and a mostly consumer debit card mix. For small or variable turnover, fixed fees can make a flat rate cheaper.

What is blended pricing?

Blended or bundled pricing groups cards into a few categories with one rate each, often one for standard cards and a higher one for non-standard cards. The provider keeps the difference when a card costs less than the blend.

How do I know which model I am on?

Count the lines in the fee section. Dozens of lines with card-type labels suggest interchange plus. Two or three lines suggest blended or flat rate. If in doubt, ask your provider in writing.

Which model is best for a small business?

Often flat rate, because it has no monthly fees and is easy to understand. As turnover grows, check whether interchange plus would be cheaper.

Can I switch pricing model without changing provider?

Sometimes. Many providers offer more than one model and may move you at renewal. Ask for a quote on each, written against your own statement.

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.