Understanding POS Fee Structures
When it comes to accepting electronic payments, there are a variety of fee structures to choose from. Two of the most commonly used are interchange plus and flat-rate processing. Understanding the differences between these two fee structures can help you make an informed decision about which one is best for your business.
What is Interchange Plus?
Interchange plus is a fee structure in which merchants are charged a percentage of the cost of each transaction, as well as a fixed fee per transaction. The percentage charged is the interchange fee, which is set by the card networks, and is typically around 1% to 2% of the transaction amount. In addition to this, the processor adds their own markup, which is typically between 0.1% and 0.5% of the transaction amount.
The benefit of interchange plus is that the fees are transparent and fairly predictable. Merchants can see exactly how much they are paying for each transaction, and can calculate their costs based on the interchange rate and markup. This makes it easier to manage cash flow and budgeting.
What is Flat-Rate Processing?
Flat-rate processing, on the other hand, is a fee structure in which merchants are charged a fixed fee per transaction, regardless of the cost of the transaction. The fee is typically a percentage of the transaction amount, and is charged on all transactions, regardless of whether they are debit or credit.
The benefit of flat-rate processing is that it is simple and easy to understand. Merchants don’t need to worry about calculating markup or interchange fees, and can budget more easily because they can anticipate exactly how much they will be charged for each transaction.
Which One is Best for Your Business?
Choosing between interchange plus and flat-rate processing depends on a number of factors. For small businesses with low transaction volumes, flat-rate processing may be the best choice because it is simple and predictable. However, for larger businesses with higher transaction volumes, interchange plus may be the better choice because it allows for more flexibility and transparency in pricing.
Ultimately, the decision between interchange plus and flat-rate processing depends on your individual business needs and preferences. It is important to carefully evaluate both options and choose the one that best fits your business.
