Every processing quote in Canada is one of two models wearing different clothes. Flat-rate charges one percentage on every transaction — simple, predictable, and quietly padded. Interchange-plus passes the card networks' wholesale cost straight through and adds a fixed markup — transparent, variable, and usually cheaper once volume climbs. The difference isn't philosophy; it's arithmetic. This guide works it with a Toronto retailer's real numbers.
What's inside the rate: the four parts, one negotiable
Every card transaction breaks into four parts, and only one of them is negotiable:
| Part | What it is | Typical Canadian range | Negotiable? |
|---|---|---|---|
| Interchange | Set by Visa/Mastercard, paid to the cardholder's bank — the biggest slice | 1.20–1.50% standard; up to 2.00–2.45% premium/rewards; 2.60%+ corporate; 2.70%+ card-not-present | No |
| Network assessments | The card brand's own cut on every dollar | Roughly 0.09–0.11% | No |
| Processor markup | Your provider's margin over wholesale | 0.20–0.40% + per-transaction fee | Yes — this is the only part to negotiate |
| Interac debit | Separate rails: priced per tap, not as a percentage | Roughly $0.03–$0.12 per transaction | Mostly no |
Flat-rate bundles all four into one number. Interchange-plus itemizes them and adds the markup on top. That single structural difference explains every dollar of the gap below.
Worked math: a Toronto retailer at $40,000/month
The setup: $40,000/month in card sales, $45 average ticket (~889 transactions). Card mix: 50% standard credit, 30% premium/rewards credit, 20% Interac debit.
Flat-rate at 2.65% + $0.10/transaction: $40,000 × 2.65% = $1,060, plus 889 × $0.10 = $89. Total: ~$1,149/month (effective rate 2.87%).
Interchange-plus at wholesale + 0.25% + $0.10/transaction: credit interchange on the mix works out near 1.34% on $32,000 (~$427), plus assessments ~$32, plus markup 0.25% (~$80), plus per-transaction fees ~$71; debit runs about $14 for the month. Total: ~$624/month (effective rate ~1.56%).
The gap: roughly $525/month — about $6,300 a year — on identical sales. The flat-rate provider keeps the difference, mostly earned on the debit transactions and standard cards that cost far less than 2.65% wholesale.
The debit line is doing quiet work here. Interac costs about eight cents a tap; flat-rate bills it at 2.65% — on a $45 sale, that's $1.19 versus $0.08. Every debit tap on flat-rate is pure margin for the provider. Canadian retailers with heavy debit mixes overpay the most.
Where the crossover sits
Canadian processing data shows consistent break-even bands, though every business differs:
| Monthly card volume | Which model usually wins |
|---|---|
| Under $10,000 | Flat rate often fine — the dollar gap is small and simplicity has value |
| $10,000–$25,000 | Case by case — run your own mix through both |
| $25,000–$40,000 | Interchange-plus usually cheaper |
| Over $40,000 | Interchange-plus almost always cheaper |
Below $10,000/month the annual gap may be a few hundred dollars — worth knowing, not worth agonizing over. Above $25,000 it becomes a line item worth a phone call.
Decision framework: which model for your volume
- Pull one statement. Total all processing costs for a month and divide by card volume — that's your effective rate. Compare it to the wholesale bands above.
- Weigh your debit mix. Heavy Interac volume is the strongest signal to leave flat-rate: you're paying credit-card prices for eight-cent transactions.
- Negotiate the markup, not the model. On interchange-plus, the only negotiable line is the processor's markup — get competing markup quotes in writing.
- Watch the minimums. Check for monthly minimums that inflate slow months; a cheap markup with a high floor can lose to flat-rate in January and February.
- Re-run annually. Card mixes drift as customers change habits; the model that won last year isn't guaranteed this year.
A note on steps: this is an explainer with a decision framework, not a repair procedure — the numbered framework above is the actionable part, and there's no settings path to click through.
FAQ
Is interchange-plus always cheaper than flat-rate?
No — at low volumes the gap is small and flat-rate's simplicity has real value. The crossover for most Canadian retailers sits around $25,000–$40,000/month in card volume. Below $10,000/month, flat-rate is often fine.
Can I negotiate interchange rates down?
No. Interchange is set by the card networks and assessments by the brands — neither your processor nor you can change them. The negotiable part is your processor's markup over wholesale. That's the number to shop.
Why does my debit mix matter so much?
Interac debit costs roughly $0.03–$0.12 per transaction — pennies, not percent. Flat-rate pricing bills debit at the full credit-card percentage, so a debit-heavy store hands the provider an enormous margin on every tap.