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Tiered pricing "simplifies" fees, but usually costs merchants more than other models. Here's what you need to know about tiered pricing.
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Credit card processors have many ways to charge you for accepting payments. They must cover interchange fees (the baseline cost set by banks and card networks) and then add their own markup to turn a profit.
The most common — and most expensive — method is tiered pricing.
In this guide, we’ll explain what tiered pricing is, how it works, and the tricks providers use to make it look better than it really is. We’ll also show you how to tell if your account uses it, why it usually costs more than other models, and what pricing structures will actually save your business money.
Table of Contents
Tiered pricing was created to make sense of the hundreds of interchange rates that vary by:
Instead of merchants trying to parse all those details, processors bundle interchange rates into a few simplified categories (or tiers).
Sounds convenient, right? The catch is that processors base the tier rate on the highest interchange fee in that group. That means you’ll pay:
A fair rate on a few transactions
More than you should on most of them
Processors usually break transactions into three main tiers:
| Tier | Typical Transactions | Sample Rate |
|---|---|---|
| Qualified | Card-present, debit, non-reward credit cards | 1.75% + $0.25 |
| Mid-Qualified | Card-present rewards cards, keyed-in transactions | 2.30% + $0.30 |
| Non-Qualified | Card-not-present, high-reward cards, corporate cards, online sales | 3.50% + $0.30 |
Each processor sets its own rules for which transactions count as qualified, mid-qualified, or non-qualified. Qualified transactions get the lowest rates, while non-qualified ones are the most expensive — as much as two to three times higher than qualified rates from the same provider.
To break it down further, here’s what it means for you:
| Cost Category | What It Means |
|---|---|
| Qualified | Lowest cost, but rare |
| Mid- & Non-Qualified | Much higher costs — 2 to 3x higher than qualified |
| Most Transactions | Likely to be non-qualified due to rewards cards |
Despite this, tiered pricing is the most commonly used pricing plan, with over half of all merchants in the United States currently being on a tiered plan.
If it’s so bad, why is it still the most common plan in the U.S.? Two reasons:
Tiered pricing is just one of four main pricing models. The others are: flat-rate, interchange-plus, and membership (subscription) pricing.
| Pricing Model | How It Works | Pros | Cons | Best For |
|---|---|---|---|---|
| Tiered | Transactions classified as qualified, mid-qualified, or non-qualified | Simple at first glance | Hard to predict costs; usually higher overall | Merchants unaware of better options |
| Flat-Rate | One flat rate per transaction type; markup blended into rate | Predictable, easy to understand | Can overpay on some transactions | Small/low-volume businesses |
| Interchange-Plus | Passes interchange at cost + fixed markup | Transparent, potential savings | Interchange fees vary | Mid to large businesses |
| Membership | Interchange + small per-transaction fee + monthly subscription | Often cheapest overall, fewer junk fees | High monthly fee; only worth it for high/stable volume | Large, high-volume businesses |
Here’s a quick overview of tiered pricing compared to other pricing models:
Tiered pricing started as an attempt to simplify processing rates, but today it’s often the most confusing plan you could end up with — mainly because of how it’s marketed.
Most U.S. merchants are still on a tiered plan because they’re often unaware of alternatives or don’t question the cost. Don’t be one of them!
If you’re still on tiered pricing, call your provider to ask about switching to interchange-plus or consider moving to a new provider. Unlike other pricing models, tiered pricing offers no real advantage for merchants; it primarily boosts your processor’s profits.
Credit card processing rates can be complex, and this guide only covers one pricing model. For a deeper dive into all options, check out our complete guide to credit card processing rates and fees.
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