Interchange Plus Pricing Credit Card Processing Vs. Tiered Pricing Credit Card Processing

Both interchange plus pricing credit card processing and tiered pricing are based on the same fixed costs. The difference is in how the credit card processor charges for processing services. There are two fixed cost components that all credit card processors must account for in their charges for processing services. Each cost component is made up of two fees: a percentage of the sale and a fee per item.

The first cost component is called Interchange. Interchange is set by the Card Associations, collected by the credit card processor, and paid to the bank that issues the credit or debit card. Interchange is by far the largest cost component, with 80-90% of a transaction's fee being paid to the issuing bank.

The second cost component is called Dues and Assessments, or sometimes just referred to as Assessments. Dues and Assessments are set by the Card Associations, collected by the credit card processor, and paid to the Card Associations for the use of the card's brand and processing network. Assessment fees are much smaller than Interchange fees, typically 2-5% of a transaction's cost is made up of Dues and Assessments.

Tiered pricing programs have many different formats. In general, the credit card processor will charge for processing services in Qualified, Mid-Qualified, and Non-Qualified Tiers that cover a transaction's Interchange cost and one or both of the transaction's Assessment costs. A Base Credit or Debit card might be charged a Qualified rate, while a Rewards or Commercial/Corporate card might recieve a Mid or Non-Qualified rate.

Interchange plus pricing, also known as cost plus or interchange pass through, charges the merchant a fixed fee for processing services plus the exact interchange rate and assessment for each transaction's card brand and type.

In most cases, Tiered pricing is not as cost-effective for the merchant as interchange plus pricing simply due to the fact that the Tiers are covering multiple Interchange Rates that can vary widely in cost. The credit card processor can have higher or lower margins depending on the interchange rate, while with interchange plus, the credit card processor's margin remains the same on all transactions.

Burlington Bank Card strives to provide our merchants with secure and reliable interchange plus processing, transparent pricing, and one-on-one personal service.

Please call 1-800-758-1002 or contact us to learn more about Interchange Plus Credit Card Processing, or get a quote for an Interchange Plus Merchant Account.     

  • Rewards 1: 1.65% + $0.10
  • Rewards 2: 1.95% + $0.10

In a Tiered pricing program, if both of the above interchange rates are covered by the same Tier, for example Mid-Qualified: 2.15% + $0.20, then the processor's margin excluding Dues and Assessments would be 0.50% + $0.10 on Rewards 1 and 0.20% + $0.10 on Rewards 2.

The same transactions accepted on an interchange plus pricing model, for example Interchange Plus 0.10% + $0.10, then the credit card processor's margin would remain 10% + $0.10 on both sales, and the merchant's cost, excluding Dues and Assessments, would be lowered to Rewards 1: 1.75% + $0.20, and Rewards 2: 2.05% + $0.20.

Please call 1-800-758-1002 or contact us to learn more about Interchange Plus Credit Card Processing, or get a quote for an Interchange Plus Merchant Account.