It wasn't that long ago (3-4 years or so) that when you set up a merchant account for credit card processing, you would get 3 Tier Pricing. In fact, many of you that accept credit cards in your business may still be set up this way. So what is it and how does it work? Let's take a look.
Typically, with 3 Tier pricing, you will have three different categories of card transaction types. Let's take a look at how they work.
First will be "Qualified". This will be for either a credit or debit card that is swiped thru your credit card terminal or POS system or for what is more commonly called a "card present" transaction. This will always be your best rate on 3 Tier Pricing. The rate could be either bundled (quoted simply as a rate like 2.52%) or unbundled which is a rate plus a transaction fee(quoted like 1.79% + $.25). Depending on your type of business and the averags size transaction that you process, will dictate whether bundled or unbundled is best for you.
Your second tier would be classified as "Mid-Qualified". Now, each processor can determine, on their own, which types of transactions fall into this category (or "bucket" as some refer to it). This could be for "card not present" (or hand-keyed), Rewards, business, Travel & Entertainment cards, etc. These transactions will show up on your statement as a "surcharge" or "interchange fees" in addition to the Qualified Rate you already paid on these sales. The tricky part is that most processors statements will only list the fees you paid without telling what the additional percentage was. Have any ideas why they do it that way? The bottom line is that these types of transactions do cost more to process but, quite honestly, this is where many processors, because of the vaguery that exists, are able to make the bulk of their fees off of you. All processors will add some uptick in the base Qualified Rate on these transactions of say .75% but many I've seen will add over 2.00% and most merchant won't ever catch it. Consequently, you could be paying in the 3-4% range on those line items.
The third category in described as "Unqualified". Simply this is just another category that different card or transaction types are lumped into. Most often, these will be corporate type cards but many processors could also throw in some of the Rewards Cards in this category (which by the way, we are seeing tons more of those in the marketplace these days, for obvious reasons). Again, these transactions will fall under "surcharges" or "interchange" on your statement and will be another area where you could potentially be overcharged based on what costs really are.
All this may sound confusing to you, the merchant, but it doesn't have to be. As with anything in life, if you simply take the time to become educated in the particular field of interest, you will position yourself to make more informed decisions.
You will find a very helpful tool at my website that will give you a more thorough education, in about an hour or so, than the majority of reps trying to sell to you have. You owe it to yourself and your bottom-line to check it out. Here it is:
www.creditcardprocessingknowledge.com
Typically, with 3 Tier pricing, you will have three different categories of card transaction types. Let's take a look at how they work.
First will be "Qualified". This will be for either a credit or debit card that is swiped thru your credit card terminal or POS system or for what is more commonly called a "card present" transaction. This will always be your best rate on 3 Tier Pricing. The rate could be either bundled (quoted simply as a rate like 2.52%) or unbundled which is a rate plus a transaction fee(quoted like 1.79% + $.25). Depending on your type of business and the averags size transaction that you process, will dictate whether bundled or unbundled is best for you.
Your second tier would be classified as "Mid-Qualified". Now, each processor can determine, on their own, which types of transactions fall into this category (or "bucket" as some refer to it). This could be for "card not present" (or hand-keyed), Rewards, business, Travel & Entertainment cards, etc. These transactions will show up on your statement as a "surcharge" or "interchange fees" in addition to the Qualified Rate you already paid on these sales. The tricky part is that most processors statements will only list the fees you paid without telling what the additional percentage was. Have any ideas why they do it that way? The bottom line is that these types of transactions do cost more to process but, quite honestly, this is where many processors, because of the vaguery that exists, are able to make the bulk of their fees off of you. All processors will add some uptick in the base Qualified Rate on these transactions of say .75% but many I've seen will add over 2.00% and most merchant won't ever catch it. Consequently, you could be paying in the 3-4% range on those line items.
The third category in described as "Unqualified". Simply this is just another category that different card or transaction types are lumped into. Most often, these will be corporate type cards but many processors could also throw in some of the Rewards Cards in this category (which by the way, we are seeing tons more of those in the marketplace these days, for obvious reasons). Again, these transactions will fall under "surcharges" or "interchange" on your statement and will be another area where you could potentially be overcharged based on what costs really are.
All this may sound confusing to you, the merchant, but it doesn't have to be. As with anything in life, if you simply take the time to become educated in the particular field of interest, you will position yourself to make more informed decisions.
You will find a very helpful tool at my website that will give you a more thorough education, in about an hour or so, than the majority of reps trying to sell to you have. You owe it to yourself and your bottom-line to check it out. Here it is:
www.creditcardprocessingknowledge.com
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