by Matt Rej
There’s a common misconception among merchants on flat-rate credit card processing: they think the only way to get on interchange-plus is by changing providers.
This is almost never true.
In most cases, you can get off flat-rate pricing (or tiered, or whatever non-transparent and highly marked up structure you’re stuck on) without changing processors at all.
You can continue using the same provider, hardware, gateway, integrations, and POS system. And your deposits will continue hitting the same bank account. You’ll just have a different pricing structure underneath. Plus you’ll save a ton of money.
Why Merchants Think They’re Stuck
Flat-rate processors are really good at marketing themselves on simplicity. You sign up for 2.6% + $0.10 or 2.9% + $0.30 (whatever it is), and that’s the deal.
This pricing structure feels like something that’s set in stone and can’t be changed, because there’s no indication of that as a possibility anywhere.
So when you grow past the point where flat-rate pricing makes sense, you start to evaluate options and realize that interchange-plus is much cheaper.
And that’s when the wrong assumption gets made. Businesses think that IC+ pricing lives somewhere else. If you’re using a flat-rate provider, you’ll need to find a credit card processor that offers interchange-plus pricing. Right?
Wrong. IC+ pricing is just a different way of presenting the same underlying costs.
All processors have access to this pricing stature because they’re paying interchange and assessments to the card networks regardless of how they bill you.
Where Your Processing Fees Actually Go
Every single credit card transaction has three components that exist no matter what your statement looks like:
- Interchange — Goes directly to the card issuing bank. Varies by card type and transaction, and set by the networks (Visa, Mastercard, Discover, Amex).
- Assessments — Set by the networks and goes directly to the networks themselves.
- Processor Markup — This is what your processor keeps for the service they provide to facilitate transactions.
On a flat-rate plan, your processor is still responsible for paying the same interchange and assessment fees to the networks and banks. They just bundle everything into one rate and quote you on a single number.
When the actual interchange on a transaction comes in lower than their flat rate, they keep the difference. When it comes in higher (rare, but it can happen), they eat it. But overall, flat-rate is more profitable for the provider because most card mixes land well below the rates they’re charging you.
IC+ unbundles this.
Interchange and assessments are both passed through to the merchant at exact costs. And the processor’s markup sits on top of this as a clearly defined number (something like 0.20% + $0.10 per transaction).
Let’s say a transaction carries a 1.65% + $0.10 interchange rate plus a 0.15% assessment. With IC+ pricing, your 0.20% + $0.10 markup brings you to 2% + $0.20 effective. Whereas if you were on a flat-rate plan, that same transaction could cost 2.60% + $0.10 on the low end or upwards of 3.49% + $0.30 on the high end.
The difference is significant, and IC+ typically translates to thousands in savings every single month, even for smaller merchants doing modest volume.
Switching Pricing Structures vs. Switching Processors
These are two completely different approaches that get blurred all the time.
Switching processors requires you to essentially change everything. You need to get a new merchant ID, go through the underwriting process with a new acquirer, and set up a completely new contract. It’s also likely you’ll need new gateway credentials, new hardware, and any existing integrations will be broken.
There’s also a good chance you’ll have some downtime during the switch, plus a transition period where you’re maintaining two accounts.
Switching pricing structures just means asking your existing processor to bill you differently. Everything else stays exactly the same.
Literally the only change is how line items will be itemized on your statement.
Behind the scenes, all the money continues flowing exactly where it did before. Your processor still has to pay the networks and banks for interchange/assessments. But instead of getting a massive markup from the difference in that cost and your flat rate, their markup drops to something that’s much more reasonable (and cheaper for you).
The only perceived “downside” of this is that your statements will be a little more complicated. What was once just a couple pages with a handful of line items might now be 10+ pages with dozens of line items and interchange categories.
This is actually a good thing. Not only is IC+ pricing cheaper, but it’s also more transparent. So you can see exactly where all of the money is going.
Every Major Credit Card Processor Can Quote IC+ Pricing
This is the part that surprises people most. Even the processors that are commonly associated with flat-rate pricing will move you to interchange-plus under the right circumstances.
Even Stripe, Square, PayPal, Helcim, all of them. You can even get IC+ pricing with PayFacs who are notoriously tough to negotiate with, like Shopify.
Plus any ISO or direct processor relationship can get you interchange-plus rates, too. Anyone who is reselling services from Fiserv, Elavon, TSYS, Worldpay, Global, etc. can get you IC+ quotes because that’s the native structure of those processor backends.
If you’re on a tiered pricing structure with “qualified” rates, that’s just something the ISO chose to add on. That’s not something that’s required by your processor.
That said, not every merchant necessarily qualifies for IC+ on day one. Square or Toast probably isn’t going to give you an IC+ quote if you’re only doing $5k per month or you’re on a free software tier.
But just because they don’t do this by default, it doesn’t mean it’s not possible. Every provider has the ability to offer IC+ pricing. It’s just a matter of whether you need to ask for it or meet a certain volume threshold to get there.
How to Switch to Interchange-Plus Pricing Without Changing Processors
You just need to be direct with your processor here and ask them for an IC+ quote. A few things worth noting about this process:
- Make it clear that you want a pricing structure change.
- Be specific and ask for “interchange-plus” or “cost-plus” pricing by name.
- If you just ask for “lower rates” it will put you in a negotiation about discounts on your flat rates (which is the wrong conversation).
- Prepare for them to push back or stall with responses like “we don’t offer that” or “that’s not available on your account.”
This isn’t something that necessarily happens overnight. There will be some back and forth.
It’s in your processor’s best interest to keep you on a flat-rate plan because it’s more profitable for them. But if you pull on the right negotiation levers it makes this conversation much easier.
You should also come prepared to the table with a deep knowledge of your current fees. Pull your last few months of statements to calculate your effective rate. You could also ask for more detailed interchange reporting to run some simulations on what the IC+ quote would cost (to ensure their quote is actually a better deal for you), though not every processor will give you this information.
This is why it’s so helpful to work with a merchant consultant during this process. Someone who has your back when negotiating with your processor, and a payments expert can essentially handle everything on your behalf.
You might get cheaper rates if you do this alone, but you probably won’t get your processor’s rock-bottom pricing. And your rates will likely go up over time.
So if you want some assistance, reach out to our team here at MCC for a free consultation. We’ll help you get lower rates without switching providers. Moving from a flat rate to IC+ is no problem, and it’s something we practically do on a daily basis for our clients.