What Is Flat-Rate Credit Card Processing?

Flat-rate credit card processing provides a simple, easy-to-understand model for merchants looking to accept card payments.

Also called “flat-fee credit card processing,” flat-rate processing removes the unpredictability and complexity that can come with other pricing models. Below, we’ll take a closer look at what flat-rate credit card processing is, how it works, the pros and cons of the model, and whether it’s a good fit for your type of business.

What Is Flat-Rate Credit Card Processing?

Flat-rate credit card processing is a payment model that combines interchange fees and other processing fees into a consistent, standardized fee for all transactions of the same type.

For example, a payment processor using flat-rate pricing may charge 2.9% + $0.30 for all online credit and debit card transactions. This rate is charged regardless of the interchange fees or credit card network fees associated with the card.

What Flat-Rate Payment Processing Is Not

Flat-rate pricing does not mean that you’ll pay the same price for all your transactions. It just means that the fees associated with the payment method will be rolled into one consistent, predictable rate for transactions of the same type.

You generally will, for example, pay a different flat rate for in-person card transactions than you would for eCommerce transactions.

How Does Flat-Fee Credit Card Processing Work?

Flat-rate processing essentially combines all the fees associated with payment processing and charges only a simplified transaction fee that might look something like these:

• 2.6% + $0.10 for card-present transactions
• 2.9% + $0.30 for card-not-present transactions

In other words, if you had a $20 in-person transaction at 2.6% + $0.10, you’d pay $0.62 for the transaction, regardless of what type of card was used. If that transaction had been online at 2.9% + $0.30, it would cost $0.88, regardless of the card used. Pretty straightforward, no?

Which Payment Processors Use Flat-Rate Credit Card Processing?

Flat-rate credit card processing tends to be a model used by third-party payment processors. Also called “payment service providers,” third-party processors generally do not charge a monthly fee but rely mainly on transaction fees to support their business model.

Some of the big names in third-party payment processing include Square, Stripe, and PayPal, all of which use flat-rate pricing by default.

What’s Included In Your Flat-Rated Credit Card Processing Fee?

Most of the payment service providers (PSPs) that use flat-rate pricing do so instead of charging recurring monthly fees. That means your transaction fee will generally cover:

• Transaction costs
• PCI compliance
• Account maintenance
• Fraud monitoring
• Some supporting software
• Gateway fees

On the other hand, you may still have to pay additional fees for:

• International transactions
• Currency conversion
• Advanced features and software
• Chargebacks
• Refunds

Another thing to keep in mind is that flat-rate processors typically offer a month-to-month contract, which means you can switch processors at any time and won’t have to pay any fees to terminate your account.

Average Flat-Fee Credit Card Processing Rates

At the time of this update, flat-rate credit card processing fees range between 2.6% and 3.5% on the variable side and between $0.05 to $0.50 on the fixed fee side.

Card-present transactions (including swiped, dipped, and tapped transactions) tend to skew toward the lower end of these ranges, while online and keyed-in transactions represent the higher end of these ranges.

Are Flat-Rate Merchant Services Cheaper?

On a per-transaction basis, flat-rate pricing is usually significantly more expensive than interchange-plus pricing. Remember, you’re effectively paying for far more than just the transaction with each swipe.

That being said, flat-rate pricing may be the cheapest way to accept credit card payments for low-volume businesses that can’t afford all the fees associated with a traditional merchant account.

Because flat-rate payment processors generally don’t charge a recurring account fee, the following types of merchants may save money with flat-rate pricing:

• Businesses with low transaction volume
• Seasonal businesses
• Freelancers
• Businesses that mainly use cash or bank-to-bank transfers for transactions
• New businesses

Flat-rate pricing will likely not be cost-effective for:

• Large corporations
• High-volume businesses
• Businesses doing over $5,000/month in card-based sales

When To Use Flat-Rate Credit Card Processing

• Do you own a very small business?
• Do you own a newly established business?
• Are you running a business as a side gig?
• Are you running a business for only part of the year?

If you answered yes to any of those questions, flat-rate processing might be a good fit for your business.

Flat-rate pricing can save you money by eliminating most, if not all, merchant account fees. The lack of a long-term contract makes switching to a full-service merchant account when the time is right easy and painless.

Ready to get started with a payment processor? We can help you find the best credit card processing for your small business.