| Traditionally small to mid sized businesses have been | | | | transaction. They can ensure profit if they charge a |
| set up with what is called multi-tier pricing for their | | | | large mark up for any transactions that are not |
| credit card processing. This system is usually set up | | | | qualified. So you may pay 2.9% for a mid qualified |
| with three tiers (qualified, mid-qualified, and non-qualifed.) | | | | transaction and 3.5% for a non qualified transaction |
| Occassionally, if the business owner has negotiated | | | | (These numbers can range much higher and lower.) |
| well, there will be a fourth tier for qualified offline debit | | | | The fact is that some of the cards that fall into these |
| cards. While this system has worked well for many | | | | categories may only cost an additional quarter of a |
| years, the increasing number of rewards and | | | | percent to process. So the merchant may over pay |
| corporate cards being issued has made this type of | | | | by 1-2% to run certain card types. The business owner |
| pricing obsolete. | | | | can avoid this if they are set up on interchange plus |
| Visa and Mastercard have many different interchange | | | | pricing. |
| categories for the multiple card types that are issued. | | | | What interchange plus pricing does is pass the true |
| Tier pricing takes a large number of these categories | | | | cost of running the card right through to the merchant. |
| and lumps them into one of the three tier buckets | | | | So the fees associated with that individual transaction |
| available to the merchant. If the merchant only ever | | | | will be put through at the lowest possible cost. The |
| takes standard credit cards then this system will work | | | | business owner pays a mark up at the end of the |
| well for them. Once they start to see more debit, | | | | month based solely on their number of transactions |
| rewards, and corporate cards being used in their place | | | | and the sales dollar volume. (typically .25-.50% plus |
| of business they will notice that their merchant | | | | $.10-$.15 per trnasaction.) |
| services bill has increased dramatically. This is because | | | | This system will almost always prove to be a better |
| many of these transactions are falling in to the mid or | | | | deal than a three tier structure. Make sure to check |
| non qualified transaction categories. | | | | your latest credit card processing statement to look |
| Some of these cards are actually not that much more | | | | for a high number of mid or non qualified transactions. If |
| to process than a standard credit card, but the | | | | you see them, then setting up an interchange pluse |
| underwriting company for the merchant account | | | | pricing system may be the way to start saving your |
| needs to make sure that they are profiting on every | | | | business money. |