The Truth About Flat Rate Pricing (And Why It’s Costing You More Than You Think)
The most popular payment processors today — Toast, Square, Stripe, Shopify — all use flat rate pricing. And on the surface, it seems like a dream.
You process $100, and they take 2.6% plus $0.15 per transaction. Boom. Done.
No guessing games about interchange rates, card types, or networks. No wondering if it’s debit or credit, a rewards card or a corporate Amex. No trying to read a 5-page statement that might as well be written in hieroglyphics.
But here’s the truth: flat rate pricing is simple for a reason.
It’s how they hide the margin.
Flat rate in a real world example - The Liquor Store:
Let’s pretend Toast or Square opened a liquor store.
They order three bottles of tequilla from their distributor:
Montezuma (cheap bottle): $5
Jose Cuervo (mid-tier): $10
Patron (top shelf): $20
Any real store would sell them for maybe:
Montezuma: $10
Cuervo: $20
Patron: $40
That’s just good business — you apply a markup to cover your cost and make a profit.
Now imagine Toast's liquor store sells everything for $30.
Every single bottle. One price. One rate.
If you're buying Montezuma, you’re getting crushed. You just paid $30 for a $10 bottle.
Cuervo? Still overpaying.
Patron? Hey, now we’re talking — you just saved $10!
But here’s the catch: Most people walking into your business are buying Montezuma.
They’re using debit cards and non-rewards credit cards — the cheap stuff from a processor’s perspective.
Yet you're being charged as if every customer is ordering Patron.
The reality for small businesses
Only 15–25% of the cards you accept are high-end business or rewards cards.
But with flat rate pricing, you’re paying premium rates on every transaction, no matter what card is used.
That means the vast majority of your processing volume is overpriced — not by a little, but by a lot.
The processors aren’t stupid.
They’re buying Montezuma for $5 and selling it to you for $30, because you like how clean the price tag looks.
So what should you do?
I’m not here to tell you flat rate is evil.
It is easy, and sometimes that simplicity is worth it, if you know what you're paying for.
But if you're like most small businesses, you’re not just paying for simplicity, you're paying extra on every single transaction.
You deserve to know your actual costs.
You deserve to see whether that 2.6% flat rate is fair based on your card mix, or just a good deal for your processor.
Want to find out which bottle you're really being sold?
Let’s look at your last statement together. No strings, no processor switch. Just the truth.