Get a 0% Interchange-Plus Markup with Membership Fee Pricing

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zero-percentSo we’ve talked about tiered pricing and we’ve talked about interchange-plus pricing. These are the two most popular pricing models, and you probably already know – if you’ve read our articles – that interchange-plus pricing is almost always a better deal and a most honest arrangement for merchants. But there’s a new pricing model on the rise: the flat fee plus interchange system, which I tend to call membership fee pricing. It’s a variation of interchange-plus, but is quite different. Instead of charging the typical maintenance fee, percentage markup and per transaction fee, this new breed of provider just charges a monthly membership fee plus a per transaction fee, which is ostensibly a 0% markup. These providers will normally offer a few different plans, each with different value-added services. As a rule, the plans with higher membership fees will have a lower per transaction fee, thus providing better value for merchants who process more transactions each month. It’s an interesting concept, but here’s the real question of the hour: Can the membership fee pricing structure for payment processing compete with standard interchange-plus markups? The short answer is yes, yes they can. I’ll show you how.

Where to Find Membership Fee Pricing for Payment Processing

I first saw this type of pricing arrangement from Heartland Payments, which offers a $60 per month plus interchange plan for low-volume merchants (under 50K per year). If you read the review, you’ll see my math describing why this is not actually a good deal for most merchants. Still, it was an interesting proposition to me. Next I saw this from Transparent Merchant Services. Transparent does a much better job of providing value for a wider range of merchants than Heartland does with their low-volume option. Value-added services like a payments gateway/virtual terminal make these plans even better values. They have no early termination fees either, which is great to see. Then I came across Payment Depot, who – in my opinion – provides the best membership fee pricing model currently available to merchants regardless of processing volume. Like Transparent, Payment Depot includes value-added services to make the plans even more alluring, along with nixing early termination fees. They go a step further than Transparent, however, by doing away with PCI compliance fees and processing limits. This leads to some serious savings and value for the broadest spectrum of merchants possible.

Why Does a Flat Fee Plus Interchange Make Sense?

Here’s what I make of this pricing structure. Most processors charge you a percentage fee, which means that larger transactions cost merchants more to process. But, when you think about it, larger transactions don’t necessarily cost the provider more to process. Having to deal with a thousand one dollar transactions is, in reality, far more expensive than dealing with one $1000 transaction. So why do most processors charge a percentage markup on transactions? As far as I can tell, there are two reasons:

  1. Because there is a greater risk involved with larger transactions. If a customer disputes a $1000 transaction and you decide to skip town on the bill, the processor is left with the task of paying it for you and taking you to collections. It’s much more likely to have one $1000 transaction go sour than one thousand one dollar transactions. For a greater risk, some would say, a greater reward is requisite for the company footing that risk.
  2. Because this is just “How It’s Done,” and it allows the processing company to make a larger profit on businesses that are processing high dollar volumes, even if they have comparatively few separate transactions. In most cases the businesses with high dollar volumes are willing and able to pay more than businesses with small dollar volumes, so it makes some sense to charge these businesses more for their processing. Also, the card networks charge a percentage fee and a transaction fee (via interchange/assessments), so it just makes intuitive sense for the processor to do the same.

There is merit to these rationales, but card payment processing providers like Payment Depot are proving that it’s possible to change this protocol. By paying a flat fee for account maintenance and access to the card networks, the playing field is leveled (to use Payment Depot’s tagline). A transaction fee covers the increased cost of dealing with a large volume of transactions, but doesn’t penalize merchants for processing large tickets. While processing a larger dollar volume with a low transaction volume will produce the most savings with this type of pricing plan, even small-ticket merchants can find solid value depending on their overall dollar volume. You’ll have to do the math for particular processing habits, or get in touch with us and we can help.

Is Membership Fee Pricing the Future of Payment Processing?

The question of sustainability remains, of course, since providers like Transparent Merchant Services and Payment Depot are relatively new on the scene. But, personally, although I am always cautious and skeptical, I see great potential in this pricing model. If these companies are making enough profit to say afloat without charging a percentage markup, then this could indeed be a revolutionary change for pricing in the payment processing sector. Time will tell, but for now I’m excited to see how things go, and I hope that merchants will give this pricing model a shot. If you do, please report back to me! I’d love to hear your experience. What do you think? Comment with your insights.

Tom DeSimone
Tom loves asking tough questions and getting straight answers, so he has a lot of fun calling payment processors for Merchant Maverick to cut through their smoke and mirrors and find the real deals. He has run a full-time editorial business from his home in New York’s Hudson Valley since 2010 and could not imagine a better job. When not busy writing and keeping credit card processors honest, Tom enjoys backpacking in the mountains.
Tom DeSimone
Leave a comment


    Casey Hagadorn

    I cant find where they state the fee. Please just tell me the bottom line. I make jewelry so I don’t have alot of business. Thanks!

    Chloe Bahal

    Hi Casey,

    There are many factors that affect the fee so your best bet is going to be to contact the processor directly and get a quote. I hope this helps and if you have further questions please let me know.


    What is the flat fee that Payment Depot charges? It doesn’t seem like they are truly transparent with this information since you didn’t have it in your review. Is it based on volume? Does it change based on type of merchant? It is quite possible that the flat fee that Payment Depot charges is too high to be truly competitive with certain business types. I believe this model will put Payment Depot out of business in a few years because I they won’t make enough profit to sustain itself. Which will be bad for merchants in the long run. And it is quite possible they will be forced to increase their membership fee over time to cover costs. READ the fine print.

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