Understanding Credit Card Processing Fee Structures
When you accept credit and debit card payments, you're charged a fee for each transaction. That fee depends on the pricing structure used by your payment processor. The three most common structures are: Interchange Plus (IC+), Tiered Pricing, and Flat Rate Pricing.
Each model works a little differently—and knowing how they work helps you make informed decisions that align with your business goals.
Interchange Plus (IC+) Pricing
The most transparent and cost-accurate pricing model.
With Interchange Plus, every transaction is broken into two parts:
- The interchange fee - this is the base cost set by the card networks (Visa, Mastercard, Discover, etc.). It varies depending on card type (debit vs credit, rewards cards, corporate cards, etc.), transaction method (in-person vs online), and other risk factors.
- The markup - this is the fee your payment processor charges for handling the transaction, usually quoted as a fixed percentage and per-transaction fee (e.g., 0.30% + $0.10).
Because these two components are separated and clearly listed on your statement, IC+ gives you full visibility into exactly where your money is going.
For example, a transaction may carry a 1.80% interchange fee from Visa. If your processor's markup is 0.25% + $0.10, your total cost on that transaction would be 2.05% + $0.10.
IC+ pricing is ideal for businesses that want detailed reporting and may qualify for lower interchange rates based on their transaction mix or volume.
Tiered Pricing
A bundled pricing model where transactions are grouped into rate categories.
With tiered pricing, your transactions are not billed at the true interchange rate. Instead, they're sorted into three “tiers”:
- Qualified - typically basic debit or non-rewards credit cards.
- Mid-qualified - rewards cards or transactions with additional risk factors (e.g., keyed-in).
- Non-qualified - corporate cards, international cards, or transactions missing data.
Your processor sets a fixed rate for each tier. However, the criteria for how a transaction is assigned to a tier are controlled by the processor—not the card networks—and are not always disclosed in full detail.
This structure simplifies your billing format but can make it harder to understand what you're truly paying. Because many everyday transactions fall into mid- or non-qualified tiers, businesses may end up paying higher rates overall.
Example:
- Qualified: 1.79%
- Mid-qualified: 2.89%
- Non-qualified: 3.49%
Tiered pricing can be easier to read on a statement but offers less insight into the true cost of each transaction.
Flat Rate Pricing
A single, fixed rate applied to every transaction, regardless of card type.
Flat rate pricing offers a simple and predictable structure. Every transaction—whether it's debit, credit, rewards, or corporate—is charged the same percentage and fee.
This structure is commonly used and is designed to simplify payment processing for smaller businesses or those just starting out.
Example: 2.6% + $0.10 per transaction across the board.
While flat rate pricing is easy to understand and budget for, it doesn't adjust based on actual card costs. So as your business grows and your transaction volume increases, it may not be as cost-efficient as other models like IC+.
Helping You Choose the Right Model
As your payment processor, our goal is to match your business with a fee structure that makes sense for how you operate. For smaller businesses or startups, flat rate pricing offers ease and predictability. For more established or higher-volume businesses, Interchange Plus typically offers better long-term savings and transparency. Tiered pricing may seem straightforward on the surface, but it's important to understand how your transactions are being categorized.
We're here to walk you through your options, show you how each model would apply to your business, and ensure you're set up for both simplicity and sustainability.
If you have questions, please contact our Sales Team to walk you through the best option.
sales@pepperpay.com; 786-358-9338 option 1