Tiered pricing is credit card processing fees based on different rates for different types of cards. Each transaction is classified based on the type of card used and separated into categories of qualified, mid-qualified and non-qualified, with lower rates for qualified cards and higher rates for mid- and non-qualified cards.
Tiered pricing allows credit card processors to use a very low rate to entice small businesses and use much higher rates for any cards that have higher wholesale rates. This pricing model should be avoided at all costs and this article will explain why.
Who Sets the Rates for Tiered Pricing
Interchange rates are the wholesale rates set by credit card companies and are paid by all credit card processing companies. For example, using a Visa rewards credit card is going to cost the same amount between processing company A and processing company B. There are many of these interchange rates and different credit card companies will have different rate for each of their cards.
The difference between companies A and B will be based on the difference between the rates they add on top of the interchange rate.
For tiered pricing, lower rates are applied to qualified cards and higher rates are applied to mid-qualified and non-qualified cards. The rate that the salesman from a tiered pricing company will show when trying to make a sale is the qualified rate.
The problem is that the processing company itself determines which cards are in each of the categories. Therefore, over half of the transactions are likely to be in the mid- and non-qualified categories, increasing the average rate you're paying for card transactions. Furthermore, credit card processors can change which cards are in each of the categories as they see fit.
The bottom line is that you will go into a tiered pricing program with an impossibly low rate and end up paying much higher rates for the majority of transactions. This is due to the fact that the credit card processing company is determining the categories and rates.
Non-qualified interchange rate and credit cards don't exist
Interchange rates are simply fixed rates. For example, Visa sets a rate of 1.65% for xx cards. This rate is constant between all credit card processing companies. Tiered pricing companies will determine if this rate is qualified, mid-qualified, or non-qualified.
Therefore, non-qualified interchange rates or cards don't exist until the processing company defines them as such.
Unfortunately, it is common for processors to only define debit cards, which have the lowest interchange rates, as qualified. This allows them to charge higher rates for the majority of transactions
Don't Accept Tiered Pricing
Avoiding getting caught in a tiered pricing system is simple if all you pay is the interchange rate. At 99 Merchant Account, you will pay wholesale rates set by the credit card companies. This means that you will pay the lowest rates possible for all types of cards. We don't have qualified categories because we don't need to apply hidden fees. Instead we change a membership fee and a fixed amount for every transaction. Our commitment to transparent and honest billing will give you the peace of mind that you are not being overcharged and save you a lot of money. Sign up today and see the difference.
Visit Us: 99merchantaccount.com