April 18, 2024

Flat Fee Credit Card Processing

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Flat-fee credit card processing can be affordable, depending on your business. Read on for the ins and outs of this pricing model.

Your sales volume, accepted payment methods, and average ticket size will determine the cost of flat-fee credit card processing.

This is why it's more suitable for new, small, or seasonal businesses. It can get really expensive for large and established ones, especially with millions of sales per year.

This article should help you decide if a flat rate is a good idea. Plus, you get to compare other pricing models with it. Keep scrolling.

What is Flat-Fee Credit Card Processing?

A flat fee in credit card processing means you'll be charged a flat rate per transaction.

This is a fixed percentage + fixed fee per transaction, regardless of your customers' card type. But the rates differ based on the type of transaction (i.e., in-person or online).

Because it offers a flat rate, you can better budget for your processing costs depending on your average sales volume.

How much is your monthly sales volume?

That said, it's cheapest for those with low transaction volumes. Because it involves a percentage rate, higher volumes, and larger ticket sizes can lead to expensive processing costs.

The flat-fee structure is typically a pay-as-you-go pricing model, so you only pay when you make a sale. In addition, flat-rate processors typically offer a free plan, so you won't need to worry about monthly fees.

How Does Flat-Fee Credit Card Processing Work?

To understand how flat-fee credit card processing works, it's important to grasp the basics of credit card processing fees.

There are 3 parts to a credit card processing fee:

  • Interchange fees
    Interchange fees are paid to the banks that issue the credit cards.

  • Assessment fees
    Assessment fees are paid to the credit card networks, like Visa, Mastercard, Amex, and Discover.

  • Processor markup
    These are fees charged by your payment processor.

With flat-rate credit card processing, the interchange and markup fees are blended together. This makes it less transparent since you don't know how much you're specifically paying for either.

That said, you'll be charged a percentage + flat fee per transaction. This flat rate is the same regardless of card type.

Let's say your customer makes an in-person card payment of $100. And your processor of choice charges 2.6% + 10¢ for card-present transactions.

For this specific transaction, your processing fee is $2.7. You can scroll to the examples below for the processing rates of specific flat-fee processors.

Average Flat-Fee Credit Card Processing Rates

The average credit card processing fee ranges from 1.5% to 3.5%. But flat rates can range from 2.6% to 3.5% plus $0.10 to $0.30.

Note that this flat rate varies on whether the customer paid in person, online, or through a keyed-in payment.

To give you a better idea, here are examples from some payment processors.

How much do you pay per month in credit card processing fees?

Examples of Flat-Rate Fees

Square
Square is a flat-rate payment processor with a full suite of POS systems. You can choose from a variety of hardware options, plus you can pick a plan suitable for your business industry.

You can get a free account and a free card reader to start.

Square's processing rates are:[1]

  • In-person transactions: 2.6% + $.10
  • Online transactions: 2.9% + $0.30
  • Keyed-in transactions: 3.5% + 15¢

Stripe
Stripe is another flat-rate processor, but it's more suitable for online businesses. You can maximize the platform if you have on-staff developers due to all the coding/customizations you can do.

Like Square, you have no monthly fees with your account.

Stripe's transaction fees are:[2]

  • In-person transactions: 2.7% + $0.05
  • Online transactions: 2.9% + $0.30
  • Keyed-in transactions: 3.4% + 30¢

Chase Payment Solutions
Unlike Square and Stripe, Chase is a merchant account provider. This means you'll be required to undergo an underwriting process to open an account.

Here are Chase's processing rates:[3]

  • In-person transactions: 2.6% rate +10¢ per tap, dip and swiped transaction
  • Online transactions: 2.90% + 25¢ per eCommerce transaction and monthly fee starting at $9.95
  • Keyed-in transactions: 3.5% rate +10¢ per keyed transaction

Chase Payment Solutions may be more suitable for Chase Business Banking customers due to the perks they can get. But growing companies and mobile businesses may also do well with it.

National Processing
National Processing is another merchant account provider offering flat-rate pricing. However, you will be charged monthly fees starting at $9.95/mo.

National Processing's rates are:[4]

  • In-person transactions: 2.5% + $0.10 per transaction (Basic In-person Package), 2.41% + $0.10 per transaction (Advanced Package)
  • Online transactions: 2.9% + $0.30 per transaction
  • Keyed-in transactions: 3.5% + $0.15 per transaction

Since National Processing offers low in-person transaction rates, it can be more suitable for businesses with physical locations. It even beats the in-person rates of Square, Stripe, and Chase.

Now that you know how flat rates work and some of its examples, here's how it compares to other pricing models.

Flat Fee vs. Other Credit Card Processing Rates

There are three more pricing models apart from flat-rates. If you're a growing business and scaling rapidly, interchange-plus pricing may be suitable.

What matters most to you when picking a credit card processing model?

Flat Fee vs. Interchange-Plus Pricing

Interchange-plus pricing is typically more affordable than flat-rate pricing. Interchange rates tend to be cheaper than flat rates set by credit card processing companies.

Interchange rates typically range from 1.7% to 2% for credit cards and 0.5% for debit cards. This is also why it may be more suitable for high-volume businesses.

In addition, interchange-plus pricing is more transparent than flat-rate pricing. You'll know exactly how much you're paying for interchange rates, card brand fees, and processor markup.

Take a look at Helcim's pricing below as an example. Helcim is a merchant account provider offering interchange-plus pricing.[5]

Monthly VolumeIn-person TransactionsOnline and Keyed Transactions
$0 - $50,000Interchange + 0.40% + 8¢Interchange + 0.50% + 25¢
$50,001 - $100,000Interchange + 0.35% + 7¢Interchange + 0.45% + 20¢
$100,001 - $500,000Interchange + 0.25% + 7¢Interchange + 0.35% + 20¢
$500,001 - $1,000,000Interchange + 0.20% + 6¢Interchange + 0.25% + 15¢
$1,000,001+Interchange + 0.15% + 6¢Interchange + 0.15% + 15¢

Interchange rates depend on the card network, such as Visa, Mastercard, American Express, and Discover.

Flat Fee vs. Tiered Pricing

Tiered pricing is similar to flat rate pricing. But instead of one flat rate, you get 3.

Depending on the type of card used, you may be charged a qualified rate, a mid-qualified rate, or a non-qualified rate.

Qualified Rates
Qualified rates are specific to debit cards and non-rewards cards. It's the lowest possible rate charged by a payment processor for processing a credit or debit card transaction.

That said, it's reserved for transactions that meet certain criteria, such as:

  • Payments processed within a certain timeframe
  • Swiped payments instead of manually entered
  • Payments that meet other requirements set by the processor

Ensure that your transactions meet the payment processor's criteria to help you save money on processing fees.

Mid-qualified Rates
Mid-qualified rates apply to standard rewards cards, like loyalty and cashback reward cards. In addition, keyed-in payments and transactions not processed within 24 hours may also be considered.

They typically fall in the middle of the spectrum when it comes to interest rates and other fees associated with using a credit card.

Non-qualified Rates
Non-qualified rates apply to premium cards, corporate cards, international cards, card-not-present transactions, and transactions with missing information.

These rates are typically the highest among the three.

Flat Fee vs. Subscription Pricing

If a processor offers subscription pricing or membership pricing, then you'll need to pay a monthly fee for your account. Often, you'll get little to no processor markup. But you'll still pay the direct interchange cost.

This pricing model may be most cost-efficient for large businesses since you won't be charged large percentage rates. Stax is an example of a payment processor offering subscription pricing.

Flat Fee vs. Zero-Fee Processing

Zero-fee processing or no-fee credit card processing lets you surcharge your customers. And to surcharge your customers means to pass on the credit card fees to them.

It's typically a set percentage by your payment processor. This can help you save on processing fees. However, only credit card payments can be surcharged.

Note that your customers may not be so stoked about being charged additional fees for their purchase.

Can you pass credit card processing fees to customers?
You can pass credit card fees to your customers through surcharges in most states. There are payment processors that specialize in no-fee credit card processing, like Helcim. That said, be sure you're fully aware of the rules of surcharging before you start.

Advantages and Disadvantages of Flat-Fee Credit Card Processing

Compared to other pricing models, there are a couple of reasons why you may (or may not) opt for flat-rate pricing.

Advantages:
Flat-fee credit card processing provides transparency and predictability in pricing. The fixed fee per transaction simplifies budgeting and makes it easier to calculate your processing costs.

In addition, flat-fee processing can be cost-efficient if it comes with a free account, since you get to save on monthly fees.

You also don't need to worry about non-qualified rates for premium cards. All transactions are charged the same flat rate.

Disadvantages:
Flat-fee processing is not the most cost-effective for businesses with high average transaction amounts or large sales volumes. A traditional interchange-plus pricing structure might be more beneficial in these cases.

Additionally, flat-fee processing may not offer the same level of flexibility and customization as other pricing models. This could limit your ability to negotiate rates.

Lastly, flat rates offer less transparency with your processing cost. You won't know how much you're paying for interchange fees, assessment fees, and processor markup.

What is the cheapest way to take card payments?
There is no universal answer when figuring out the cheapest way to take card payments. But generally, in-person payments are cheaper to process than online and manually entered payments.

Regarding pricing models, small businesses may save on monthly fees with some flat-rate processors offering free plans. High-volume businesses may save more with interchange-plus pricing.

Given the advantages and disadvantages, how do you decide if you should go for flat-rate pricing?

Deciding whether flat-fee credit card processing is right for your business depends on various factors.

  1. Transaction Volume
    Consider how many transactions your business processes on a monthly basis. If you have a high sales volume, interchange-plus pricing might be more cost-effective.

  2. Average Transaction Amount
    If your average transaction amount is low, flat-fee processing may be more suitable. However, if your transactions are generally higher in value, interchange-plus pricing could be more beneficial.

  3. Flexibility and Customization
    Determine whether or not you need the ability to negotiate rates or take advantage of specific card brand promotions. Flat-fee processing may have limitations in this area.

  4. Accepted Mode of Payment
    Flat rates are the cheapest if you accept in-person payments. But if you mainly take payments over the phone, it can be a really expensive option.

If you've assessed these factors and found that flat-rate pricing makes the most sense, here's how you can select a processor.

How to Choose a Credit Card Processor Offering Flat-Fee Pricing

Not all flat-fee credit card processors are the same. Perform these 5 steps to choose the right one:

  1. Compare processing rates.
    Look for a processor that offers your effective rate. Plus, make sure that there are no hidden fees.

    You should compare in-person, online, and keyed-in rates as well. You can calculate your effective rate through the calculator below.

    Effective Credit Card Processing Rate Calculator

  2. Check out free and paid plans.
    Consider if there's a free plan available or if you can upgrade to a paid account with more features.

  3. Evaluate the processor's features.
    Assess the features and services provided by the processor, such as reporting tools, fraud protection, and customer support.

  4. Consider integrations and scalability.
    If your business operates online or uses specific software or hardware, make sure the processor integrates smoothly with your existing systems.

    Then, consider if the processor's pricing and features are scalable for when your business grows. The credit card processor should cater to your business needs in the now and in the future.

  5. Read customer reviews.
    Review feedback from other businesses to gauge the processor's reliability and customer service. Trustpilot and BBB can be good sources.

Only want the best of the best? Check out our article on the best credit card processing companies. You can cut down your search from there.

What If Flat-Fee Credit Card Processing Isn't Suitable for Your Business?

If flat-fee credit card processing isn't suitable for your business, there are alternative pricing models you can explore.

  • Interchange-plus pricing can be better for quickly-growing businesses.
  • Tiered pricing can work for businesses with brick-and-mortar stores.
  • Subscription pricing is most suited for large-volume businesses or enterprises.

Don't forget to try to negotiate your rates. It's one of the perks of not opting for flat-fee credit card processing.

Bottom Line

In conclusion, flat-fee credit card processing offers simplicity and predictability for businesses. With a flat-fee structure, you can easily calculate your costs and avoid surprises.

However, it's important to consider if this pricing model aligns with the specific needs of your business. Factors such as transaction volume and average ticket size should be taken into account.

References

  1. ^ Square. Square Payments Fees, Retrieved 02/21/2024
  2. ^ Stripe. Pricing, Retrieved 02/21/2024
  3. ^ Chase. Credit card processing fees, Retrieved 02/21/2024
  4. ^ National Processing. Understand Our Pricing, Retrieved 02/21/2024
  5. ^ Helcim. Pricing, Retrieved 02/21/2024

Write to Karen Eloriaga at feedback@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

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