Common Q & A: Credit Card Processing

Interchange vs. Tiered Processing: What’s the Difference?

When it comes to credit card processing, most businesses are placed on one of two pricing models: Interchange Pricing or Tiered Pricing. Understanding the difference helps you know exactly what you're paying for—and where you can save.

🟦 Interchange (Also Called “Interchange-Plus” or “True Cost”)

Interchange is the most transparent and cost-effective pricing model in the payments industry.

How It Works

• Every time a card is used, Visa, Mastercard, Discover, or AmEx charge a wholesale fee—this is called the Interchange rate.
  
  

• With Interchange pricing, you pay:
  Interchange (the true wholesale cost) + a small processor fee
  (Example: 0.45% + $0.08 per swipe)
  
  

Why Businesses Prefer Interchange

✔ Transparent — you see exactly what Visa/Mastercard charged
✔ No hidden markups
✔ Best for businesses that want predictable savings
✔ Typically the lowest overall processing cost
✔ You benefit from lower wholesale rates automatically

Summary:
You pay the real cost of the card + a small fixed fee. That's it.

🟧 Tiered Pricing (Also Called “Bundled Pricing”)

Tiered pricing is a more traditional—and often more expensive—model used by many banks and older processors.

How It Works

The processor groups all card types into “tiers,” usually:

• 1. Qualified
     
     

  2. Mid-Qualified
     
     

  3. Non-Qualified
     
     

The problem is you don’t control which tier a transaction falls under—and most cards fall into the expensive tiers.

Why Tiered Pricing Is a Disadvantage

⚠ Can be confusing
⚠ Higher rates on rewards cards, business cards, or mobile wallets
⚠ Processors can change tiers at any time
⚠ Many hidden markups
⚠ Bills are harder to understand or audit
⚠ No benefit from lower wholesale rates

Summary:
You pay whatever tier the processor assigns, which is often much higher than the true cost.

🟩 Quick Comparison