Tiered Pricing: Questions to Ask Your Processor

How to recognise tiered pricing

Look for rate lines labelled qualified, mid-qualified and non-qualified, sometimes shortened to Qual, Mid and Non, or named after card types. Each line shows a volume and a rate. You will usually not see the interchange category of each sale, which is what makes the structure hard to compare with other offers. Tiered pricing is not automatically bad, but you need a few answers before you can judge it.

Question 1: What decides which tier a sale falls into?

Ask your processor for the written rules that send a transaction to each tier. The card networks publish their own interchange programs and the conditions for each, but the mapping from those programs to your processor's three buckets is the processor's own. Rewards cards, business cards and keyed-in payments often end up in the higher tiers. Ask which card types and entry methods map to each tier on your account, and get the answer in writing so you can check future statements against it.

Question 2: What share of my sales lands in the higher tiers?

You can measure this yourself. On a recent statement, add up the volume in the mid-qualified and non-qualified lines and divide by your total card volume. Do the same for two or three months. If the share is high, or rising without any change in how you take payments, ask why. A business whose customers mostly use rewards or business cards may see a large share in the higher tiers every month, and that is the cost the tier labels hide.

Question 3: What would the same volume cost on interchange-plus?

Interchange-plus shows the network cost of each sale separately from the processor's markup, so you can see exactly what the processor adds. Ask your provider to price your last month's volume on interchange-plus, or have the statement reviewed independently. Compare the total fees in dollars, not the headline rates, because a low qualified rate means little if most of your sales do not qualify for it.

Other questions worth asking

Are there surcharges for non-qualified sales on top of the tier rate? Which fixed monthly fees apply, and are any of them tied to the pricing model? Can my account be moved to interchange-plus without new equipment or a new contract? Is there an early termination fee if I change structure or provider? Each answer should match something in your agreement or fee schedule.

What changes for multi-location and enterprise operations

Across many locations, the tier mix can vary a great deal. A location that takes more phone orders, or serves more business customers, may push far more volume into the higher tiers than a counter-service location with tap payments. Measure the tier share for each merchant ID separately. At higher volumes, the transparency of interchange-plus is usually easier to audit across a portfolio, because every location's statement can be checked against the same published network programs. Larger businesses should also ask whether Level 2 or Level 3 data on business card sales is supported, and how it is priced under each model.