Flat Rate Credit Card Processing – Pros and Cons

Flat-rate credit card processing fees provide businesses with a simple, predictable monthly charge for processing an unlimited number of credit card transactions. Rather than paying variable fees that increase with volume or sales, a flat rate plan caps expenses at a fixed cost.

Flat rate credit card processing fees

For many businesses, a flat fee structure reduces surprise charges and makes budgeting easier. The costs remain the same from month to month, unlike variable fees that could fluctuate greatly based on peaks and valleys in sales. The flat monthly rate also ensures there are no limits on the number of transactions, no matter how much processing a business needs.

By consolidating fees into one low, flat rate, companies can often save on their credit card processing costs, especially if they have a high volume of smaller transactions. The flat fee absorbs the variable expenses of each swipe, dip, or click, passing the savings on to the merchant. More of each sale goes to the bottom line rather than getting deducted in fees.

Potential downsides and limitations

While flat-rate credit card plans offer simplicity and savings for many businesses, they also come with certain downsides and limitations to be aware of. Perhaps most significantly, the flat monthly fee itself may be higher than the total variable costs for some companies, especially those with lower sales volumes or transaction counts. If fees seem disproportionately high compared to actual processing needs, a flat rate plan may not ultimately save money.

Flat rate providers also often place caps on the maximum amount allowed for any single transaction. These caps, typically $200-$500 per transaction, prevent excessively large charges which helps limit the processor’s risk. However, for businesses that regularly handle higher-ticket sales, these caps could pose a problem. Any sales above the cap amount would require additional fees or a different payment processor.

Chargebacks, returns, and voids are also not always included in the flat monthly fee and may incur additional charges. While flat-rate plans absorb normal transaction fees, they do not erase the costs for disputes, refunds, and transaction reversals. These exception fees can sometimes match or even exceed the standard per-transaction fees of a variable plan.

Perhaps most notably, flat-rate credit card processing does not typically offer any volume-based discounts or incentives.

Businesses that can drive higher and higher sales volumes usually benefit from graduated fee structures and tiered pricing. But with a flat fee, costs remain the same no matter how high processing needs grow over time. For fast-growing companies, this could mean forgoing potential savings.

Consider your business needs

Before committing to a flat-rate credit card processing plan, it is important to evaluate whether it will truly meet the specific needs of your business. Some key factors to consider include:

Average ticket size and monthly transaction volume: Flat rate plans typically work best for businesses with a high volume of small transactions. But for those with larger average sales or fewer transactions on average, a variable plan may prove more cost-effective.

Current and projected growth: If you anticipate rapid growth in sales and transactions, a flat fee structure may limit your ability to gain volume-based discounts and could quickly feel too restrictive. Variable plans typically scale more easily with business growth.

Seasonality: Flat rate plans provide a fixed cost each month, but seasonal businesses will still experience fluctuations in transaction levels and processing needs. For those with cycles of growth and decline, a variable plan could minimize fees during slower periods.

Risk tolerance: The capped transaction limits and additional fees common in flat-rate plans mean taking on more financial risk. Make sure the costs and strings attached to a flat rate provider feel commensurate with your risk tolerance.

Complex processing needs:  While flat-rate plans cover basic transaction processing, they typically do not include more complex services like retail mobile payments, recurring billing, or API integrations. For those needs, you will likely pay extra, switch providers, or remain with a traditional variable-fee processor.

Available plan options: Not every credit card payment processor offers flat rate plans, so make certain the options they provide will meet your requirements before making a change. Check with your current provider about their flat rate options as well as any other recommendations for your business profile.

To summarize, flat-rate credit card processing could deliver an affordable, straightforward solution but it really depends on your unique business needs and priorities. Carefully evaluate all factors before pursuing or paying more for a flat fee plan. With the right flat rate provider and features, the potential benefits may shine through, but that is not guaranteed without proper considerations. Make sure the plan fits your needs.

Other benefits of flat-rate plans

In addition to simple, predictable pricing and possible cost savings, flat-rate credit card plans offer several other benefits worth considering. These include:

Processing simplicity. With one straightforward monthly fee rather than a long list of charges per transaction, flat rate plans deliver a simpler and less tedious processing experience. No more closely monitoring individual fees or ensuring you stay under certain volume caps each month. The fees just get paid, and the charges are unlimited.

Fraud and chargeback protection. Reputable flat-rate payment processors automatically provide some level of fraud liability protection, purchase protection, and chargeback coverage as part of their flat monthly fee. This helps avoid unexpected costs and ensures coverage of issuance fraud or customer disputes.

Bundled and discounted services. Flat rate providers often bundle additional services like virtual terminals, payment links, and e-commerce tools at a discount or include them at no extra cost. They may also provide volume-based discounts for bundling multiple service plans. This can represent extra value, especially if only using some of the bundled services.

More than just transaction fees. Rather than simply charging for each swipe, dip, or online transaction, flat-rate plans fund additional services and resources to support businesses. This includes 24/7 fraud monitoring, chargeback advocacy, reporting and alerts, mobile payment acceptance, and more. The monthly fee contributes to an overall provider partnership rather than just payment processing.

Peace of mind. Perhaps most significantly, flat-rate credit card plans provide business owners with greater peace of mind that their processing costs are covered, capped, and predictable each month. Rather than worries over contested charges, volume surpassing caps, or expenses ballooning at any time, the flat fee structure instills more confidence and control over this key operational expense.

In summary, flat-rate credit card processing delivers benefits well beyond just a simplified pricing structure. From automatic fraud and chargeback protection to bundled services, reporting resources, and an overall sense of partnership and peace of mind, flat rate plans can provide value that extends far beyond any single transaction.

Conclusion

 In conclusion, flat rate credit card processing provides a simple, affordable option for accepting payments, but it must be evaluated carefully based on each business’s unique needs and priorities. There are reasonable arguments on both sides of the pros and cons, from cost savings and simplification to limitations, risks, and inflexibility.

For the right company in the right situation, a flat fee structure could streamline operations, stabilize costs, and maximize every sale. But for others, a variable-fee plan may prove more cost-effective, scalable, or just better tailored to realities like seasonal changes in volume or larger average ticket sizes.

There is no one-size-fits-all solution when it comes to how credit card transactions get processed and charged.

Some key things to weigh when determining if flat-rate credit card processing makes sense include:

• Current and projected monthly volume and sales totals. Flat rate shines for high-volume, small-ticket businesses, not low-volume or high-ticket ones.
• Willingness to accept limits on maximum transaction amounts. Caps provide risk management but could inconvenience large customers.
• Tolerance for possibly higher upfront fees. Although savings may be possible, fees could exceed typical variable costs, especially for low-volume businesses.
• Capacity to cover additional charges for exceptions, chargebacks, returns, or fraud. Flat fees only cover normal processing, leaving other costs as add-ons.
• Interest in simplicity versus tiered discounts. Flat rates provide predictability while variable rates often give volume-based pricing breaks.
• Available options and recommendations from your processor. Not all provide flat-rate plans, so understand all choices and costs before switching.

In the end, do the math, check your priorities, minimize risks, and go with what gives you the most affordable, supportive, and sustainable credit card processing solution for your business needs. A flat rate could be it, but for many merchants, variable or hybrid models will likely serve them even better. The right choice is one that fits.