What Is Tiered Pricing For Credit Card Processing?

Tiered pricing "simplifies" fees, but usually costs merchants more than other models. Here's what you need to know about tiered pricing.

WRITTEN & RESEARCHED BY
Erica Seppala
Editor & Senior Staff Writer

Last updated onUpdated September 10, 2025

REVIEWED BY

Expert Contributor

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Key Takeaways

Tiered pricing sorts transactions into tiers (qualified, mid-, non-qualified), often resulting in higher costs for merchants.
Tiered pricing is confusing and opaque, with unclear rules for which transactions fall into each tier.
Merchants often pay more than with other models like interchange-plus, especially for rewards card transactions.

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

What Is Tiered Pricing?
How Does Tiered Pricing Work?
How Does Tiered Pricing Compare To Other Pricing Plans?
Why You Shouldn’t Settle For Tiered Pricing

What Is Tiered Pricing?

Tiered pricing was created to make sense of the hundreds of interchange rates that vary by:

Card-present vs. card-not-present
Transaction size
Card type (rewards, corporate, debit, etc.)
Industry or type of goods/services
Credit card brand (Visa, Mastercard, Discover, AmEx)

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

How Does Tiered Pricing Work?

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:

Profit for providers: Tiered pricing is very lucrative, so it’s aggressively sold. Many processors won’t even mention interchange-plus unless you ask.
Merchant confusion: Most business owners don’t realize better pricing models exist. Processing feels like a “necessary evil,” so they accept the first plan offered.

The Low Advertised Rate Trap

Many providers advertise “Rates As Low As…” followed by a rate that seems to be (and is) too good to be true. Here’s the problem:

That teaser rate usually applies only to qualified transactions (the rarest category).
Sometimes it’s actually a PIN debit rate, which won’t apply if customers sign instead of entering a PIN.
Sales reps often quote you only the qualified rate without telling you about the mid- and non-qualified tiers that make up the bulk of your costs.

Bottom line: Knowing just the qualified rate won’t help you estimate costs. If most of your transactions are downgraded (and they probably are), you’ll be paying much higher rates than advertised.

Read your entire merchant agreement before signing up, as these additional rates will be listed there.

How Does Tiered Pricing Compare To Other Pricing Plans?

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 vs Flat-Rate: Both blend rates, but tiered pricing is less predictable. Flat-rate gives a clear upfront cost for card-present, online, or keyed-in transactions and is usually cheaper for small businesses.
Tiered vs Interchange-Plus: Interchange-plus pricing is transparent. Tiered hides markups and can penalize you for rewards or delayed transactions.
Tiered vs Membership: Membership pricing eliminates per-transaction markups with a subscription fee. Usually cheaper than tiered pricing, but only cost-effective for steady, high-volume processing.

Why You Shouldn’t Settle For Tiered Pricing

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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Erica Seppala

Editor & Senior Staff Writer at Merchant Maverick

Erica has been writing about small business finance and technology since 2008. She joined Merchant Maverick in 2018 and specializes in researching and reviewing business software, financial products, and other topics to help small businesses manage and grow their operations. Her expertise has been cited in MSN, Reader's Digest, Vox, U.S. News & World Report, and Real Simple. She is a Certified ProAdvisor for QuickBooks Online and QuickBooks Payroll, a graduate of Limestone University, and currently resides in Greenville, South Carolina.

View Erica Seppala's professional experience on LinkedIn.