Flat Rate vs Interchange-Plus Pricing (Blended vs Cost-Plus)

What each structure charges

Under blended pricing, the provider sets a rate such as a percentage plus a fixed fee for in-person sales and often a different one for online or keyed sales. Whatever the card costs the provider in interchange, you pay the same. Under cost-plus, the statement shows interchange for each card program, network fees, and then the provider's markup, usually written in basis points (100 basis points is 1%) plus a per-item fee. Visa describes the merchant side of this as a merchant discount that merchants negotiate and pay to their financial institution; interchange itself is a transfer between banks.

Why interchange varies so much

Visa's US schedule effective April 18, 2026 shows how wide the cost range is. On a card-present retail sale, a debit card from a regulated issuer (one covered by the Federal Reserve's Regulation II) is 0.05% + $0.21, plus $0.01 for issuers that meet fraud-prevention standards, while an exempt debit card is 0.80% + $0.15. Consumer credit Product 2 (card present) runs from 1.51% + $0.10 for All Other Products to 2.30% + $0.10 for Visa Infinite (spend qualified). Card-not-present credit Product 1 runs from 1.89% + $0.10 to 2.60% + $0.10. The Federal Reserve reports that in 2024 the average interchange fee on covered (regulated) debit transactions was $0.23, or 0.47% of the average transaction, against $0.51, or 1.21%, on exempt transactions. A blended rate has to cover all of that with one number, so a merchant whose customers mostly use regulated debit can pay a lot more over cost than one whose customers mostly use premium rewards credit cards.

Model both on your own statement

Illustrative example only, with made-up round numbers, not market rates: suppose a month has $50,000 of card sales across 1,000 transactions. A blended quote of 3.00% would cost $1,500. A cost-plus quote of interchange plus 0.30% and $0.10 per transaction would cost interchange plus $150 plus $100. If that month's interchange and network fees came to $1,000, cost-plus would total $1,250. If they came to $1,300, it would total $1,550 and blended would be cheaper. The answer turns entirely on the interchange figure, which is why you need an interchange-level report or statement for your own business, not a generic average. Add every monthly, annual, PCI and statement fee to both quotes before comparing.

When blended pricing makes sense

Blended pricing can be a reasonable choice when volume is low, when you value a predictable per-sale cost, or when your provider bundles services you would otherwise pay for separately. Check what happens to keyed and online sales, whether some card types are charged at a higher blended rate, and whether the rate can change during the term.

What Regulation II actually caps, and what it leaves alone

Half the spread in the interchange numbers above comes from one regulation, so it is worth reading in its own words. 12 CFR 235.3 says an interchange transaction fee an issuer receives for an electronic debit transaction is reasonable and proportional only if it is no more than the sum of 21 cents and 5 basis points multiplied by the value of the transaction. 12 CFR 235.4 allows a further fraud-prevention adjustment of no more than 1 cent per transaction, but only for an issuer that develops and implements policies and procedures reasonably designed to reduce fraudulent debit transactions, reviews them at least annually, and annually notifies its payment card networks that it complies. That is the whole of the ceiling — 21 cents, 5 basis points and a conditional cent — and it binds the card issuer, not your processor. Nothing in Regulation II limits what an acquirer may charge a merchant, which is why a regulated debit sale that costs your provider a fraction of a dollar can still reach you inside a single blended rate. The third piece, 12 CFR 235.7, bans network exclusivity and routing restrictions: an issuer or network must enable at least two unaffiliated payment card networks to process an electronic debit transaction, and must not inhibit the ability of any person accepting debit cards to direct the routing of those transactions. Under cost-plus, where the network's cost is passed through, routing choices show up on your statement. Under a blended rate they do not, because you pay the same quoted number whichever network carries the sale.

The per-item fee, not the percentage, decides small tickets

Illustrative example only, with made-up round numbers, and not a savings claim. Take two sales on a regulated debit card at the Visa card-present retail rate of 0.05% + $0.21 shown in the schedule effective April 18, 2026. On a $100 sale, interchange works out at about $0.26, which is 0.26% of the sale. On a $6 sale it works out at about $0.21, which is about 3.5% of the sale. The rate did not move; the fixed cent amount did all the work. Now run the same two sales against an illustrative blended quote of 2.6% plus $0.10: about $2.70 on the $100 sale and about $0.26 on the $6 sale. Against an illustrative cost-plus quote of interchange plus 0.30% and $0.10, using the interchange figures above: about $0.66 and about $0.33. The ranking flips between the two tickets. That arithmetic sits underneath every argument about which structure costs less, and it is why your average ticket is the first number to put next to a quote. Pull your own average ticket and card mix off a statement, apply both quotes line by line, and add every fixed monthly, annual, PCI and statement fee to each total before comparing.

When cost-plus makes sense

Cost-plus tends to suit businesses that want to audit their bill, have a large share of debit sales, run large tickets, or have enough volume that a few basis points of markup matter. It is only as good as the markup terms. In a 2022 complaint, the FTC alleged that First American Payment Systems typically raised its rates, including percentage markups for merchants on cost-plus pricing, at least once a year and sometimes twice. That is one company's alleged conduct, but it is a reason to get the markup and any change-notice terms in writing.

Names you will see on quotes

Interchange-plus is also called cost-plus or pass-through pricing. Flat rate is also called blended pricing. Tiered pricing, with qualified, mid-qualified and non-qualified buckets, is a third model that combines the drawbacks of both: you cannot see the interchange, and the provider decides which bucket each sale lands in. If a quote uses any of these names, ask for a pricing schedule that lists every fee and how it is calculated.