Fee building blocks, pricing models and 2026 rules
Flat rate vs blended vs cost-plus vs subscription: card pricing models compared
How each merchant pricing model works in Australia, a side-by-side worked example at two business sizes, and how to tell which model fits your card mix.
The pricing model that costs least is the one that matches your card mix and volume. Flat-rate pricing charges one percentage on every card and suits low-volume businesses that value simplicity. Blended pricing is a negotiated single rate (or one for debit and one for credit). Cost-plus (also called interchange-plus) passes through the actual interchange and scheme fees and adds a stated margin, which usually favours debit-heavy and higher-volume businesses. Subscription pricing charges a fixed monthly fee plus a small margin over cost and only pays off when volume is high enough to spread the fee. In the worked example below, the same business pays anywhere from about $350 to $700 a month depending on the model.
This guide belongs to the overview of merchant payment processing fees. All rates are illustrative assumptions, not offers from any provider.
How each model works
| Model | Price you see | Who carries the risk of cost changes | Transparency |
|---|---|---|---|
| Flat rate | e.g. 1.4% on all cards, maybe higher online | Provider (it keeps any saving or absorbs any rise) | Simple to read, hard to audit |
| Blended | e.g. 1.1% on all cards or debit and credit rates | Mostly provider until the rate is reviewed | Moderate |
| Tiered | Different rates for "qualified" and "non-qualified" payments | Mixed; tier rules decide | Low; tier rules can be opaque |
| Cost-plus | Interchange + scheme fees at cost, plus margin (e.g. 0.3% + 3 cents) | You (cost changes flow through) | High, but longer statements |
| Subscription | Monthly fee (e.g. $99) + small margin over cost | You | High |
A useful test: when interchange caps fell on 1 October 2026, a cost-plus or subscription plan passed the saving through automatically. A flat or blended plan passes it through only if the provider changes the rate.
Worked example: a café-restaurant taking $50,000 a month
Assumptions (illustrative): 1,250 card payments a month (average $40). By value: 65% domestic debit, 30% domestic consumer credit, 5% foreign-issued cards. Interchange assumed at 5 cents per debit payment, 0.3% on consumer credit and 1.6% on foreign cards (uncapped until 1 April 2027). Scheme fees assumed at 0.1% of value.
Underlying cost (interchange + scheme fees)
| Item | Calculation | Amount |
|---|---|---|
| Debit interchange | 1,250 × 65% = 812.5 payments × $0.05 | $40.63 |
| Consumer credit interchange | $15,000 × 0.3% | $45.00 |
| Foreign card interchange | $2,500 × 1.6% | $40.00 |
| Scheme fees | $50,000 × 0.1% | $50.00 |
| Underlying cost | $175.63 |
What each model charges
| Model (illustrative terms) | Calculation | Monthly cost | Effective rate |
|---|---|---|---|
| Flat rate 1.4% | $50,000 × 1.4% | $700.00 | 1.40% |
| Blended 1.1% + $25 monthly fee | $550 + $25 | $575.00 | 1.15% |
| Cost-plus: margin 0.3% + 3 cents, $20 monthly fee | $175.63 + $150 + $37.50 + $20 | $383.13 | 0.77% |
| Subscription: $99 + 0.15% over cost | $175.63 + $75 + $99 | $349.63 | 0.70% |
On these assumptions the café would save about $317 a month ($3,800 a year) by moving from the flat rate to cost-plus, before any exit fee or terminal change.
The same models for a small business taking $8,000 a month
Now take a market stall with 200 payments (same $40 average and card mix). Every per-value item scales to 16% of the café's figures.
| Model | Calculation | Monthly cost |
|---|---|---|
| Flat rate 1.4% | $8,000 × 1.4% | $112.00 |
| Blended 1.1% + $25 | $88 + $25 | $113.00 |
| Cost-plus 0.3% + 3 cents + $20 | $28.10 + $24 + $6 + $20 | $78.10 |
| Subscription $99 + 0.15% | $28.10 + $12 + $99 | $139.10 |
At this volume the subscription's fixed fee dominates and it becomes the most expensive option. The blended plan's monthly fee wipes out its lower rate. A flat rate with no monthly fee is close to cost-plus, and some small businesses will value its simplicity and quicker set-up over a saving of about $34 a month.
Find your own crossover with the monthly processing cost estimator or the exact figure with the card fee calculator.
Which model tends to fit
- Debit-heavy, in-person businesses (cafés, bakeries, convenience stores): cost-plus or a flat rate that has been cut since October 2026; check least-cost routing either way.
- Higher-value sales with many credit cards (furniture, trades, professional services): blended or cost-plus; commercial credit cards (still capped at 0.8%) can be a large share.
- Tourist-facing businesses: watch foreign-card pricing; the foreign cap of 1.0% starts on 1 April 2027 and may change the comparison.
- Low or seasonal volume: flat rate with no monthly minimum, or cost-plus without a minimum fee.
- High, steady volume: subscription or negotiated cost-plus.
Questions to ask about any model
- What are all the rates, by card type and channel, in writing?
- Is there a monthly fee, minimum monthly charge or minimum term?
- How are interchange and scheme fee changes passed through, and with how much notice can the margin change?
- Is least-cost routing on? See least-cost routing.
- What do online, keyed and recurring payments cost?
Frequently asked questions
Is tiered pricing the same as blended?
No. Tiered pricing sorts payments into tiers with different rates, often depending on card type or how the card was entered. It can be hard to predict which tier applies, so compare it on a full month of real transactions.
Does a flat rate include GST?
It depends on the provider. Check the fee schedule and your tax invoice. See GST on merchant fees.
Can I change model without changing provider?
Often yes. Many providers offer more than one plan. Ask for a quote on a different model using your last three months of transactions.
Sources
- Reserve Bank of Australia — interchange caps and the Conclusions Paper (March 2026)
- Australian Small Business and Family Enterprise Ombudsman — guidance on reviewing payment costs
- business.gov.au — choosing payment options for your business
