How Does Flat Rate Pricing Measure Up for Merchants?

If you missed first article in the series, where we reviewed how credit card fees are calculated with a spotlight on tiered merchant pricing, we recommend giving it a quick read before diving in.

In flat flee merchant pricing, merchant services providers charge the same rate for every transaction, regardless of the card type accepted (credit card, debit card or gift card transaction, Visa or MasterCard) or how the card is processed (card present, card-not-present transaction or e-commerce transaction).

The Pros and Cons of Pass Flat Rate Pricing

Pro:  Simplicity. Con: Costs.

On the surface, flat rate pricing seems like the optimal method for businesses that want easy accounting (typically those who are very small, to small).  Simplicity is the real draw as flat rate pricing doesn’t require merchants to worry about understanding interchange fees, dues & assessments and third-party charges; however, the disadvantages shouldn’t be overlooked:

• More expensive: At higher transaction volumes, tiny percentages add up quickly. Transactions like debit card payments have low interchange costs, which would normally mean lower processing fees; however, because paying a flat rate lumps all transactions into a single fee towards the upper end of the spectrum, merchants pay more in the end.
• Not refund-friendly: When a merchant issues a refund, only a portion of the fee paid is returned as some of the cost of processing the original transaction is non-refundable.
• Less-detailed recordkeeping: With flat rate fees, it’s virtually impossible to know what methods customers prefer to pay with – debit card, gift card, credit card or online purchase – because flat fee payments don’t reveal the detailed information.

How to Make the Best Decision for your Business

Find a payment processing partner or merchant services provider that you can trust.

At Paragon, we can accommodate all merchant pricing models and are committed to a PURE^SM and Simple pricing philosophy. During the sales process, our account managers educate merchants about the various rate structures available and listen to understand which will serve the merchant best.

For software providers, choosing a flexible payments partner who offers a highly customizable approach allows you to provide customers with the best solution possible while monetizing your payments program in the process.