Tiered pricing (also called bundled pricing or bucket pricing) is a payment processing model that groups the 300+ interchange categories into three tiers: qualified, mid-qualified, and non-qualified. Each tier carries a different rate, with qualified being lowest and non-qualified being highest.
The problem with tiered pricing is opacity. The processor decides which transactions qualify for which tier — and these decisions are not always disclosed or consistent. A basic credit card swiped in-store might be "qualified" at 1.69%, but a rewards card or a keyed-in transaction might be "non-qualified" at 3.50% or higher. Merchants have no visibility into why a transaction was downgraded.
Processors profit significantly from tiered pricing because they can set non-qualified rates much higher than actual interchange costs, and control which transactions fall into each tier. Mid-qualified and non-qualified surcharges are where processors extract the most margin.
Tiered pricing was the industry standard for decades. Many small business merchants are still on tiered pricing without realizing it. If your statement shows qualified, mid-qualified, and non-qualified rates — or if you see mysterious "EIRF" or "NABU" fees — you're likely on tiered pricing and almost certainly overpaying.
Interchange plus pricing has replaced tiered pricing as the recommended model for all merchants serious about cost management.
Tiered pricing creates unpredictable costs because you can't control which tier your transactions fall into. If your customers frequently pay with rewards cards (which are extremely common), most of your transactions will be non-qualified — at the highest rate.
Merchants on tiered pricing typically pay 20-40% more than they would on interchange plus pricing. The opacity makes it difficult to audit or challenge your bills. Ask your processor for a "rate sheet" — if they can't clearly show you every interchange category they've assigned to each tier, that's a red flag.
A landscaping company processes $30,000/month. Many customers pay with corporate or rewards cards. - Tiered pricing: 70% non-qualified at 3.50%, 20% mid-qual at 2.75%, 10% qualified at 1.79% - Total cost: (0.70 × $30,000 × 3.50%) + (0.20 × $30,000 × 2.75%) + (0.10 × $30,000 × 1.79%) - = $735 + $165 + $53.70 = $953.70 - Interchange plus at actual cost + 0.30% markup: - Effective rate ~2.1% = $630 - Monthly savings switching to interchange plus: $323.70
Look at your processing statement. If you see 'qualified,' 'mid-qualified,' and 'non-qualified' rate categories, you're on tiered pricing. If you see individual interchange categories listed next to your transactions, you're on interchange plus.
Tiered pricing isn't always bad, but it's almost never better than interchange plus for merchants processing over $10,000/month. It can seem simpler, but the hidden costs typically outweigh the benefit of simplicity.
Tiered pricing is more profitable for processors because they control the tier assignments and profit from the spread between actual interchange cost and the tiered rate. Many merchants don't realize they're overpaying.
Yes, in many cases. Ask your current processor to reprice you to interchange plus. If they refuse or quote an unreasonably high markup, that's a signal to shop your account. Switching is often straightforward with no equipment changes required.
We never put merchants on tiered pricing. Liberty Bancard uses interchange plus exclusively — every rate, every fee, every transaction category is visible on your statement. If you're currently on tiered pricing, upload your statement and we'll show you what interchange plus would have cost you last month.
Continue learning: Browse all 60 payment processing terms in our Payment Processing Glossary, or upload your statement for a free analysis of your current processing costs.