Tiered vs Interchange-Plus: Which Pricing Model is Better?

By RatesNegotiator Team

The pricing model on a merchant processing agreement has a major impact on total monthly costs. Tiered structures group transactions into qualified, mid-qualified, and non-qualified categories, often resulting in higher costs due to opaque classification rules. Interchange-plus passes through the actual interchange rate set by Visa or Mastercard and adds a fixed markup, offering greater transparency and usually lower overall costs.

This article explains both models in detail, helps business owners identify which one they are currently on, and provides guidance on how to evaluate whether switching to interchange-plus could reduce monthly processing expenses.

Making the Right Choice

For most businesses, interchange-plus is the better option because it provides full visibility into what the card networks charge versus what the processor adds as markup. With tiered models, the processor has discretion over which transactions qualify for the lowest rate, and many transactions that should qualify at the lowest tier get bumped to mid-qualified or non-qualified categories, increasing costs. Businesses on tiered models often pay 20 to 50 basis points more per transaction than they would on an interchange-plus arrangement. If you are unsure which model you are currently on, upload a recent merchant statement for a free analysis and we will identify the pricing structure in use and recommend the best path forward for lowering monthly costs. Understanding the difference between these two models is one of the most impactful steps a business owner can take toward reducing processing expenses.