Interchange-Plus vs. Flat-Rate Pricing for Dealerships: Which Saves More?

When you're evaluating payment processors, pricing structure matters as much as the quoted rate. A "2.6%" quote from one processor isn't the same as "2.6%" from another if they're pricing differently.

The two main models you'll encounter: interchange-plus and flat-rate. Understanding the difference could save your dealership thousands annually.

The Basic Difference

Interchange-Plus Pricing

How it works:

• You pay actual interchange (what card networks charge)
• Plus a fixed markup from your processor
• Interchange varies by card type, transaction method, etc.

Example:

• Interchange for this transaction: 1.65%
• Processor markup: 0.30%
• Your total rate: 1.95%

Key characteristic: Your rate varies by transaction.

Flat-Rate Pricing

How it works:

• You pay one rate for all transactions
• Processor absorbs interchange variation
• Simple and predictable

Example:

• All transactions: 2.6% + $0.10
• Regardless of card type

Key characteristic: Same rate every time.

How Interchange Works

What Is Interchange?

Interchange is the fee the card-issuing bank charges, set by the card networks. When your customer pays with their Chase Visa, Chase gets the interchange.

Interchange varies by:

• Card type (consumer vs. business vs. rewards)
• Card network (Visa, Mastercard, Amex, Discover)
• Transaction method (chip, swipe, keyed, online)
• Merchant category

Typical Interchange Ranges

Consumer credit cards: 1.5% - 2.5% Business/Corporate cards: 2.0% - 3.0% Rewards cards: 2.0% - 2.5% Debit cards: 0.05% + $0.21 - 0.22 (regulated) or higher (unregulated)

This variation is why pricing model matters.

Running the Numbers

Scenario: $200,000 Monthly Card Volume

Let's compare pricing models with typical dealership transaction mix.

Assumptions:

• $200,000 monthly volume
• 60% consumer credit
• 20% business credit
• 20% debit

Interchange-Plus Example

Interchange costs:

• Consumer credit ($120K × 1.8% avg): $2,160
• Business credit ($40K × 2.5% avg): $1,000
• Debit ($40K × 0.5% avg): $200
• Total interchange: $3,360

Processor markup:

• $200K × 0.30%: $600

Total processing cost: $3,960 Effective rate: 1.98%

Flat-Rate Example

At 2.6% flat rate:

• $200K × 2.6%: $5,200

Total processing cost: $5,200 Effective rate: 2.60%

Monthly Difference: $1,240

Annual difference: $14,880

That's real money — and this is a modest volume example.

When Each Model Wins

Interchange-Plus Typically Wins When:

You have high debit volume

• Debit interchange is much lower
• Flat-rate doesn't give you that benefit
• Savings compound significantly

You process high-ticket transactions

• Interchange is percentage-based
• Processor margin is often per-transaction
• Lower effective rate on large transactions

You have significant consumer card volume

• Consumer cards often have lower interchange than business
• Flat-rate charges same regardless

Transparency matters to you

• You can see exactly what you're paying
• Easier to benchmark and negotiate
• Clear accountability

Flat-Rate Typically Wins When:

Volume is very low

• Simplicity may outweigh small savings
• Less accounting complexity
• Predictable budgeting

Almost all transactions are high-interchange

• Heavy business/corporate cards
• Heavy rewards cards
• Flat rate may actually be competitive

You value simplicity above all

• One rate, no complexity
• Easy to understand
• No statement analysis needed

The Dealership Perspective

Why Interchange-Plus Usually Wins for Dealers

Service department:

• High transaction volume
• Mix of consumer and commercial customers
• Significant debit card usage
• Lower interchange cards common

Parts department:

• Wholesale customers may use commercial cards
• But also retail with consumer cards
• Debit common for smaller purchases

F&I / Down payments:

• Larger transactions favor interchange-plus
• Per-transaction fees are smaller percentage
• Significant savings opportunity

Common Dealership Card Mix

Many dealerships see:

• 50-60% consumer credit
• 15-25% business/commercial credit
• 20-30% debit

This mix favors interchange-plus pricing.

Hidden Considerations

With Interchange-Plus

Watch for:

• What's the markup? (Should be competitive)
• Are there other fees added?
• How are downgrades handled?

Downgrade risk:

• If transaction data is incomplete, interchange increases
• Good processor helps you qualify for best rates

With Flat-Rate

Watch for:

• What's excluded from the flat rate?
• Are chargebacks extra?
• Any monthly or annual fees?

Fine print:

• Some flat-rate providers exclude certain card types
• Amex may be priced separately
• International cards may cost more

Making the Comparison

Get Comparable Quotes

When evaluating processors:

1. Provide same volume and transaction info to each
2. Get total monthly cost estimates (not just rates)
3. Compare apples to apples

Analyze Your Current Statement

If you're currently on interchange-plus:

• Calculate your effective rate (total fees ÷ total volume)
• Compare to flat-rate alternatives
• Would you save or lose?

If you're currently on flat-rate:

• Request interchange-plus quote
• Compare projected cost
• Factor in any setup/transition costs

Run Multiple Scenarios

Processing costs can change with:

• Volume increases
• Card mix shifts
• New transaction types

Model different scenarios to understand range of outcomes.

The Transparency Factor

Interchange-Plus Transparency

Your statement shows:

• Each transaction's interchange
• Processor markup clearly separated
• Assessment fees (card network fees)
• Other fees itemized

You can verify you're getting what was quoted.

Flat-Rate Opacity

Your statement shows:

• Total fees charged
• Sometimes transaction detail
• Hard to verify competitiveness
• Processor absorbs variation (up or down)

You're trusting the rate is fair.

Negotiation Implications

Interchange-Plus Negotiation

You can negotiate:

• The markup (main lever)
• Per-transaction fees
• Monthly fees
• Other ancillary fees

Interchange itself is fixed by card networks.

Flat-Rate Negotiation

You can negotiate:

• The rate itself
• Per-transaction fees
• Volume-based discounts

Less granularity, but still room to negotiate.

Our Recommendation

For most dealerships: Interchange-plus is the better model.

Why:

• More transparent
• Typically lower total cost
• Better for mixed transaction types
• Easier to verify fairness

Consider flat-rate only if:

• Your volume is very small
• You genuinely value simplicity over savings
• Your card mix is unusually high-interchange

Questions to Ask Processors

For Interchange-Plus

1. What's your markup?
2. Are there any other percentage-based fees?
3. What are per-transaction fees?
4. How do you handle interchange optimization?
5. Can I see a sample statement?

For Flat-Rate

1. What's included in the flat rate?
2. What's excluded or priced differently?
3. Are there any other fees?
4. How does pricing change with volume?
5. Can I see a sample statement?

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Get Transparent Interchange-Plus Pricing →

Anchorbase uses interchange-plus pricing so you always know what you're paying. No hidden markups, no flat-rate obscurity — just clear, competitive pricing.