How to Tell an Interchange Plus Quote from a Tiered Pricing Quote

February 4, 2012

February 4, 2012

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Users often ask me how to tell an interchange plus quote from a tiered pricing quote.

First, some background:

Interchange plus:

An interchange plus quote will sound like “interchange PLUS 0.20% PLUS $0.20″ – that’s why its called interchange plus.  The PLUS part is the markup that the processor is making on top of interchange.  It will always be less than 0.50% of your volume and $0.30 per transaction, anything more than that is way too high.  What they are quoting you is the markup.  On average interchange rates are about 1.77%, but it does vary depending on what kind of cards your customers use, your average ticket size and the type of business you are (for example, the average rate for ecommerce interchange rate is higher at around 2.06%).

Tiered:

With Tiered pricing usually just one price is quoted (called a qualified rate).  It will always be more than 1%.  For example they will quote 1.6% or 2.3%.  What they do not tell you is that ALWAYS, there is something called a downgrade, where a large portion of your transactions will be classified as a Mid qualified or Non qualified rate.  Often, the salesperson will not tell you about those rate unless specifically asked – they count on making most of their money by marking up those rates really high and you not paying attention.

It is very hard to compare one tiered pricing plan to another, because even if the qualified rate, non qualified rate and the mid qualified rate are the same, the rules about which transactions fall into each category can be different.

Everyone should avoid Tiered pricing (and its more evil cousin ERR pricing).

But, if for some reason you do not, here are some questions to ask to make sure you are getting the full story on the quote.  Let’s say that they quoted you a 1.6% rate.

Questions to Ask about Interchange Pricing:

  • 1.6%, does that apply to every single transaction?
  • What about a rewards card?  How much is that?
  • How about a business card?  How much is that?
  • What happens if the customer calls in the order and doesnt sign the receipt?  How much does that cost?
  • What about debit cards, I know that debit cards have a lower interchange rate (even when the customer doesn’t type in the PIN), so shouldn’t I be getting a lower rate for debit cards?

Asking those questions will help you get a more fair deal, but the only way to be entirely sure you are getting the best deal is to get interchange plus pricing from a reputable processor that is FeeFighters certified.

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