Understanding Qualified, Mid-Qualified & Non-Qualified Credit Card Processing Fees

What is Tiered Pricing?

Tiered pricing (also known as qualified / non-qualified pricing) is a pricing method used by nearly every payment processor in the US. This is the most common pricing method offered to small businesses. Unfortunately, that’s for the benefit of the processor and not the merchant, as tiered pricing is often used as a ‘teaser’ pricing method that can actually be quite expensive.

How Does it Work?

The processor will offer you three tiers, such as:Qualified Rate1.69%Mid-Qualified Rate1.20%Non-Qualified Rate1.70%

While there are hundreds of different types of credit cards in the US. For this example, let’s simplify it by looking at 3 different credit card types:

Visa Basic ConsumerVisa Rewards CardVisa Signature EliteQualifiedMid-QualifiedNon-Qualified1.69%1.69% + 1.20% = 2.79%1.69% + 1.70% = 3.39%

On the surface, 1.69% seems reasonable, and unfortunately, that’s the trick. Most merchants don’t ask when the other rates will apply or how they will be calculated. Some processors don’t even display the mid and non-qualified rates except in their fine print.

All the sudden the ‘qualified’ rate of 1.69% isn’t as appealing as it first was. The processor then will determine what ‘qualification’ each of these cards fall under. Keep in mind that Visa does not see ‘qualifications’; these are tiers that are invented by the processor and are assigned at their own discretion. This means that each processor decides how each of the credit card types is qualified. They then add the mid and non-qualified rates on-top of qualified rates. For example:

How Does Tiered Pricing Compare to Interchange Plus Pricing?

Unlike most processors, we offer all of our merchant’s interchange plus pricing. By passing the true interchange cost and only charging for a single markup of 0.18%, interchange plus pricing gives you significant savings while creating a very transparent arrangement with your processor (you know our cost and margin!)

Visa Basic ConsumerVisa Rewards CardVisa Signature EliteTrue Visa Interchange = 1.51%True Visa Interchange = 1.65%True Visa Interchange = 2.30%1.51% + 0.18% = 1.69%1.65% + 0.18% = 1.83%2.30 + 0.18% = 2.48%

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