Interchange Plus shows the wholesale cost separately from your processor's markup. Tiered pricing hides the markup inside three rate buckets that the processor controls. On the same volume and card mix, tiered pricing typically costs 30 – 50% more.
The wholesale cost is the same either way
Before we get into pricing models, one thing to understand: nobody can charge you less than the actual wholesale cost of a transaction. That wholesale cost has two parts:
- Interchange — flows to the cardholder's bank. Set by the card networks. Typically 0.05% – 2.95% depending on card type.
- Assessments — flows to Visa/Mastercard/Discover. Typically 0.13% – 0.14%.
Whether you're on Tiered pricing or Interchange Plus, your processor pays the same wholesale cost. What differs is how the markup is presented to you — and whether you can see it at all.
How Interchange Plus works
Interchange Plus separates the wholesale cost from the processor's profit:
| Component | Example rate | Who keeps it |
|---|---|---|
| Interchange | ~1.65% | Cardholder's bank (pass-through) |
| Assessments | ~0.14% | Card networks (pass-through) |
| Processor markup | 0.25% + $0.10 | Your processor (profit) |
The markup is a single, transparent line item. If interchange changes, your cost moves with it; if you process a debit card with cheaper interchange, you pay less. Your processor's cut stays the same percentage no matter what.
On your statement, Interchange Plus looks like dozens of line items grouped by interchange category (Visa CPS Retail, Mastercard Merit III, etc.) and then a separate markup line. It's busier to read, but it's honest.
How tiered pricing works
Tiered pricing collapses all of that into three "buckets" with single rates:
| Tier | Marketed rate | What lands here |
|---|---|---|
| Qualified | 1.69% | Standard debit, basic consumer credit (only ~30% of transactions in practice) |
| Mid-Qualified | 2.49% | Rewards cards, keyed-in transactions |
| Non-Qualified | 3.69%+ | Business cards, corporate cards, downgraded transactions |
The headline "1.69%" rate gets you in the door. But the processor decides which transactions go in which bucket — and they get to define what counts as a "downgrade." The result: most transactions end up in Mid-Qualified or Non-Qualified, where the real margin lives.
The trick: on tiered pricing, the markup is invisible. Wholesale interchange for a rewards card might be 1.65%; you're charged 3.69%. The 2-point spread is the processor's margin — but you can't see it broken out anywhere on the statement.
Real numbers, same merchant, both models
Here's a typical neighborhood retail shop processing $25,000/month, 600 transactions, mixed card types:
Tiered pricing
| Qualified ($7,500) | 1.69% | $126.75 |
| Mid-Qualified ($11,000) | 2.49% | $273.90 |
| Non-Qualified ($6,500) | 3.69% | $239.85 |
| Per-transaction (600 × $0.25) | $150.00 | |
| Monthly fees | $55.00 | |
| Total | $845.50 | |
| Effective rate | 3.36% |
Interchange Plus
| Interchange (blended) | ~1.78% | $444.80 |
| Assessments | ~0.14% | $35.20 |
| Markup (0.25%) | 0.25% | $62.90 |
| Per-transaction (600 × $0.10) | $60.00 | |
| Monthly fees | $15.00 | |
| Total | $617.90 | |
| Effective rate | 2.46% |
Same merchant, same activity. Different pricing models. Tiered costs $227.60 more per month — over $2,700 a year. And nothing about the merchant changed; only the model.
What about flat-rate (Square, Stripe)?
Flat-rate pricing — 2.6% + 10¢ on Square, 2.9% + 30¢ on Stripe — is the simplest model. One rate, all-in. No interchange tables, no qualified/non-qualified buckets.
At low volumes (under ~$15k/month) and with simple needs, flat-rate is genuinely fine. The simplicity is worth real money, and the lack of monthly fees can offset the higher per-transaction rate.
Above ~$15 – $20k/month, the math turns against flat-rate. For our $25k retail example, Square at 2.6% + 10¢ would charge about $710/month — better than tiered, but $90 – $150 worse than competitive Interchange Plus.
| Model | Sample monthly cost | Effective rate |
|---|---|---|
| Flat-rate (Square 2.6% + 10¢) | $710 | 2.84% |
| Interchange Plus (0.25% + 10¢) | $618 | 2.46% |
| Tiered pricing | $846 | 3.36% |
How to tell what you're on right now
Pull out your most recent statement and check for these:
- You're on tiered pricing if you see "Qualified," "Mid-Qualified," "Non-Qualified" tiers, or codes like "QLFD," "MQLD," "NQLD," or line items like "NQ Surcharge."
- You're on Interchange Plus if you see dozens of interchange categories listed by name (Visa CPS Retail Credit, Mastercard Merit III, etc.) with a separate small markup percentage and per-transaction fee.
- You're on flat-rate if you see a single rate applied to every transaction with no interchange breakdown at all (Square, Stripe, Toast, Clover Go).
Which is right for your business?
- Under $10k/month and small ticket sizes: flat-rate (Square/Stripe) is usually fine and the simplest.
- $10k – $50k/month, mixed card mix: Interchange Plus almost always wins, often by 20 – 35%.
- $50k+/month or high average tickets: Interchange Plus with negotiated markup. At this volume, every basis point matters.
- You should never choose tiered pricing. If you're on it, you're paying for the privilege of opacity.
Switching pricing models
You don't necessarily need to switch processors to switch pricing models. Many processors will move existing accounts to Interchange Plus if you ask — particularly if you can show them a competing quote. Some won't, and at that point switching is the right move.
Either way, the move is usually easier than business owners fear: most equipment is reprogrammable on-site in 15 minutes, and a new account typically opens in 1 – 3 business days.