Payment processing is where most bar and restaurant owners get taken advantage of. Not because anyone is trying to scam you—but because the pricing is genuinely confusing and most people don't know what questions to ask.
The Three Pricing Models
Flat Rate
2.6% + $0.10
Same rate for all card types. Simple but often expensive for high-volume.
Best for: Low volume, simplicity
Interchange Plus
IC + 0.2%
Actual card cost plus small markup. Most transparent pricing.
Best for: High volume, transparency
Tiered
1.5%-3.5%
Different rates for "qualified" vs "non-qualified" transactions.
Best for: The processor, not you
Tiered pricing sounds good—"qualified" transactions at 1.5%! But here's the catch: processors decide what's "qualified." Most rewards cards, corporate cards, and keyed-in transactions get bumped to higher tiers. You think you're paying 1.5%, you're actually paying 2.8%+.
What's Actually in Your Rate
| Component | Who Gets It | Typical Range |
|---|---|---|
| Interchange | Card issuing bank (Chase, etc.) | 1.5% - 2.5% |
| Assessment | Card network (Visa, MC) | 0.13% - 0.15% |
| Processor Markup | Your processor | 0.1% - 1.0%+ |
Interchange and assessment fees are non-negotiable—everyone pays them. The only variable is processor markup. That's where you can save money.
Real Numbers: What Bars Actually Pay
Based on typical bar/restaurant card mix:
$50,000/month in credit card sales
Difference between best and worst: $350/month = $4,200/year
Questions to Ask Your Processor
- "What's my effective rate?" - Total fees / total volume. Should be under 2.8% for most bars.
- "Is this interchange plus or tiered?" - Always choose interchange plus if offered.
- "Are there any monthly fees?" - PCI fees, statement fees, batch fees add up.
- "What's the contract length?" - Avoid 3-year contracts with early termination fees.
- "Can I see a sample statement?" - If they won't show you, that's a red flag.
When a POS company offers "free" terminals in exchange for using their processing, they're making it back in higher rates. Calculate the total cost over your contract term, not just the hardware savings.
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