Card Not Present Tiered Pricing

Card-Not-Present Tiered Pricing

When using tiers for processing fees, most processing companies use a three-tiered system. The tiers are qualified, mid-qualified, and non-qualified.

Every transaction that is run through the processor will fall into one of these tiers.

Qualified transactions cover all credit and debit cards that are swiped or the chip inserted. This is the most common card transaction and constitutes the bulk of charges.

Transactions jump to the mid-qualified if the card is manually input or a rewards card is used.

The last of the three tiers is the non-qualified charge. This tier covers a variety of transactions, including international cards, company cards, and card-not-present transactions.

A card-not-present transaction will always fall into the non-qualified tier and have the highest charge. This is a direct result of potential fraud. Credit card companies try to work around this by requiring the CVV (card verification value) from the back of the card, but even this is not foolproof.

Often tiered pricing is geared toward high risk businesses. The majority of these are online businesses that deal with credit cards being input remotely. However, they can also include any delivery service that takes payment over the phone or occasionally by mail.

Because there is no way to verify that the person making the payment is the owner, the processing company takes a greater risk in covering the charges.

Generally, this process is not about the company trying to make extra money. Instead, the higher rates are about the company covering their bases.

Tiered pricing receives a mixed review. Some claim it to be a straightforward way to categorize charges and separate them into three easy to understand groups.

Others claim it is an easy way for processing companies to hide fees and shift charges to higher percentage tiers without explanation.

Regardless of the perception of tiered pricing it sometimes is the best fit for a high risk business.

There are options, however, a business with heavy card-not-present traffic will generally be guided toward a higher percentage fee.

When entering into a contract with a processing company, the business must understand where they are coming from. What are they presenting to their processor?

At the end of the day, it comes down to whatever system best fits their specific needs. Whether that is a tiered system that will provide the best fit is between them, their business, and the processing company.