Understanding Processing Fees

While interchange rates are dictated by the card networks an issuers, your payment processor fees are determined by the provider you choose.

There are 4 different types of pricing models that payment processors use to determine your rates. They include:

1. Tiered pricing – This pricing model charges you based on three main tiers — qualified, mid-qualified, and non-qualified.

Transactions that fall under the qualified category have lower fees, while your processor will charge higher rates for non-qualified transactions. Debit cards and non-reward credit card transactions typically fall under the qualified rate, while transactions involving corporate cards and higher rewards cards would be under the non-qualified category.

2. Padded pricing – With padded pricing, the processor charges a flat rate for all transactions. So, whether a customer pays using a credit card, a debit card, or a rewards card, the rate will be the same.

3. Interchange-plus pricing – With interchange-plus pricing, your processor breaks down your rate into two components:

  • The interchange, which, as mentioned above, is the fee set by credit card networks.

  • The “plus”, which is essentially the markup of your processor.

4. Membership-based pricing – Arguably the most favorable model out the above, processors that use membership-based pricing do not take a cut out of your sales. Instead, you only pay the interchange rates set by the card networks (Visa, Mastercard, Amex, etc.). Membership-based processors  make money through monthly or annual membership fees.

Merchant Consultants Group, will help your company save money whether you are on Tiered, Padded, or Interchanged pricing, we help negotiate these fees with our banks to lower your costs no matter your pricing preferences.