Merchant accounts have fees attached to them that keep the operators of those accounts in business. Many of those fees are charged periodically, some are charged per item. There is a schedule of rates called “interchange fees” that dictate how much is charged to the merchant and when.
The complexity of rates is far too great for just a few words, but the basics are important to understand before you begin shopping for a merchant account.
The most common pricing structure you’re likely to run into is 3-tier pricing, or the revised version from recent years known as “6-tier pricing”. Part of the reason this structure is most common is because it’s also one of the simplest to explain. Essentially, each transaction is placed into a tier with a corresponding rate attached to it.
The trick, for merchants, is finding out which 3 or 6 tier pricing structure is best for them. Every merchant service will offer a variable tier system, so it’s difficult to comparison shop.
Understanding the Three Tiers
The key to understanding which merchant solution to use is to examine the three tiers and what they mean. The first tier, the qualified rate, refers to accepting consumer credit cards and it’s usually the lowest fees a merchant incurs. The second tier is the mid-qualified rate, and it’s used for transactions where the card information is keyed into the terminal. It’s also used if businesses want to accept gift cards.
The final tier is the non-qualified rate, and it’s like a form of punishment for failing to use the terminal properly. If, for example, customer information is input without an address verification or batch information is uploaded past a certain amount of time, the non-qualified rate may apply.