There are two main types of credit card processing pricing: Interchange plus pricing and Tiered pricing. The best form of pricing is based on several factors, and deciding which one is best for you can be based on these factors. Take a look at the basics about both to make a good, informed decision, and let us know how we can help you with your decision.

Interchange plus pricing has the potential to be the least expensive, most transparent credit card processing pricing model. Interchange pass through separates interchange and assessments, which are the actual costs of processing, from the processor’s markup.

Card-issuing banks charge fees when businesses accept their credit cards. Visa, MasterCard, and Discover generate income by charging assessments. Interchange and assessment charges are the same for all credit card processors. For this reason, it’s easiest to think of the sum of interchange and assessments as the “wholesale” cost of credit card processing.

The only portion of credit card processing cost that you can negotiate is the markup over interchange and assessments. It is best to focus on the processor’s markup portion of cost. The markup is the most important area of expense because it’s the only one that will differ from one processor to the next.

The other option to work with is tiered pricing for processing credit cards. The word “tiered” indicates that the merchant account provider splits all card transactions into separate tiers. The most common tiered pricing structure includes three tiers of pricing: Qualified, Mid-Qualified and Non-Qualified. You may also see a six-tier system, which includes special pricing for PIN-entered and PIN-not-entered debit card transactions. But, for this comparison, we will focus only on the three-tiered system. The major credit card networks post a Qualification Matrix, which dictates the interchange category a transaction will post to, based on how the transaction is entered and which type of card is used.

Once the card is swiped or keyed in, the credit card terminal talks to the cardholder’s bank to identify the card type and then places the transaction into one of the three tiers:

1. Qualified Rate: 1.79% (regular card, swiped face-to-face transactions)

2. Mid-Qualified Rate: 2.09% (rewards card swiped, keyed in)

3. Non-Qualified Rate: 2.39% (corporate card, ZIP code verification incorrect)

So which is the best for you?  It depends on the type of business, how you process, and generally what type of cards your customers are giving you to process.  Choosing the best pricing for you can be tough, but some facts and research will help your decision immensely.