To help you understand, there are few different options on how your processing charges will be priced by the company you sign up with. The 2 most common are Interchange Plus and Tiered Pricing.
If you’re on interchange, then you’re not on tiered. That simple. If you don’t know about Interchange+, there are few posts in the forum that outline specifics about it.
If you are on tiered however, then you have to deal with “Qualified, Mid-Qualified & Non Qualified” transactions. This is the trickiest way possible as they usually promise rates as low as 1.69% plus few cents per transaction for all qualified transactions, but the “forget” to tell you that mid & non qualified transactions add about 1.5% - 2.5% plus few extra cents, ON TOP OF THE QUALIFIED RATE!
You will never be able to figure out which is which between qualified, mid & non qualified transactions as it is not listed anywhere but only on your statement and honestly, good luck deciphering a tiered pricing statement!
Here is an example of how tiered pricing works:
[]Let’s say that the interchange rate for a Visa debit (set by Visa), is 1.19% plus 5 cents.
[]This would be considered a qualified transaction for your processing company if you accept the debit card in store using a pin pad. Since they are already charging you 1.69% plus whatever cents above cost (let’s use 8 cents as an example), then this transaction has no risk since it is a debit and the processing cost is covered allowing room for some profit.
[]However: If you accept the debit card over the phone due to delivery, or if you accept it in store but process it as credit, then it drops to the mid-qualified category.
[]By dropping category, you just got charged the 1.69% plus the 8 cents for the qualified part but now the transaction is mid-qualified, so you have an additional charge of 1.5% plus 5 cents, which brings the total charge to 3.19% plus 13 cents.
[]Now, if you processed that card yesterday, but you haven’t batched out / settled your transactions before midnight, then it will drop one more time and go to non-qualified which will also add extra charges just like the mid-qualified did! Rates will vary.
[]If the card was a credit rewards card, you could be going straight to non-qualified category because the rates are to high for your processing company.
There is a lot more involved which would take forever to explain, and even I, don’t know everything in that.
But that’s an just an example so you can get an idea of how confusing and expensive the tiered pricing can be.
