Interchange-Plus vs. Tiered Pricing: Which Is Better for Your Business?

The Two Main Pricing Models

When you sign up for a merchant account, your processor assigns you a pricing model. The two most common are tiered pricing and interchange-plus pricing. They produce very different outcomes for your business — in cost, transparency, and your ability to compare processors.

Tiered Pricing: How It Works

Under tiered pricing, your processor groups all transactions into two or three buckets: qualified, mid-qualified, and non-qualified. Each bucket has a different rate, and your processor decides which bucket each transaction falls into.

A typical tiered pricing schedule might look like this:

Under tiered pricing, processors have discretion in how they classify transactions. A rewards card that carries a 1.80% interchange rate might be classified as non-qualified and charged at 3.79%. Because the underlying interchange cost is not shown on a tiered statement, it is difficult to verify how individual transactions were classified or why.

Tiered pricing is a common model. Its main limitation is that the underlying interchange cost is not disclosed on your statement, which makes it difficult to verify how your transactions are being classified or to compare your effective rate against other pricing structures.

Interchange-Plus Pricing: How It Works

Interchange-plus pricing (also called cost-plus pricing) passes the exact interchange rate through to you, plus a fixed markup. Your statement shows the actual interchange cost for each transaction category, plus your processor's markup as a separate line item.

A typical interchange-plus quote looks like: Interchange + 0.25% + $0.10

Here is how that plays out in practice:

Every transaction is priced at cost plus a consistent markup. You can verify every line on your statement against the published interchange tables. There are no hidden buckets, no discretionary downgrades, and no surprises.

How to Tell Which Model You Are On

Look at your merchant statement. If you see rates labeled "qualified," "mid-qualified," and "non-qualified," you are on tiered pricing. If you see a line that says "Interchange +" followed by a fixed percentage and per-transaction fee, you are on interchange-plus.

If you are not sure, our guide on how to read a merchant statement will help you identify the key sections.

What About Flat-Rate Pricing?

A third model worth mentioning is flat-rate pricing, used by processors like Square and Stripe. These processors charge a single rate for all transactions — typically 2.6% + $0.10 for in-person and 2.9% + $0.30 for online.

Flat-rate pricing is simple and predictable, which makes it attractive for new or very small businesses. But for businesses processing more than $10,000 per month, the flat rate is almost always higher than interchange-plus. The simplicity comes at a cost.

Frequently Asked Questions