The 3-Tier Pricing is the most popular pricing method and the simplest system for most merchants. In 3-Tier Pricing, the merchant account provider groups the transactions into 3 groups (tiers) and assigns a rate to each tier based on a criterion established for each tier.
First Tier - Qualified Rate
A qualified rate is the percentage rate a merchant will be charged whenever they accept a regular consumer credit card and process it in a manner defined as "standard" by their merchant account provider using an approved credit card processing solution. This is usually the lowest rate a merchant will incur when accepting a credit card. The qualified rate is also the rate commonly quoted to a merchant when they inquire about pricing. The qualified rate is created based on the way a merchant will be accepting a majority of their credit cards. For example, for an internet merchant, the internet interchange categories will be defined as Qualified, while for a physical retailer only transactions swiped through or read by their terminal in an ordinary manner will be defined as Qualified.
Second Tier - Mid-qualified Rate
Also known as a partially qualified rate, the mid-qualified rate is the percentage rate a merchant will be charged whenever they accept a credit card that does not qualify for the lowest rate (the qualified rate). This may happen for several reasons such as:
A consumer credit card is keyed into a credit card terminal instead of being swiped
A special kind of credit card is used like a rewards card or business card
A mid-qualified rate is higher than a qualified rate. Some of the transactions that are usually grouped into the Mid-Qualified Tier can cost the provider more in interchange costs, so the merchant account providers do make a markup on these rates.
The use of "rewards cards" can be as high as 40% of transactions. So it is important that the financial impact of this fee be understood. So therefore, merchants will be charged the qualified plus the mid qualified rate. Example) If your qualified rate is 1.5% and the mid qualified rate is 1 %, your effective rate would be 2.5 %.
Third Tier - Non-qualified Rate
The non-qualified rate is usually the highest percentage rate a merchant will be charged whenever they accept a credit card. In most cases all transactions that are not qualified or mid-qualified will fall to this rate. This may happen for several reasons such as:
A consumer credit card is keyed into a credit card terminal instead of being swiped and address verification is not performed
A special kind of credit card is used like a business card and all required fields are not entered
A merchant does not settle their daily batch within the allotted time frame, usually past 48 hours from time of authorization.
A non-qualified rate can be significantly higher than a qualified rate and can cost the provider much more in interchange costs, so the merchant account providers do make a markup on these rates.
For more information:
Naples Merchant Services
239-449-6040
888-601-0801 fax
info@naplesmerchantservices.com
www.naplesmerchantservices.com
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