ricing is how a processor determines how a merchant will pay the credit card processing fees. In order to accept credit and debit cards, the merchant must pay. Depending on what your business does, how much you process, and many other factors, one pricing category may work better for your business than another in terms of less fees to pay.
While the card network sets the original fees, ISOs, issuing banks, and payment processors can add their own fees onto that base rate. In order to make sure that you are getting a good rate, check the most recent guides that Visa and MasterCard have released and compare them to your own.
Pricing rates can be categorized as tiered pricing, interchange plus pricing, and bundled pricing. Keep in mind that all of these rates may also come with an authorization fee per transaction.
If your agent priced you under the tiered pricing category, then there are three groups of rates that you get charged depending on the type of card that your customer uses. These groups are the Qualified Rate, the Mid-Qualified Rate, and the Non-Qualified Rate. These can be further affected by the card brand, but most agents will price all brands the same way.
The Qualified Rate applies to credit cards that meet the definition of standard in the merchant’s industry and are considered as such by the payment processor. These are the lowest rates out of the tiered pricing model. Cards that are swiped are usually considered to be “qualified,” although there are ways for merchants that primarily do business online to process at the qualified rate.
The Mid-Qualified Rate is usually used for cards that are keyed in instead of swiped on the terminal. Additionally, if a customer is using a business card or a rewards card, the mid-qualified rate would also be used.
The Non-Qualified Rate is the generally the highest of the tiered pricing rates. The non-qualified rate could apply to cards that are keyed in and don’t require address verification or a business card where not all of the necessary data is captured during the transaction.
Interchange plus pricing is exactly what it sounds like: the interchange set by the card network, plus the markup. For example, if Visa sets an interchange price as 1.80%, and the payment processor’s markup is .035%, then the processor charges the merchant 1.80% + .035%. Sometimes the card brand affects the interchange plus pricing quoted to you by your merchant services agent.
Bundled rate pricing is the easiest to understand: one rate for all transactions. While this seems attractive, just be sure that this model is right for your business. Businesses that do benefit from bundled rates tend to have small tickets and do very little credit card processing.
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