There is a new pricing method, the 6-tier pricing method that is gaining in popularity, but for most merchants, their transactions are separated into three groups. This pricing method is known as 3 tier pricing. Each tier (group) has a different rate and has different criteria to qualify for that particular rate.
TIER ONE IS THE QUALIFIED RATE
This rate is the standard rate and lowest rate for transactions. When getting quotes for merchant accounts, this is the rate that will be quoted. The merchant will be charged this rate when the merchant uses an approved credit card processing procedure. Internet interchanged categories are considered tier one and will get the qualified rate. A retail transaction will only get the tier one rate if the card is swiped or read by the terminal.
TIER TWO IS THE MID-QUALIFIED RATE
When a credit card is accepted that doesn’t meet the requirements for the qualified rate, the tier two rate will be charged. Reasons that a transaction doesn’t qualify are because the card number is keyed in instead of swiped, it may be a business card, or it is a reward card. Tier two transactions cost the provider more so that cost is passed along to the merchant who accepts the transaction.
TIER THREE IS THE NON-QUALIFIED RATE
This is the highest rate that the merchant will be charged. This will happen when the required fields are not entered when the transaction is processed. An example of this is when the card is keyed in and there is no address verification.
To find out more about payment processing and pricing tiers, contact Merchant Data Systems. They are an experienced payment processing company that processes both retail and e-commerce transactions for businesses. Merchant Data Systems also sells payment processing equipment including several types of payment processing terminals.
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