Tiered Pricing

What tiered pricing is

Tiered pricing is a card-processing model that sorts transactions into a few rate buckets. The common three are qualified, mid-qualified, and non-qualified. Your processor sets the criteria and the rate for each bucket, then charges you the matching rate. Some pricing plans use more than three buckets.

The model compresses hundreds of interchange categories into a short list. A transaction’s card type and how you process it can affect its tier. For example, a consumer card sale in person and a manually keyed sale may land in different buckets, even when the sale amounts match.

The qualified rate is only one bucket. Your transaction mix and the processor’s tier rules determine what you actually pay.

How transactions move between tiers

Qualified is usually the lowest-priced bucket, and its rate is often the one highlighted in a sales quote. Mid-qualified and non-qualified rates are higher. Rewards, business, or international cards, keyed transactions, and missing transaction data are examples that processor rules can place in a higher tier. The exact criteria belong to the processor’s pricing schedule.

A tier rate bundles the underlying interchange cost with the processor’s charges. You do not see the actual interchange category and markup for each sale as separate amounts. That makes it harder to tell whether a higher fee reflects a more expensive card or a larger processor margin.

Illustrative tier-rate comparison

Illustrative example only. These are not standard or current market rates, and other statement fees are not included.

What it means for your costs

Your effective rate depends on the mix of transactions that fall into each bucket, not just the advertised qualified rate. If many sales are rewards, business-card, or keyed transactions, higher-tier charges can raise the total bill. A tier assignment can also change your cost without a change to the published tier rates.

For illustration, a processor offer might list qualified at 1.69% + $0.25 and non-qualified at 3.35% + $0.31. On a $100 sale, those rates produce a $1.94 versus $3.66 processing charge, before any other fees. These are illustrative rates, not standard or current market quotes.

Where it appears on your statement

Look for line items or rate columns labeled “qualified,” “mid-qualified,” and “non-qualified.” Abbreviations such as “qual,” “mqual,” and “nqual” can mean the same thing. Compare the volume and fees in each tier with the total processing volume, rather than judging the account by its qualified rate alone.

A line called “non-qualified” does not always prove that your account uses tiered pricing. The term can also describe a downgrade on a pricing plan that uses another model. Compare the line with your contract’s rate schedule and the rest of the statement before drawing conclusions.

Why it matters to your business

Tiered pricing gives you fewer rate categories to read, but it hides what each transaction actually costs at the interchange level. It also makes processor offers harder to compare because each processor controls its own tier criteria and bundled rates. An advertised low rate tells you little if much of your volume is billed at higher tiers.

What you can actually change

1. 01
   Find every tier line. On your latest statement, total the fees and sales volume billed as qualified, mid-qualified, and non-qualified. Include any abbreviated versions such as “qual” or “nqual.”
2. 02
   Check the rate schedule. Compare the statement’s tier names and rates with your processing agreement. Look for the criteria that move a transaction into a higher tier, including keyed entry, card type, and batch timing.
3. 03
   Compare pricing models. Request a like-for-like quote using your actual monthly volume and transaction mix. Compare the total cost with an interchange-plus offer, where interchange and the processor markup are shown separately.

Frequently asked questions