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Merchant Account Pricing | What to focus on

Posted by Alex Neir on Fri, January 13, 2012 @ 11:08 AM
Merchant Account Pricing

Merchant account pricing can be confusing in that there are quite a few moving parts that determine the overall cost month to month. This post is intended to explain how merchant account pricing is set up and give your business specific direction when considering alternate pricing plans.

There are three pricing models used to establish merchant account pricing.

  1. Interchange Plus – Transparent pricing in which you are assigned an exact markup over interchange
  2. ERR (Enhanced Rate Recovery) – One advertised rate with disguised downgrades
  3. Tiered Pricing – Multiple tiered prices depending on how credit cards are accepted

Regardless of the pricing model there are two components that make up the majority of your merchant account cost. The percentage of the sale and the per-transaction cost.

Most merchant service providers will have a preferred pricing model which is used to quote merchant account pricing. It is up to the business requesting an account to specify which pricing they prefer. The most cost effective pricing is Interchange Plus.

Specific direction when considering alternate pricing plans

Rule 1 – request interchange plus pricing. If the provider you are speaking with tells you that your business does not qualify for Interchange Plus pricing, look for another provider.

Rule 2 - Understand how your business’s transaction size and frequency affect your merchant account costs. First, determine your average sale amount. Take the total amount of sales for the previous month and divide them by the total transactions. Second determine the total number of transaction you are likely to conduct month or month.

With these two figures you can do a simple calculation to determine where you need to focus when negotiating your rates. If you have a higher average sale amount and lower transactional volume you need to negotiate a lower percentage of sale. If you have a lower average sale amount and I high transactional volume you need to negotiate a lower per transaction price.

For example - If your pricing is 1.59% and $0.25 per transaction:

  • A $1.00 transaction will cost $0.27 or 26.59%
  • A $100.00 transaction will cost $1.84 or 1.84%

Would you like more guidance on how to negotiate your merchant service pricing? Download our guide on questions to ask when looking for a merchant account.

Tags: ERR Pricing, Tiered Pricing, Interchange Plus Pricing, Merchant Account Pricing

Merchant Account Discount Rate – Explained

Posted by Alex Neir on Tue, March 01, 2011 @ 01:34 PM
Discount Rate

Merchant Account Discount Rate – Explained

What is the discount rate on a merchant account? This is a very common question. The discount rate is the fee charged for running a credit card transaction. There are typically multiple discount rates associated with a merchant account. The number of rates depends on the pricing that has been set up on the account. The 3 most common pricing structures are ERR Pricing, Tiered Pricing and Interchange Pricing.

In order to determine the discount rate that will apply for a specific transaction you must first examine the details on how the credit card information is captured and what type of credit card is being used. Is the credit card being swiped through a terminal or keyed into the terminal? NOTE: Keyed into the terminal also includes customers typing their credit card information on a website. Next, what type of credit card is being used? A check card, debit card, rewards card, corporate card, international card, etc. These details ultimately drive the discount rate that will apply.

Let’s look at an example based on a tiered pricing structure.

For our example we’ll use a 3 tier model. Each tier is identified as follows:

  • Qualified Discount Rate – Card swiped through a terminal
  • Mid-Qualified Discount Rate – Card keyed into a terminal or a rewards card
  • Non-Qualified Discount Rate – International card or corporate card

Each specific tier will have a discount rate associated with it:

  • Qualified – 1.79%
  • Mid-Qualified – 2.39%
  • Non-Qualified – 3.09%


Credit Card Transaction Amount = $100

Transaction Deatils

Interchange Fee

Discount Rate


Swiped, Check Card




Swiped, Rewards Card




Check Card, Keyed In




Keyed In, Rewards Card




Swiped, International Card





Would you like to understand credit card pricing and which pricing structure is right for your business? Please give our friendly staff a call and we would be happy to consult with you. (800)917-8026

Tags: Interchange Fees, Discount Rate, Tiered Pricing

The 3 best price structures for credit card processing | Tiered

Posted by Alex Neir on Thu, August 26, 2010 @ 04:08 PM

The 3 best price structures for credit card processing | Tiered Pricing

pricing structure for a credit card processing
There are many ways to set up the pricing structure for a credit card processing account. We will discuss the 3 best price structures for credit card processingand give a detailed explanation of each.
  1. ERR Pricing: One rate
  2. Tiered: Two to four rates
  3. Interchange Plus: Every rate

The second price structure for credit card processing is called Tiered Pricing. Tiered pricing gets its name from the fact that there are multiple tiers set up to determine the price associated with the transaction.

Typically there are 2 to 4 tiers that are set depending on the type of business. Retail merchants usually have 3 to 4 tiers and internet business tend to have only 2. For this example with will look at are retail business.

The 4 tiers set up most often for retail business are as follows:

  • Debit
  • Qualified
  • Mid-Qualified
  • Non-Qualified

Each tier’s rate is negotiated with your merchant service provider. We will use the following for illustrative purposes.

  • Debit: 1.10%
  • Qualified: 1.69%
  • Mid-Qualified: 2.29%
  • Non-Qualified: 2.99%

Each tier’s qualification parameters:

  • Debit: Debit cards where the PIN is entered by the customer at check out
  • Qualified: Check cards that are swiped through the terminal
  • Mid-Qualified: Check cards that are keyed in to the terminal, Rewards cards that are swiped or keyed into the terminal
  • Non-Qualified: Corporate or international cards swiped or keyed

As a merchant business with a tiered pricing structure illustrated above, you will be charged the tier rate associated with the transaction regardless of the interchange table rate.

(The Interchange Table is the rate table set up by Visa, MasterCard, Discover and American Express to facilitate the acceptance of plastic as a form of payment. There are currently over 180 different interchange rates that can apply. The rate is determined by how the card is transacted – swiped vs. keyed and the type of card that is transacted – debit card, check card, rewards card, corporate card, international card) More information on interchange fees

Transaction Amount = $100

Interchange Qualification

Interchange Rate

Tier Rate


Check Card, Swiped




Rewards Card, Swiped




Check Card, Keyed In




Rewards Card, Keyed In




International Card, Swiped




The tiered pricing structure for credit card processing is most advantageous for merchants that are transacting medium volumes.

What pricing structure is right for my business?

Tags: Interchange Fees, Pricing Structure for Credit Card Processing, Tiered Pricing, Credit Card Processing Fees