Credit Card Processing

Flat Rate (Subscription) Merchant Accounts

by Ben Dwyer

Subscription or membership flat rate merchant accounts are one option for businesses that want to take credit cards. A subscription pricing model is one in which a credit card processing company charges a fixed cost instead of a percentage of your sales.

Subscription pricing is becoming more popular as businesses try to find ways to cut credit card processing costs. This type of pricing can be competitive, but there is an element of marketing spin that can sometimes make it seem better than it actually is.

Subscription flat rate pricing is available from some processors in the CardFellow marketplace, and overall it’s a transparent model with the ability to be low cost. You don’t need to run from it, but don’t fall for the hype and think it’s automatically cheaper. It’s important to know what’s involved to make sure you’re truly getting the right solution for your business. In this article, we’ll explain flat rate credit card processing (sometimes called 0% markup processing) and the advantages and disadvantages of the model.

What is subscription flat rate merchant account pricing?

Subscription flat rate merchant account pricing is a transparent credit card processing price structure where the processor’s markup is applied as a flat monthly fee and per-transaction fee instead of a percentage of sales volume. This is what makes the flat rate structure different than other forms of pricing such as interchange plus.

You may see flat rate pricing marketed as 0% markup or “no markup” processing. That’s not quite accurate – there’s no percentage markup, but there is still a markup.

How does the subscription flat rate model work?

With the subscription flat rate pricing model a business pays exact interchange fees in addition to a flat monthly or annual fee to the processor. In most cases, there is also a per-transaction fee, meaning you’ll pay a fixed amount on every transaction you process.

It’s important to note that interchange fees themselves have a percentage rate and a per-transaction fee. (For example 1.65% + 10 cents per transaction.) Those fees are not set by your processor and are not part of the markup, which is why the processor can say that there is no percentage markup. The percentage is part of the interchange fees, which are the same for every processor.

Not familiar with interchange yet? Check out our related article: What are interchange fees?

What are the advantages of the subscription flat rate price structure?

The subscription model is the only pricing structure where a processor’s markup is not based on a percentage of sales. This ensures that the processor’s monthly fee remains the same regardless of a business’s processing volume. As a result, it may be a cost effective option for new and growing businesses.

However, it’s important to note that many membership pricing models cap the number of transactions a business can process at each membership level. As your business processes more transactions, you may need to change to a more expensive monthly membership. At that point, it’s often more cost effective to seek out other pricing models.

What are the disadvantages of the subscription flat rate price structure?

It’s easy to think that simple = lowest cost. That’s a dangerous assumption in credit card processing, and one that some subscription processors hope you’ll use to make decisions.

Businesses that have been processing for awhile might see a subscription pricing offer of 0% markup and 30 cents per transaction and think that’s a great deal. Depending on your business, it may not be. I’ll go into greater detail in the next section.

Another possible disadvantage is that many subscription models require different monthly membership fees depending on how many transactions you process. If your business processes more transactions than allowed by your membership level, you may kicked into the next (more expensive) membership level and will need to remember to manually request a change if your number of transactions drops again.

Is the subscription flat rate model the best merchant account pricing?

The flat rate model is a transparent processing solution, but the best solution for you will depend on your business’s needs. There are many factors to consider, but two of the most important are the average ticket (transaction total) and your number of transactions in a month.

Let’s compare interchange plus pricing with subscription flat rate processing. Remember that the wholesale cost of interchange and assessments is the same for every processor, so we can disregard it in our example and focus on the processor’s markup.

Example 1

Let’s say that you sell furniture. You’re likely processing higher average ticket transactions, but fewer transactions per day than some other types of businesses. You’ve decided to take credit cards, and you have an offer from Processor A using interchange plus pricing with a markup of 0.10% and 10 cents per transaction and from Processor B using subscription flat rate pricing with a markup of 0% and 25 cents per transaction. Processor A has a $10 monthly fee, and Processor B has a $29 monthly fee.

You sell a couch for $2,000.

With Processor A, you’d pay $2.10 to the processor for their markup. (2000 x 0.001 + 0.10) With Processor B, you’d pay 25 cents. On the surface, it looks like a no-brainer in favor of the subscription pricing. However, to get the most accurate number, you’d also include your monthly fee divided by your number of transactions for that month. If you only sell that one couch all month, you’d be paying $12.10 to Processor A as a markup or $29.25 as a markup to Processor B.

If you sold 10 of those couches in a month, you’d pay Processor A $21 (20,000 x 0.001 + 10 x 0.10) and Processor B $2.50 (10 x 0.25). Again it looks like a big savings with the subscription pricing, but the monthly fee changes that. The monthly fee would add another $1.00 per sale with Processor A for a total of $31 or $2.90 per sale with Processor B for a total of $31.50. Those costs are pretty close, but it’s important to remember that the disparity could be even greater if you have a higher monthly fee for your subscription pricing. Memberships from some processors start as high as $69 for a basic plan.

It’s important to remember that all of the costs (including what seem like low monthly fees) affect the total.

Example 2

Now let’s say that you own a shoe store. Your average sale is $50 and you have 10 sales per day for a total of 300 transactions per month. With Processor A, that’ll cost you 15 cents per transaction (50 x 0.001 + 0.10). Adding in our monthly fee of $10 adds 3 cents per transaction for Processor A, bringing the total to 18 cents per transaction.

With Processor B, it’ll cost you 25 cents per transaction, plus the monthly fee of $29 split over 300 transactions, equaling 35 cents per transaction. (29 / 300 + 0.25). For the month, you’d pay a total markup of $55 with the interchange plus pricing (300 x .15 + 10) or $104 with the membership pricing. (300 x .25 + 29).

Guess what? That 0% processing option just cost close to double as much as the competitive interchange plus processing. It’s easy to disregard the monthly cost because it doesn’t seem like it’s part of your processing costs, but these examples illustrate that it’s important to take it into account. When searching for the lowest cost processing, 0% markup doesn’t automatically equal lowest cost.

The caveat is that the examples above illustrate possible savings with competitive, transparent interchange plus pricing like you’ll find here at CardFellow. If you’re on a tiered pricing model or don’t have competitive pricing to start with, it’s possible you’d save anyway by switching to a membership pricing model. Just be aware that you may be able to save even more with truly competitive interchange plus.

What would the flat rate be for my business?

Membership fees are set individually by processors and vary depending on your business details. Memberships can range from modest monthly fees around $29 up to hundreds of dollars. To see exactly what you’d pay, you can use CardFellow’s free quote comparison tool to get fully disclosed subscription flat rate credit card processing quotes for your business.

Is one better than the other?

Not necessarily. The best processing solution is the one that takes your specific needs into account and offers transparent pricing with true interchange pass-through, so you don’t pay padded costs or play the shell game of “non-qualified” transactions. Competitive interchange plus and subscription flat rate both have the potential to offer great pricing with transparent costs – but only if you know what to look for. You’ll need a processor that passes interchange to you at cost and commits to a low, consistent markup on top of interchange.

Where can I get subscription flat rate pricing?

Right here. There are processors within the CardFellow marketplace that offer flat rate subscription pricing. You’ll be able to see quotes alongside interchange plus pricing so that you can compare apples to apples. You’ll just need to create a free account to see quotes for subscription pricing for your business. Sign up here.


2 thoughts on “Flat Rate (Subscription) Merchant Accounts”

  1. When a merchant is charged a tiered rate, is that rate added to the interchange rate to arrive at the processing rate? For example if interchange is 1.60 and their lowest tiered rate is 1.39, is the rate they are charged 2.99 plus transaction fee?

    1. >When a merchant is charged a tiered rate, is that rate added to the interchange rate to arrive at the processing rate?

      Not exactly. The processor will decide on the tiered rates (often three rates: qualified, mid-qualified, and non-qualified) and then lump all interchange categories into one of those three tiers. The tiered rate covers interchange and their markup. A tiered rate below interchange may be quoted, but will almost never materialize – it’s usually for a very specific, limited set of circumstances, such as PIN debit transactions.

      >For example if interchange is 1.60 and their lowest tiered rate is 1.39, is the rate they are charged 2.99 plus transaction fee?

      No – if the lowest tiered rate is 1.39% and there’s a transaction that costs 1.60% at interchange, that transaction will not be charged according to the 1.39% tier. It will fall to a more expensive mid-qualified or non-qualified tier with a higher rate.

      You can read more about tiered pricing here:

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