Fees, pricing models and 2026 rules
Flat rate vs interchange-plus vs tiered vs subscription pricing in Canada
How the four card processing pricing models work, a side-by-side worked example in dollars, and how to tell which model is the best fit for your sales mix.
Which pricing model costs less depends on your card mix, average ticket and monthly volume, not on the model's name. Flat rate charges one percentage on everything and suits businesses that value simplicity or process little. Interchange-plus passes the real card costs through and adds a fixed markup, which tends to suit steady volumes and debit-heavy or standard-card mixes. Tiered pricing sorts cards into rate buckets the processor controls and is the hardest to compare. Subscription pricing charges a monthly fee plus cost and tends to suit higher volumes. The only reliable test is to run each quote on the same month of your own sales.
This guide is part of the fees and rules section. All rates below are illustrative.
The four models in one table
| Model | What you see on the statement | Who sets the margin | Passes interchange cuts through? |
|---|---|---|---|
| Flat (blended) | One rate per payment method, maybe plus a per-transaction fee | Processor, inside the rate | Only if the processor lowers the flat rate |
| Interchange-plus | Interchange + network fees + fixed markup, line by line | Processor, as the markup | Yes, automatically |
| Tiered | Qualified / mid-qualified / non-qualified rates | Processor, through tier rates and tier rules | Not necessarily |
| Subscription | Monthly membership fee + interchange and network fees at cost, small per-transaction fee | Processor, as the monthly fee | Yes, usually |
A fuller comparison including Interac debit, gateways, POS bundles and terminals is in the pricing models table.
Flat rate: simple, predictable, often higher per dollar
A flat-rate plan might quote, for example, an illustrative 2.65% for tapped or inserted cards and a higher rate for online or keyed payments. Every credit card, from a basic card to a premium business card, costs the same.
Fits when: your volume is low or irregular, you want one number to budget with, you are just starting, or you value an all-in-one app and hardware package.
Watch out for: debit priced as a percentage rather than a flat fee; a rate that stays the same when interchange falls (including after the 19 October 2024 small business reduction); and fees for features you assumed were included.
Interchange-plus: transparent and reductions reach you
Interchange-plus (also called cost-plus or pass-through) charges actual interchange and network fees, then adds a disclosed markup such as an illustrative 0.25% + $0.08 per transaction. Statements are longer, but each layer is visible.
Fits when: your volume is steady, many customers pay by Interac debit or standard cards, or you want to benefit directly from interchange reductions.
Watch out for: fixed monthly fees that wipe out the saving at low volume, network fees marked up above cost, and markups expressed in a way that is hard to compare (basis points versus percentages). One basis point is 0.01%, so 25 basis points = 0.25%.
Tiered: buckets you do not control
Tiered pricing groups transactions into two or three tiers. A "qualified" rate might apply to standard cards inserted or tapped; "mid-qualified" and "non-qualified" rates to rewards, business, foreign or keyed cards. The processor decides the tier rules.
Fits when: rarely the clearest choice. It may look simple on a quote that shows only the qualified rate.
Watch out for: a quote that advertises the qualified rate while most of your cards fall into higher tiers. Ask for the tier definitions in writing and a sample statement. The Code of Conduct requires the cost per transaction disclosure to show the different rates for processing methods that attract different rates, with plain-language definitions.
Subscription: a fixed fee for access to cost
Subscription or membership pricing charges a monthly fee and then passes interchange and network fees through at cost, often with a small per-transaction fee.
Fits when: volume is high enough that the monthly fee is a small share of costs.
Watch out for: the monthly fee in slow or seasonal months, minimum terms, and per-transaction fees that add up for small-ticket businesses.
Worked example: the same month, four ways
An illustrative café: $15,000 of monthly card sales, 600 transactions (average $25). 40% of value ($6,000, 300 transactions) is Interac debit; 60% ($9,000, 300 transactions) is credit, with average interchange plus network fees of 1.50% (illustrative).
| Model (illustrative terms) | Credit cost | Debit cost | Fixed monthly | Total | Effective rate |
|---|---|---|---|---|---|
| Flat 2.65% on all cards, no fixed fees | $238.50 | $159.00 | $0 | $397.50 | 2.65% |
| Interchange-plus: cost + 0.25% + $0.08; debit $0.10 | $135 + $22.50 + $24.00 | $30.00 | $20 | $231.50 | 1.54% |
| Tiered: 1.79% qualified (half of credit value), 2.79% non-qualified; debit $0.15 | $80.55 + $125.55 | $45.00 | $15 | $266.10 | 1.77% |
| Subscription: $59/month + cost + $0.05; debit $0.05 | $135 + $15.00 | $15.00 | $59 | $224.00 | 1.49% |
At this volume and mix, the three non-flat models cost less than the flat plan. Halve the volume and keep the fixed fees, and the gap narrows, especially for the subscription. Switch to a mostly premium-card, online mix, and interchange rises for every model except the flat plan, whose rate does not move (although the flat-rate processor's own margin shrinks).
How to decide
- Collect three recent statements and note volume, transactions and the debit/credit/online split.
- Ask each processor to price that month, not a sample business.
- Convert each quote to total dollars with the card fee calculator, including fixed fees.
- Re-run with a slow month and a busy month.
- Weigh the non-price factors: deposit timing, hardware, contract term, support, and how easy it is to leave. The quote comparison checklist lists them.
For the arithmetic of reading statements, see how to calculate your effective rate; for the layers inside the fee, see interchange, network fees and processor markup.
FAQ
Is flat rate a bad deal?
No. It is a price for simplicity and predictability. For low or irregular volumes, or when an all-in-one package matters more than a few tenths of a percent, a flat rate can be the best fit. The point is to know what you are paying for.
Can I ask a flat-rate provider for interchange-plus?
Some processors offer both, often with interchange-plus available above a volume threshold. Ask; the answer is part of the quote comparison.
Does the Code of Conduct ban tiered pricing?
No. The Code regulates disclosure, notice, exit and other practices, not which pricing model a processor offers. It does require clear disclosure of the rates that apply to different processing methods.
Sources
- Financial Consumer Agency of Canada — Code of Conduct disclosures and statements
- FCAC: Accepting card payments — merchant rights and how card payments work
- Department of Finance Canada — small business interchange reduction
- Competition Bureau Canada — misleading pricing representations
