All online merchant services providers will offer different pricing plans for when they handle credit card transactions. But the best merchant services will provide a more responsible approach to collecting payments. Quality teams will provide sensible rates that are consistent for all card transactions and keeps you from bearing hidden fees.
The best merchant services will be direct with you and provide predictable pricing points for all your transactions. The work can be the opposite of what you’d find through a tiered pricing plan.
A tiered pricing plan is a system for credit card processing that determines what you will pay for each transaction. It creates frustration and confusion, as you might struggle to figure out what you’re going to spend when taking care of your transactions.
The General Concept
Tiered pricing is a part of some online merchant services that entails figuring out what you will spend to process credit card transactions based on certain factors. You may be subject to one of three rates:
- Qualified – A qualified rate entails a credit card transaction that someone swiped or inserts as a chip. It can also work for debit cards.
- Mid–Qualified – A mid-qualified transaction entails keyed-in transactions, loyalty cards, and cashback cards. These tend to cost more to process, as the card company will need to cover the costs for getting these loyalty and cashback programs running. The cost is also higher for keyed-in transactions, as they might require a separate CVV number to ensure one’s card data is accurate.
- Non–Qualified – A non-qualified rate is for corporate cards or other cards with more valuable reward programs. It can also work for card-not-present transactions that entail a CVV number due to the card not being physically available.
There three separate tiers can come with many values. A qualified rate might entail 1.4% plus 10 cents of a transaction. But a non-qualified rate will be 4.5% plus 10 cents. A mid-qualified transaction may be at the halfway point here.
The definition of what is qualified or non-qualified will vary. The number of rewards one can utilize may be a factor. Sometimes a card that offers a small reward scheme might be qualified, but it could also be mid-qualified and subject to higher rates if it has more things to offer to customers.
Is This Worthwhile?
Tiered pricing for online merchant services can be interesting, as it provides a straightforward approach to pricing. You can see what the rates are when you’re looking at unique transactions.
But there are more problems with tiered pricing than anything else. While some merchant services will promote appealing rates, they often highlight their most valuable or affordable rates. They tend to hide some of the more expensive rates you’d be more likely to spend.
A processor also has the right to change the rates as one sees fit. The processor can add more charges that can be expensive, which can be a problem considering how many rewards and fraud coverage points one might need to manage.
A Different Pricing Plan Is Best
It is recommended you look at a more useful pricing plan when finding the best merchant services. You can choose a flat pricing plan, for example. Flat pricing entails a single fee for each transaction you handle. This point works for most transaction types, although you might spend more for Card Not Present deals. You can use this if you utilize specific transaction types more often than others, although it might not offer much flexibility.
You could also use an interchange plus system. An interchange-plus plan involves the interchange fee from a card network plus a markup from a processor. While the interchange rates might vary, the processor can add whatever markup one wishes. The setup is more transparent and predictable, producing a suitable plan for merchant service needs. You can figure out where you’re going with your work when you use an interchange plus system that lets you see what fits.
Watch what you’re doing when looking for the best merchant services. A tiered pricing plan might sound interesting, but it isn’t always going to work well. Sticking with an alternate plan that offers more predictable and easier to review terms is ideal.