What is cost-plus pricing for credit card processing?

Cost-plus pricing — also called interchange-plus or pass-through pricing — is the most transparent and typically the lowest-cost way to pay for credit card processing. It's how Clearo and a handful of other processors charge for their services.

If you've ever gotten a quote with a single rate like "2.6% + 10¢" and wondered whether that's a good deal, understanding cost-plus pricing will give you a much clearer lens for evaluating your options.

The two components of every transaction cost

Every time a customer pays by credit card, two parties need to get paid before the money lands in your account: the card network (Visa, Mastercard, etc.) and the card-issuing bank (the customer's bank).

The fee going to the issuing bank is called the interchange fee. It's set by the card networks and varies by card type, transaction type, and business category. A basic Visa debit card might cost 0.05% + $0.22 to process. A premium travel rewards card might cost 2.10% + $0.10. The difference is significant.

On top of interchange, the card networks charge their own small assessment fees (typically 0.10%-0.15% of volume). These are non-negotiable and paid by every processor.

Then there's your processor's markup — the amount they add on top of interchange and assessment to cover their services and profit margin.

How flat-rate pricing obscures the cost

Processors like Square and Stripe use flat-rate pricing: you pay the same percentage on every transaction regardless of the actual card type. 2.6% + 10¢ whether the customer uses a basic debit card (actual cost: ~$0.30) or a premium rewards card (actual cost: ~$2.30 on a $100 transaction).

For the processor, this is profitable: they collect 2.6% on the cheap transactions and only lose margin on the expensive ones. For the merchant, it means you're subsidizing other businesses' expensive card transactions.

The bigger problem is opacity. You can't see what interchange was actually charged, so you can't verify whether your effective rate is reasonable. You just see one number and have to take it on faith.

How cost-plus (interchange-plus) pricing works

With cost-plus pricing, you see the actual interchange fee for each transaction, the network assessment fee, and your processor's markup separately. Your statement looks more complex, but every line item is visible and verifiable.

A typical cost-plus statement might show something like:

You can verify every interchange line against Visa and Mastercard's published rate tables. You can see your processor's markup clearly. If rates change, you'll see exactly how and why. Nothing is hidden.

When does cost-plus make sense?

For very small businesses processing under $3K-$5K per month, flat-rate pricing's simplicity can be worth the extra cost. The dollar difference is small and the administrative overhead of understanding interchange is not worth it.

For businesses processing $8K-$10K or more per month, cost-plus pricing almost always costs less. The more you process, the bigger the gap. At $50K/month, the difference between flat-rate and cost-plus can be $500-$1,000 per month. This holds true across a wide range of business types — from ecommerce merchants currently on Stripe to B2B and franchise businesses stuck on tiered pricing. See how Clearo's cost-plus rates compare to Helcim.

The crossover point depends on your card mix. Businesses with a high percentage of debit transactions benefit the most, because debit interchange rates are dramatically lower than credit — and flat-rate doesn't pass that savings along.