Interchange-Plus vs Tiered Pricing: Which Saves You More Money?
If you've ever looked at your credit card processing statement and felt confused, you're not alone. Payment processors use different pricing models, and understanding them can save you serious money.
The two most common pricing structures are interchange-plus and tiered pricing. Let's break down what each means and which is better for your business.
What is Tiered Pricing?
Tiered pricing (also called "bundled" pricing) groups all transactions into three categories:
Qualified Rate
The lowest advertised rate, but only applies to basic, swiped debit cards—maybe 10-15% of your transactions.
Mid-Qualified Rate
Higher rate for standard credit cards or keyed transactions. Often 0.5-1% higher than qualified.
Non-Qualified Rate
Highest rate for rewards cards, corporate cards, or international cards. Can be 1-2% higher than qualified.
The Problem with Tiered Pricing
Processors advertise the "qualified" rate prominently (e.g., "1.59%!"), but most of your transactions will fall into mid or non-qualified tiers.
Example:
- Advertised: "1.59% qualified rate"
- Reality: 70% of transactions are 2.3-2.9%
- Effective rate: Often 2.5%+
The processor has complete control over which transactions go into which tier—and you have no transparency into actual costs.
What is Interchange-Plus Pricing?
Interchange-plus is completely transparent. You pay:
- Interchange - The actual fee set by Visa/Mastercard (this is the same for everyone)
- Plus - A fixed markup from your processor (e.g., + 0.20%)
The Transparency Advantage
With interchange-plus, every transaction is itemized:
- Visa Debit: 1.00% interchange + 0.20% = 1.20%
- Mastercard Credit: 1.65% interchange + 0.20% = 1.85%
- Visa Infinite (rewards): 2.00% interchange + 0.20% = 2.20%
You see exactly what Visa/Mastercard charges and exactly what your processor charges.
Real-World Comparison
Let's compare a business processing $25,000/month with a typical transaction mix:
Tiered Pricing (Typical)
| Tier | % of Volume | Rate | Monthly Cost |
|---|---|---|---|
| Qualified | 15% | 1.59% | $59.63 |
| Mid-Qualified | 35% | 2.19% | $191.63 |
| Non-Qualified | 50% | 2.89% | $361.25 |
| Total | $612.51 |
Interchange-Plus Pricing
| Card Type | % of Volume | IC + 0.20% | Monthly Cost |
|---|---|---|---|
| Debit | 25% | 0.90% + 0.20% | $68.75 |
| Basic Credit | 35% | 1.60% + 0.20% | $157.50 |
| Rewards Credit | 40% | 1.90% + 0.20% | $210.00 |
| Total | $436.25 |
Savings: $176.26/month or $2,115/year
Why Do Processors Use Tiered Pricing?
Simple: it's more profitable for them.
Tiered pricing allows processors to:
- Advertise low "qualified" rates
- Control which transactions qualify
- Add margin without transparency
- Increase rates without you noticing
Who Benefits from Interchange-Plus?
Almost everyone! Interchange-plus is better for:
✅ Businesses processing $5,000+/month ✅ Businesses accepting many credit cards ✅ Businesses wanting cost transparency ✅ Businesses that want to negotiate fairly
The only exception might be very small, primarily-debit businesses—and even then, interchange-plus usually ties or beats tiered.
How to Switch to Interchange-Plus
- Request a statement analysis - Send your current statements to an interchange-plus processor
- Compare apples to apples - Look at effective rate, not advertised rate
- Check for hidden fees - Monthly fees, PCI fees, batch fees
- Review contract terms - Avoid long-term commitments
PaymentsPlus: Interchange-Plus Made Simple
At PaymentsPlus, we exclusively offer interchange-plus pricing because we believe in transparency. Our rates:
- Card-present: Interchange + 0.20% + $0.08
- Card-not-present: Interchange + 0.35% + $0.10
- Monthly fee: $10
No tiered confusion. No hidden fees. No long-term contracts.
Get your free statement analysis and see exactly how much you could save with interchange-plus pricing.
Questions about pricing models? Contact our team—we're happy to explain your options.