Tiered pricing sorts every transaction into buckets — usually qualified, mid-qualified and non-qualified — and charges a different rate for each. The processor defines what falls into which bucket. It is the least transparent pricing model in payments, and the advertised rate is usually the one you pay least often.
How the model works
| Tier | Advertised rate | Typically includes |
|---|---|---|
| Qualified | 1.79% | Swiped consumer debit and basic credit |
| Mid-qualified | 2.49% | Keyed entry, some rewards cards |
| Non-qualified | 3.49% | Corporate, international, rewards, missing data |
The 1.79% is what gets advertised. If most of your volume is online — which means card-not-present, which is rarely qualified — you may find very little of it ever touches that rate.
Why it is a problem
- The buckets are not standardised. Interchange categories are published by the networks; tiers are invented by the processor.
- They can be changed. A processor can move a card type from mid to non-qualified and your effective rate rises without a single number on your rate card changing.
- They obscure the markup. With interchange-plus you can see exactly what the processor keeps. With tiers you cannot compute it at all.
- The quote is not the price. A 1.79% quote is meaningless without knowing what share of your volume qualifies, which nobody tells you up front.
Why it still exists
It persists mostly through independent sales organisations selling to small businesses, where a headline 1.79% wins the comparison against an honest 2.9% — right up until the first statement arrives. Modern providers have largely abandoned it, because published flat pricing is easier to sell and easier to defend.
If you are on tiered pricing, the fastest way to see the damage is to divide total fees by total volume on a real statement. Compare that effective rate against a published flat rate rather than against the quoted qualified figure.
GOOD QUESTIONS
Frequently asked
Why is tiered pricing considered bad?+
Because the processor defines the buckets and can move transactions between them at will. The advertised qualified rate is a marketing number that often applies to a minority of your volume, while the rest lands in dearer tiers you were never quoted.
How do I tell if I am on tiered pricing?+
Look at your statement for the words qualified, mid-qualified or non-qualified, or for several different rates applied to the same card type. An interchange-plus statement itemises actual interchange categories; a flat-rate statement shows one rate.
What is a non-qualified transaction?+
Whatever the processor says it is. Typically it includes keyed-in transactions, corporate and rewards cards, and international cards — but the definition is set by the processor, not by the card networks, and it can change.
How do I get off tiered pricing?+
Ask your provider for an interchange-plus or flat-rate quote, then compare on effective rate using a real statement rather than on the headline number. If they will not quote either, that is itself informative.