There's a persistent myth in the payments industry that your processor sets your credit card rates. They don't. It’s the card networks like Visa and Mastercard that do. What your processor controls is how much they add on top, and whether they let you see it.
We’ve explained the differences between the three pricing models in our full guide to payment processing fees but interchange-plus is one that particularly stands out for its transparency in making that interchange markup visible to you.
Here's what you actually need to know.
Every time a customer pays with a credit card, three parties take a piece of the transaction fee: the card-issuing bank, the card network, and your processor. The first two components (interchange and the card brand assessment fee) are set by Visa and Mastercard. Your processor has no influence over them.
Interchange is the largest component by far, and it varies enormously depending on the type of card being used. In Canada, the range runs from roughly 0.77% on a basic consumer Visa processed in-store by a qualifying small business, up to 2.40% on a premium Visa Infinite Privilege card used in an online transaction. That's not a small difference. On a $200 dinner bill, it's the difference in interchange cost alone between $1.54 and $4.80.
These rates are published publicly by Visa and Mastercard. They apply to every processor in Canada equally. Nobody gets a special deal on interchange.
What processors do control is their markup. That’s the fee they layer on top of interchange for providing their technology and service. That markup is where the pricing model matters.
Not all credit cards cost the same to accept.
A customer paying with a basic Visa Classic card costs you roughly 0.77% in interchange (card present, small merchant). A customer paying with a Visa Infinite Privilege (the premium travel rewards card their bank issued to them) costs you up to 1.80% for the same transaction. This creates a problem that most pricing models handle quietly and in their own favour.
One percentage, applied to everything. Simple to understand, easy to budget, and popular with low-volume merchants and software platforms like Square and Stripe.
Here’s an example:
Let's say that rate is 2.5%. When your customer pays with a basic card at 0.77% interchange, the processor's effective margin on that transaction is 1.73%. When your customer pays with a premium card at 1.80% interchange, their effective margin drops to 0.70%.
You pay the same either way, but the processor's profit swings dramatically depending on your card mix. The simplicity you're paying for comes at the cost of subsidizing every low-interchange transaction.
Who it benefits: It benefits the processor and merchants who genuinely value simplicity over cost optimization. Once you're processing more than $10,000–$15,000 per month, flat rate tends to cost more than it saves.
Transactions are sorted into two or three rate tiers ("qualified," "mid-qualified," and "non-qualified"). The "qualified" tier has the lowest rate. But most transactions (rewards cards, corporate cards, manually keyed entries) land in more expensive tiers.
But here's the part that you should be aware of: processors define these tiers themselves, and there's no industry standard. The same card can land in a different tier at different processors.
Who it benefits: The processor benefits from this. Tiered pricing is the model most associated with unexpected statement charges, difficult-to-audit fee structures, and the kind of creeping rate increases that go unnoticed for years. It's widely used by traditional merchant services providers and banks. If you're on tiered pricing and haven't reviewed your statement lately, it's worth a close look.
Your processor passes through the exact interchange cost of each transaction and then adds a fixed markup, typically expressed as a percentage plus a per-transaction fee (for example, interchange + 0.20% + $0.10). The interchange is itemized separately from the markup on your statement.
It also means that as Canadian interchange rates change, including the government-mandated reductions for qualifying small businesses that took effect in October 2024, those changes pass through to you automatically. On flat rate or tiered pricing, rate reductions don't necessarily reach the merchant. On interchange-plus, they do.
Who it benefits: You benefit from interchange-plus pricing. When your customers use basic cards, your cost goes down. When they use premium cards, your cost reflects the actual interchange and not an averaged-up rate. Your processor's margin is fixed and visible.
TL;DR: The flat rate model is simple but can be expensive, especially when customers use basic cards—the difference gets absorbed by the processor as margin. Tiered pricing categorizes transactions but gives processors the freedom to classify them however benefits them most. Interchange-plus fixes your processor's margin, makes it visible, and passes any rate reductions from Visa and Mastercard to you.
Understanding what you're paying for starts with one question. Ask your processor: "Can you show me my interchange passthrough versus your markup, broken out separately on my statement?"
The answer tells you where your money is actually going and gives you a real baseline for comparing your options.
A few other questions worth asking:
These are normal, reasonable questions that your processor should be able to answer without hesitation.
Interchange fees are set by Visa and Mastercard and every processor in Canada pays the same ones. The only thing that varies is how much your processor adds on top and whether they're willing to show you that number clearly. Interchange-plus won’t lower your interchange rates, but its transparency gives you a direct view of what the cards actually cost versus what your processor earns.
When it comes to credit card processing fees, Paystone offers interchange-plus. You can see exactly what Visa and Mastercard charge versus what Paystone adds on top, there's nothing to question and nothing buried in the fine print.