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Also known as flat-fee credit card processing, this payment processing model can be cost effective for some businesses, mostly new and very small ones.
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.
Table of Contents
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.
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.
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:
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?
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.
Maverick Tip
National Processing is one of the few processing companies offering flat-rate processing with a full-service merchant account, i,e., they are not a third-party payment processor/payment service provider.
Read our National Processing review to learn more about them.
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:
On the other hand, you may still have to pay additional fees for:
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.
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.
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:
Flat-rate pricing will likely not be cost-effective for:
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.
Credit Card Processing With Superior Support
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With Helcim, you get everything you need to accept credit card payments online or in-person with a free account, plus high-quality support from real humans. Start For Free.
Credit Card Processing With Superior Support
Helcim |
---|
With Helcim, you get everything you need to accept credit card payments online or in-person with a free account, plus high-quality support from real humans. Start For Free.
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Merchant Maverick’s ratings are editorial in nature, and are not aggregated from user reviews. Each staff reviewer at Merchant Maverick is a subject matter expert with experience researching, testing, and evaluating small business software and services. The rating of this company or service is based on the author’s expert opinion and analysis of the product, and assessed and seconded by another subject matter expert on staff before publication. Merchant Maverick’s ratings are not influenced by affiliate partnerships.
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