Credit Card Processing    Industry News

How Does Tiered-Pricing Really Work?

Tiered pricing falls among the three top billing platforms offered by merchant service providers to clients that seek to accept credit and debit card transactions. Other platforms include bundled and interchange plus pricing. The tiered pricing platform categorizes different transactions into tiers. The tiers can be six. However, there are three or two only. The rate charged to merchants by providers is hinged on the qualifying tier.

To simplify and make it straightforward, the following is a depiction of a 3-tier setup:

Tier 1: Qualified Rate

This rate applies in instances where customers use a standard credit or debit card and when it’s inserted or swiped as a card- present transaction. The qualified rate is the least among the three.

Tier 2: The Mid-Qualified Rate

It applies when loyalty cards and membership rewards are used in making purchases. The providers include instances where employees must key in customer’s debit or credit card manually. Additionally, they must key in any card- not- present purchases in this tier.

Tier 3: Non-Qualified Rate

Under the tiered- pricing, it’s the highest one would pay. It includes purchases that are made with international and corporate cards. Moreover, erroneous transactions are covered under this rate.

It’s important to bear in mind that when priced under this billing platform, there’s a likelihood that you are overpaying for the Non and Mid- Qualified transactions. To attract customers, some providers will resort to setting abnormally low qualified rates.

However, if it happens that none or few of the transactions don’t clear as being qualified, you won’t benefit from the low rate. Therefore, a good query to pose to your merchant service provider is exactly what percentage of the transactions is to fall in the qualifying tier. Alternatively, you may ask the providers to base you on the Interchange Plus pricing. Due to this, providers earn similar amounts despite interchange costs.

Whether you have an online business or running a brick & mortar store, it’s vital to decipher and grasp what you are paying for the credit card processing services. Moreover, if you seek to know more about the various billing platforms at your disposal, it’s recommended you seek consultation from trusted merchant service companies. They’ll break down every option, so you’ll be to get the optimal option for the business you are running.