Both Stripe and PayPal/Braintree charge flat rate pricing, an increasingly popular cost structure for processors. And it’s easy to see why – simplicity is attractive. Flat rate pricing is easy to understand and it saves merchants from the annoyance of sifting through complex credit card processing statements.
At least on the surface – it appears to be totally transparent.
Whether they’re aware of it or not, every transaction a merchant processes incur three fees:
While assessments are fixed costs, the interchange rate is not. This rate can vary from as low as 0.05% to over 3%. Processors that charge a flat rate need to account for every possible interchange rate. The good thing about flat rate pricing is that there’s no guesswork and it’s easy for a merchant to figure out how much it’s going to cost them to process their payments.
Stripe and PayPal/Braintree use a fixed percentage of the volume pricing structure of 2.9% + $0.30 per transaction. This is on the higher end in comparison to interchange rates, and for merchants with low ticket transactions that extra $0.30 can be a real burden.
Quite simply, “interchange plus” pricing means the merchant pays the interchange rate plus a fee to their credit card processor. That fee is usually measured in basis points. Each basis point is 1/100th of a percent. Fixed credit card transaction costs.
For example, let’s say you’re a retail business working with a processor that charges 70 basis points for a fee of 0.70%. If you ran a card-present transaction of $50 with an exempt Visa check card, the interchange fee would be 0.80% + $0.15 for a combined rate of 1.5%.
That gives you an interchange rate of $0.75 + $0.15 for a grand total of $0.90 for the transaction.
