A $100 sale can cost you $2.30 or $3.45 depending purely on how your processor packages its markup. Here is how the three pricing models actually work — and which one your statement is hiding.
One sale, three invoices
Picture a single $100 Visa rewards purchase made on your website. Under a flat-rate processor, it costs you $3.20. Under a tiered plan, the same sale often lands in a "non-qualified" bucket and costs $3.45. Under interchange-plus, it might cost $2.30. Same customer, same card, same risk — a 50% swing in cost, decided entirely by how your processor chooses to package its markup.
For a business doing $150,000 a month, that swing is worth more than $20,000 a year. Understanding the three models is not academic; it is one of the highest-leverage negotiations a merchant can have.
What interchange actually is
Every card transaction carries a wholesale cost called interchange — a fee set by Visa, Mastercard, and the other networks, and paid to the bank that issued the customer's card. It typically runs from about 0.05% + $0.22 on regulated debit cards to 2.6% or more on premium corporate rewards cards.
Here is the part processors rarely emphasize: every processor pays the exact same interchange. Stripe, Square, your local bank, and Sterling Ridge all buy at identical wholesale rates. The only real difference between pricing models is how the markup on top of that wholesale cost is presented — clearly, or not.
Flat-rate: simplicity with a built-in ceiling
Flat-rate pricing — the familiar 2.9% + $0.30 — blends every card type into one number. It is genuinely simple: one rate, no statement archaeology, no surprises. That simplicity is why it dominates among startups and micro-merchants.
The problem is what the blend hides. When a customer pays with a regulated debit card that costs the processor roughly $0.27 in total wholesale fees on a $100 sale, you still pay $3.20. The processor pockets the difference. Flat-rate is effectively an insurance premium against complexity — reasonable below roughly $10,000 a month in volume, increasingly expensive above it.
Tiered: the model built to be misread
Tiered pricing sorts transactions into "qualified," "mid-qualified," and "non-qualified" buckets, each with its own rate. The advertised rate — the one on the sales flyer — is the qualified tier. In practice, rewards cards, keyed-in transactions, and most eCommerce sales get "downgraded" into the more expensive tiers.
The result is a statement that is nearly impossible to audit. You cannot see what interchange was actually paid, which downgrades were legitimate, or what the true markup was. Many merchants on tiered plans discover that 60–80% of their volume lands outside the qualified tier they thought they were paying. If your statement mentions "non-qual surcharge," you are on this model.
Interchange-plus: wholesale cost plus a visible markup
Interchange-plus (also called cost-plus) passes the exact wholesale interchange through to you and adds a fixed, disclosed markup — for example, interchange + 0.25% + $0.10. Every line of your statement shows the true cost of each card type and exactly what your processor earned.
The practical advantages compound. You automatically benefit when customers use cheaper cards. You can compare processors on a single number — their markup — instead of decoding blended rates. And when networks adjust interchange, the change passes through transparently rather than becoming a hidden margin opportunity.
Which model fits which business
Below $10,000 a month, flat-rate simplicity can be worth its premium. Above that, interchange-plus almost always wins — often by 20–40 basis points, and more if you take significant debit volume. Tiered pricing is rarely the right answer at any size; its main feature is opacity.
High-risk merchants should apply the same logic. Your markup will be higher to reflect real underwriting risk — typically putting effective rates between 2.95% and 5.5% — but there is no reason the structure should be opaque. Sterling Ridge writes high-risk merchant accounts on interchange-plus by default, so you always see the wholesale cost, the markup, and nothing hidden in between.
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