By Louise Peters July 16, 2025
Texas retailers operate in one of the most dynamic and competitive marketplaces in the country. With a diverse customer base, growing local economies, and increasing digital payment adoption, store owners across the Lone Star State must navigate a range of choices to manage costs while delivering a seamless customer experience. One major decision lies in selecting the right pricing model for credit card processing: flat-rate or interchange-plus.
The fees tied to accepting credit and debit cards can add up quickly. Choosing the wrong pricing model can eat into margins, affect profitability, and make it harder to forecast expenses. However, the right model can bring predictability, transparency, and cost savings over time. For Texas retailers—whether you’re running a boutique in Austin, a grocery store in Lubbock, or an online shop in Houston—understanding the difference between flat-rate and interchange-plus pricing is essential to make an informed decision.
Understanding Flat-Rate Pricing
Flat-rate pricing is one of the simplest and most popular billing structures for credit card processing. It offers retailers a single, consistent fee per transaction, regardless of the type of card used or how it was processed.
For example, a processor like Square or PayPal may charge 2.6 percent plus 10 cents for every in-person transaction. Whether your customer uses a basic debit card or a premium rewards credit card, the fee remains the same.
This predictability is what makes flat-rate pricing attractive to many small businesses. It simplifies accounting and budgeting and is easy to explain to staff and customers. For new or low-volume businesses, flat-rate pricing often seems like the most hassle-free choice.
How Flat-Rate Pricing Works
When you process a sale using flat-rate pricing, the processor deducts a fixed percentage and per-transaction fee from the total. The remainder is deposited into your business account.
Let’s say you process a $100 transaction and your flat rate is 2.75 percent. The processor keeps $2.75 and deposits $97.25. The key detail is that this rate already includes all of the interchange and assessment fees from card networks.
There are no surprises, but you may pay more overall than you would with a more granular model like interchange-plus.
What Is Interchange-Plus Pricing?
Interchange-plus pricing is a more detailed and transparent model. It separates the card network’s base costs from the processor’s markup. You pay the actual interchange fee (charged by Visa, Mastercard, or other networks) plus a fixed markup from your payment processor.
For instance, your provider might offer interchange plus 0.3 percent and 10 cents per transaction. If the underlying interchange rate for that card is 1.8 percent, you would pay 2.1 percent plus 10 cents total.
This pricing model allows retailers to see exactly what they’re paying for and can be more cost-effective for businesses processing a high volume of credit card sales.
How Interchange Fees Are Determined
Interchange rates are set by the card networks and depend on several factors:
- Type of card used (debit, credit, rewards, business)
- How the transaction was processed (chip, swipe, online)
- The industry and merchant category code (MCC)
These rates change periodically and can be complex, but your processor typically passes them through at cost, adding only their agreed-upon markup.
For high-volume or growing businesses, interchange-plus pricing often yields significant savings compared to flat-rate models, especially as your average ticket size increases or you process more card-present transactions.
Comparing Flat-Rate and Interchange-Plus Models
Choosing between these models comes down to what matters most to your business: simplicity or cost control.
Flat-Rate Pros and Cons
Pros:
- Easy to understand
- Predictable monthly billing
- Quick setup with little paperwork
- Popular with startups and seasonal businesses
Cons:
- Potentially higher costs over time
- Less transparent breakdown of fees
- One-size-fits-all approach may not scale well
Interchange-Plus Pros and Cons
Pros:
- Transparent fee structure
- Often lower costs for high-volume businesses
- Can be tailored to your transaction mix
- Easier to compare processors and negotiate better deals
Cons:
- More complex to understand
- Monthly statements may require analysis
- May include additional service or regulatory fees
Which Model Works Best for Texas Retailers?
Every retailer’s needs are different, but local business conditions in Texas can help guide the choice.
Small and Seasonal Retailers
If you’re a small boutique in Wimberley, a food truck in Fort Worth, or a vendor at farmers markets across Texas, flat-rate pricing may be the easiest route. You benefit from the simplicity, low barrier to entry, and predictable costs—especially if your monthly transaction volume is low.
You can accept card payments without needing to decode complex statements or worry about fluctuating interchange fees. Processors like Square or Shopify offer additional tools for POS, inventory, and e-commerce integration, which are valuable for small operations.
Medium to Large Retailers
Retailers with steady volume—like grocery stores, clothing outlets, or home goods chains in cities like Dallas, San Antonio, or El Paso—should take a closer look at interchange-plus pricing. Once your monthly sales reach a few thousand dollars or more, the markup in flat-rate pricing begins to add up quickly.
With interchange-plus, you only pay what the card networks charge plus your negotiated processor fee. If your processor offers good rates and minimal monthly charges, this model can produce significant savings over time.
Retailers that process a variety of card types or a mix of in-person and online transactions can better control costs with this flexible and transparent model.
Cost Scenarios: A Texas Case Study
Let’s compare two retail businesses in Texas processing $25,000 in card transactions per month.
Flat-Rate Pricing Scenario
Processor: Square
Rate: 2.6 percent plus 10 cents
Average ticket size: $50
Total transactions: 500
Processing fee:
(25,000 × 2.6%) + (500 × 0.10)
= $650 + $50 = $700
Interchange-Plus Pricing Scenario
Interchange average: 1.75 percent
Markup: 0.3 percent plus 10 cents
Processing fee:
(25,000 × 2.05%) + (500 × 0.10)
= $512.50 + $50 = $562.50
Monthly savings: $137.50
Over the course of a year, that adds up to more than $1,600. For a growing business, that difference can be reinvested in inventory, staff, or marketing.
Negotiating Processor Contracts in Texas
Texas retailers have a wide range of payment processors to choose from, including local banks, credit unions, and national providers. If you’re exploring interchange-plus pricing, you have room to negotiate better terms.
What to Ask for:
- Clear markup disclosure (percentage and per-transaction fee)
- No cancellation or early termination fees
- PCI compliance support included
- Monthly statement transparency
- No long-term contracts unless terms are favorable
Smaller retailers may not get the lowest rates initially, but as your volume grows, revisit your contract. Texas-based processors familiar with your region may also offer more tailored solutions than one-size-fits-all national firms.
Payment Trends in Texas Retail
Retailers in Texas are adopting new technology at a fast pace. From contactless payments and mobile wallets to buy now, pay later services, customer expectations are evolving. Your pricing model should align with how your customers pay.
In-Person Retail
In brick-and-mortar environments, where most transactions are card-present, interchange rates tend to be lower. This makes interchange-plus models more attractive if your average transaction is high.
Online and E-Commerce
Online transactions carry higher risk and therefore higher interchange rates. However, for Texas retailers with strong online sales, especially during holiday seasons or local festivals, having a processor that offers real-time reporting, fraud tools, and scalable fees is essential.
Hybrid Businesses
Many retailers in Texas operate both online and in-store. If you fall into this category, prioritize a processor that supports both channels seamlessly and offers a clear fee structure for each. Some flat-rate providers bundle these features, but interchange-plus options can offer more savings if volume increases.
Transitioning Between Pricing Models
If you’re currently on a flat-rate model and want to explore interchange-plus pricing, the transition can be smooth with the right provider. Here’s how to approach it:
- Evaluate your current processing statements: Look at monthly volumes, average ticket sizes, and total fees.
- Compare with interchange-plus estimates: Use sample calculators or request quotes from processors.
- Ask for a trial period: Some processors may allow you to test their services for a few months without a long-term contract.
- Ensure compatibility: Make sure your point-of-sale system, accounting software, and hardware are compatible with your new processor.
Keep your staff informed and trained during the switch. Notify customers if there are any changes in how their payments are processed or if dual pricing (cash vs. card) is introduced.
Avoiding Common Pitfalls
Whichever model you choose, avoid the following mistakes:
- Ignoring hidden fees: Some flat-rate models include additional monthly service or PCI compliance charges. Always read the fine print.
- Locking into long-term contracts: Especially if you’re unsure which model suits you best, avoid contracts that charge cancellation penalties.
- Failing to monitor rates: Interchange fees are updated biannually by card networks. If you’re on interchange-plus, stay updated and review your statements to ensure accurate billing.
- Not checking for minimum monthly fees: Some interchange-plus providers require a minimum processing volume or charge a fee if you don’t meet it.
Being proactive helps you spot changes early and negotiate or switch providers if needed.
Final Thoughts
For Texas retailers, selecting the right credit card processing model is a key financial decision. Flat-rate pricing offers simplicity and ease, making it ideal for new or small businesses that prioritize convenience over cost. Interchange-plus pricing, on the other hand, provides a transparent and often more affordable option for growing or high-volume merchants.
Understanding your business model, transaction volume, and customer payment habits is the first step. The more informed you are, the more control you have over your margins. Whether you’re in Midland, Corpus Christi, or downtown Austin, choosing a processor and pricing model that aligns with your business goals can lead to long-term savings and greater peace of mind.
In a state as vibrant and competitive as Texas, the right payment strategy can make all the difference.
FAQs
What is the main difference between flat-rate and interchange-plus pricing?
Flat-rate pricing charges the same fee for every transaction, while interchange-plus pricing separates card network fees from processor markups, offering more transparency.
Is flat-rate pricing better for small Texas businesses?
Yes, if you have low transaction volume and want a simple, predictable fee structure, flat-rate pricing can be a good fit.
Can I switch from flat-rate to interchange-plus?
Yes, many processors allow you to switch. Evaluate your current fees and talk to providers that offer transparent interchange-plus pricing.
Do I need to know interchange rates to use interchange-plus pricing?
Not in detail, but having a basic understanding helps you review statements and assess whether you’re being charged fairly.
Are there Texas-based processors that offer interchange-plus pricing?
Yes, many local banks and merchant service providers in Texas offer interchange-plus models with regional support and competitive terms.