Your Merchant Account Provider Has Price Models For Systematic Levying Of Charges

Your Merchant Account Provider Has Price Models For Systematic Levying Of Charges

As a merchant, you are aware that the whole hundred percent of the transaction amounts after a day’s batch is processed by the acquiring bank and card issuer does not fall into your account. You have to compensate for their service with the discount rates, and sometimes that of the independent sales organizer (ISO) or member service provider (MSP) and there is a well-demarcated markup of the price models used by these charging parties.


Among the most popular price models are the three-tier pricing, six-tier pricing, interchange-plus pricing, and Bill-back pricing. Price models are usually fixed on the terms of the major networks like Visa and MasterCard.


Three-tier pricing

This has been so far the most popular and simplest price model and as the name suggests, the account provider classifies the transactions into three tiers according to certain criteria. The first tier is the qualified rate is the lowest rate incurred by the merchants when they convert the payment received through the customer credit card and is usually the percentage rate for accepting most of the credit cards. The second tier is the mid-qualified rate charged on the merchant for accepting card payments that are not considered as the lowest rate such as a payment terminal or usage of shopping cards, membership cards etc. The third tier is the nonqualified rate where the accepted card payments come with the highest rates and are usually those cards issued under special circumstances without complete verification, on-time batch submission, incomplete data entries etc.

Six-tier pricing

The entry of debt based on PIN entry, the credit card issuers and payment providers had a hit in popularity since the usage of debit cards saved the customers from paying any kind of interest unlike that for credit card shopping. The rising popularity of digital currencies and blow up of Crypto Code scam also affected the credit cards. The rising completion coupled with the activities of Wal-mart, Visa and MasterCard reduced the transaction charges for debit cards to lower than that for credit cards, thereby adding three more tiers to the existing pricing classifications. Two classifications are for debit cards without the PIN and one for cards with a PIN to cover for business and international cards also.

Interchange-plus pricing

This price model is commonly used for bills or cards that are rated as very high or very low and is characterized by the usage of prices included by the Visa and MasterCard in their interchange table. There is another model with some change in the interchange-plus pricing known as Bill-back pricing in which billing is done first for the first tier cards and then, second and third tier cards are billed, while the charges for the whole billing will be the qualified price. The method is also called Enhanced Recover Reduced and may result in extra payment of surcharge for the difference in the rates of separate billing.