Tiered Rate

The Tiered Rate pricing model is a method employed by payment processors to determine the costs associated with processing transactions. In this model, transactions are sorted into distinct tiers based on certain criteria set by the processor.

Each tier has a different rate applied to the transactions falling under it. Conventional tier divisions include the following:

  • Qualified — Transactions meet the most favorable criteria set by the processor and are charged the lowest rates.
  • Mid-Qualified — Transactions meet some criteria set by the processor and are charged moderate rates.
  • Non-Qualified — Transactions do not meet the criteria set by the processor and are charged the highest rates.

Despite its apparent structure, the tiered pricing model’s challenge lies in the potential variation and opacity of the tier criteria among different processors.

This lack of transparency makes it challenging for merchants to accurately predict the costs for a given transaction, inhibiting their ability to effectively manage their payment processing expenses.

This highlights the need for clarity and transparency from payment processors in their pricing models to foster trust and understanding with their merchant clients.