Tiered Pricing vs. Interchange Plus

Tiered Pricing vs Interchange Plus

There are essentially two types of pricing formats in the industry, Tiered and Interchange. Below is an outline of each and how they can affect your business.

Tiered Pricing: An old but very profitable pricing format typically utilized by telemarketers and sales agents seeking maximum earnings.  It typically offers three rates: Qualified, Mid-Qualified and Non-Qualified.   Frankly speaking, this pricing format, while great for the salesperson, is not the best financial decision for your business and here is why.

Imagine you are shopping at your local grocery store and when checking out, all items in your cart are grouped into three categories and charged a different price for each category.  Essentially you may be paying the same for milk & eggs as you are for prime steak.  The point is you have no idea what you are paying which is why Tiered Pricing is not the best pricing format available.     

Interchange Plus:  Commonly known as “Interchange”, this pricing format is the most transparent in the industry.  Interchange are the rates and fees established by the Card Brands (Visa, MasterCard, Discover & AMEX) for the hundreds of different types of Credit Cards utilized by Consumers for the purchase of goods and services.

Card Processors must pay the Interchange collected from their Merchants each month to the Card Brands.  If your business is utilizing Interchange Plus, your monthly processing statement will clearly outline the various Interchange rates plus their fee for processing the credit card data. 

In the grocery store analogy above, with Interchange Plus you pay the individual cost for each item in your shopping cart plus a nominal service fee for the Processor and ISO. 

A final note to consider when choosing a Credit Card Processor is the importance to maintain an honest and open relationship with your representative.  Too often in the industry, once the sale is made and your signature is dry on the MPA, you are turned over to boarding and customer support never to hear from the salesperson again.  Choose wisely!