Tiered PricingQualified, Mid-Qualified & Non-Qualified Rates
Tiered Pricing — Definition & Guide
Tiered pricing is a merchant account model where transactions are sorted into rate buckets — qualified, mid-qualified, and non-qualified — at different rates. The processor decides which bucket each transaction falls into, and the criteria for that assignment are rarely disclosed in the merchant agreement. Most merchants end up with a significant portion of their volume in the higher-cost tiers. According to the Federal Reserve’s interchange fee data, actual card processing costs vary significantly by card type — this model captures that variation as processor margin rather than passing it through transparently.
This is the most common model sold by large processors and independent agents because it is the most profitable for the processor. The advertised qualified rate is the lowest rate — and the one most transactions never actually qualify for. A merchant quoted 1.79% qualified may find that 60% of their volume processes at 2.39% mid-qualified and 20% at 3.19% non-qualified — producing a blended effective rate of 2.47%.
The bundled merchant pricing structure makes it impossible to verify whether you are being charged fairly. There is no line-item breakdown of actual interchange costs — only tier assignments the processor controls. This is why interchange-plus pricing is more transparent: you see the actual wholesale cost of every transaction, not a bucket rate.
The three qualified rate tiers work like this:
- Qualified — The lowest rate. Typically reserved for standard consumer debit cards swiped in person. This is the rate advertised at signup.
- Mid-qualified — A middle rate, typically 0.3–0.7% higher than qualified. Rewards cards, manually keyed transactions, and certain card types often land here.
- Non-qualified downgrade — The highest rate, typically 1.0–1.5% above qualified. Corporate cards, premium rewards cards, and card-not-present transactions frequently fall into this tier.
Under interchange-plus pricing, you pay the actual interchange cost set by the card network plus a fixed processor markup. Every card type appears on your statement at its real cost — no buckets, no tier assignments, no processor discretion. The CFPB’s guidance on payment services agreements notes that merchants are entitled to understand the pricing basis of their merchant account — a right this model makes difficult to exercise in practice.
Generally yes. The lack of transparency makes it easy to overpay, and you cannot verify whether your transactions are being assigned to the correct tiers. Most merchants on this model pay more than they would under interchange-plus at the same volume.
Yes. Ask your processor to reprice your account to interchange-plus. If they decline, switching processors is straightforward — most merchants can switch with 30 days notice and no downtime.
The mechanics of the move are covered in how to switch payment processors — including timing, contract review, and the typical gotchas.
If your statement shows rates labeled qualified, mid-qualified, or non-qualified instead of listing individual interchange categories, you are on this model. Your effective rate is the most reliable indicator of what you actually pay.
Tiered Pricing Hides Markup in the Mid-Qualified and Non-Qualified Buckets. The Statement Tells You How Much.
Send us your last processing statement. We will calculate the share of your volume falling into each tier, separate true downgrade fees from processor padding, and show you what your effective rate would be under interchange-plus pricing instead.
Request a Free Statement ReviewNo obligation • For glossary readers comparing pricing models and processor options • Response within one business day