2 Models of Credit Card Pricing
The tiered pricing model takes the whole matrix of Interchange and boils it down to usually three or four categories. Those categories are generally called “qualified,” “mid-qual,” and “non-qual,” and sometimes there is an additional category for debit transactions. If you see those terms on your monthly statement, then you know you are being charged based on a tiered pricing model.
If your business averages small transaction amounts and you do not wish to utilize our Cash Discount Program, then this is the program for you!
On average, businesses with lower priced items or infrequent sales, will see a benefit from this program. We do not use a general “one size fits all” rate plan when it comes to small ticket pricing.
There are several pricing models that processors use to charge merchants for the service of connecting them to the various credit card networks. However, there is never only one approach that you should ever accept in your business. The reason we say this is that not all businesses are the same, nor are their transaction amounts the same either. Interchange works well for those business types that are processing high ticket amounts and low number of transactions per month. There are certain circumstances, on a case by case basis, which we look at businesses who have small ticket amounts to be placed with Interchange Pricing.
Interchange is a large matrix of rates set by Visa and Mastercard that is associated with every credit card type in circulation constituting over 250 different types. These rates are charged as a percentage against the total sale as well as a flat fee per transaction. Additionally, the Interchange rate differs for each specific card type depending upon if it is swiped or keyed in.
As an example, if a merchant swipes a Visa individual rewards card for $100, there will be an Interchange fee of $100 x 1.65% + $0.10 = $1.75. It costs the merchant $1.75 to accept that transaction before any processing fees are added.