Interchange-linked vs flat-rate merchant fees: which is actually cheaper?
Compayr Research · · 8 min
Every merchant pricing plan in Australia is a variation on two ideas: pay one blended rate for everything (flat), or pay the true wholesale cost of each transaction plus a margin (interchange-linked, "cost plus"). Neither is universally cheaper. This guide shows you how to work out which wins for your business — with worked numbers at $50,000/month.
The two models, plainly
Flat rate. One percentage on every eftpos, Visa and Mastercard transaction, regardless of card type. Favoured by fintechs (Square, Zeller) and offered by banks as "simple rate" plans. You're buying certainty: the provider absorbs the variation between cheap debit taps and expensive premium-credit transactions, and prices that risk into the rate.
Interchange-linked (cost-plus). Your bill itemises the actual wholesale cost (interchange + scheme fees) of each transaction, plus the provider's disclosed margin. Common with major banks, typically quote-based. You're buying accuracy: cheap transactions cost you less, expensive ones cost more, and your blended rate emerges from your real card mix.
The single biggest driver of which wins is your card mix — because debit interchange is very low and credit interchange is (from October, even more so) capped well below what flat rates assume [1].
Worked example: $50,000/month café
Card mix 70% debit / 27% credit / 3% international. Figures ex-GST, indicative June 2026 [3]:
| Option | Structure | Est. card processing costs |
|---|---|---|
| Fintech flat rate | ~1.27% flat, no rental | ~$636 |
| Fintech flat rate (higher) | ~1.45% flat, no rental | ~$727 |
| Bank simple rate | ~1.0% flat + ~$27 rental | ~$527 |
| Interchange-linked | wholesale + margin + ~$25 rental | ~$450–$550 (mix-dependent, quote-based) |
Two things jump out. First, at this volume the rate dominates and fixed rental barely matters — the gap between the sharpest and softest option is ~$2,400–$3,300/year. Second, interchange-linked pricing's advantage comes almost entirely from the debit share: 70% of this café's volume is being flat-rated at a level far above its wholesale cost.
Now flip the profile: a $8,000/month weekend trader. The $27 rental is 0.34% of turnover before a single transaction — flat-rate/no-rental wins comfortably. Volume moves the answer.
How October tilts the table
From 1 October the credit interchange cap drops from 0.8% to 0.3% [1]. On interchange-linked plans that reduction passes through mechanically; on flat rates it doesn't [3]. Net effect: the interchange-linked column above improves by roughly 0.1–0.25% of turnover (mix-dependent) while flat columns stand still. The crossover point where cost-plus beats flat moves down the turnover scale — more merchants land on the side where linked pricing wins.
The honest trade-offs table
| Flat rate | Interchange-linked | |
|---|---|---|
| Statement complexity | Trivial | Requires reading |
| Cost predictability | Excellent | Varies with mix |
| Captures Oct interchange cut | No | Yes |
| Fixed fees | Usually none | Usually rental |
| Best suited to | Low/seasonal volume, simplicity-first | Debit-heavy, $10k+/month, cost-first |
| Watch out for | Wholesale falls you never see | Margin creep, quote opacity |
One more honesty note: interchange-linked quotes are negotiated — the margin is the provider's lever. A fat margin on cost-plus can be worse than a sharp flat rate. The model doesn't guarantee the outcome; the comparison does.
What this means for you
Don't pick a pricing ideology; price your own profile. Three numbers — turnover, debit share, international share — decide this question, and they're all on your statement. Below ~$10k/month, flat simplicity usually earns its keep. Above it, and especially debit-heavy, the October reforms make interchange-linked (or the sharpest bank simple-rates) increasingly hard to beat.
Your numbers, both models, ranked: run the comparison at your actual turnover and mix. Compare now →
All figures ex-GST, indicative, last verified July 2026 — interchange-linked pricing is quote-based and varies by merchant. Verify with providers.
References
- [1] Reserve Bank of Australia, "Review of Merchant Card Payment Costs and Surcharging — Conclusions Paper", 31 March 2026.
- [3] Compayr internal research and modelling, June 2026.
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