The flat-rate trap: why Square and Zeller merchants might miss out on RBA savings

Flat-rate providers earned their popularity honestly: one rate, no lock-in, no rental, hardware you own. But the RBA's October interchange cut exposes the structural cost of that simplicity — when your provider's wholesale costs fall, your flat rate doesn't. This article explains the mechanics without the hype, so you can decide whether simplicity is still worth its new price.

First, credit where due

Let's be fair to the model. A flat rate (Square at 1.6% inc-GST, Zeller at 1.4% inc-GST, and similar) gives you [3]:

• Predictability — every statement is arithmetic you can do in your head.
• No fixed drag — typically no rental, no monthly fee, no minimums; at low or seasonal volumes this often beats bank pricing with a $25–27/month terminal rental.
• Genuine freedom — buy-outright hardware, leave whenever.

For a market-stall trader doing $6,000/month, flat rate is frequently the right answer, surcharge change or not. This isn't a "flat rate bad" story.

The mechanism October exposes

Your provider pays interchange — a wholesale fee — on every transaction, then charges you a flat rate built on top of it. From 1 October, the RBA caps domestic consumer credit interchange at 0.3%, down from 0.8% [1].

On interchange-linked pricing, that reduction flows to the merchant mechanically: the bill is constructed as cost + margin, and the cost just fell.

No flat-rate provider is obligated to pass it on. One has chosen to: CommBank cut its Single Rate Per Transaction plan from 1.10% to 0.99% inc-GST effective 1 October. That was a commercial decision, not a contractual mechanism — which is the distinction that matters, because a decision can be reversed and a mechanism can't be withheld. Square, Zeller and the other flat-rate providers we track have announced nothing. We record each provider's position on the pass-through tracker.

Keep the size of the prize honest

The forgone saving is not 62.5% of your fees — that figure is the cut to the consumer credit-interchange cap only. Across a realistic card mix (mostly debit, where interchange is already low), the genuine pass-through value is roughly 0.1–0.25% of card turnover [3]:

Meaningful money — but weigh it against what flat rates save you in rental ($240–330/year ex-GST typically) and admin simplicity. For small merchants the trade can still favour flat. For larger ones, it increasingly doesn't.

The question to ask yourself (not your provider)

Your provider's answer is predictable. The useful question is arithmetic: at my turnover and card mix, does the pass-through I'd capture on interchange-linked pricing exceed the fixed costs and complexity it adds?

Rules of thumb from our modelling [3]:

• Under ~$10k/month: flat rate usually still wins — fixed rental drag outweighs the pass-through.
• $10k–$30k/month: genuine toss-up; your debit share decides it.
• Over ~$30k/month, debit-heavy: interchange-linked (or a sharp bank simple-rate) usually pulls ahead, and October widens the gap.

What this means for you

The flat-rate trap isn't the rate — it's the ratchet: wholesale costs fall, your price doesn't, and the model's simplicity quietly gets more expensive every time the RBA tightens caps. If you're on Square or Zeller, don't panic and don't churn reflexively. Run the number once, honestly, at your real volume. If flat still wins, stay with confidence. If it doesn't, you now know exactly what staying costs.

Run it once, properly: the comparison engine prices flat vs interchange-linked at your turnover and mix. Compare now →

Rates quoted as published June 2026 (Square 1.6%, Zeller 1.4%, both inc-GST) — verify with providers. Pass-through estimates from Compayr modelling on published RBA caps.