The short answer
Tiered pricing is a processor model where every transaction you run gets assigned to one of 3-6 tiers, each with its own rate. The classic three-tier setup is qualified (the cheapest rate, what they quote you up front), mid-qualified (a middle rate for rewards cards and some keyed transactions), and non-qualified (the most expensive rate for corporate cards, international, and anything the processor decides doesn't qualify). You never see the interchange cost; you just see the tier.
Why processors love it
Tiered pricing lets the processor quote "1.69% qualified" at the top of the page and then land 60-80% of your actual volume in mid-qualified and non-qualified tiers at 2.5-3.9%. You think you're getting a great deal because the headline rate is cheap, and by the time you realize your effective rate is 3.4%, you're locked into a 3-year contract with an early-termination fee. This is the model the industry uses when it wants to sell on the lowest visible number.
How the downgrade game works
- A debit-card swipe at a supermarket clears at around 0.05% + $0.21 interchange. A tiered processor buckets it into "qualified" and charges you 1.69%. Their margin: 1.64%.
- That same day, a Chase Sapphire Preferred rewards card gets used online. Actual interchange: 1.80% + $0.10. Processor buckets it into "mid-qualified" and charges 2.40%. Margin: 0.60%.
- A corporate AmEx gets used from Canada. Actual interchange: 2.60% + $0.10. Processor buckets it into "non-qualified" and charges 3.95%. Margin: 1.35%.
The processor sees the whole ladder; you only see the final number on each transaction.
What operators need to know
- Tiered pricing is almost always more expensive than interchange-plus. By definition, tiered hides the interchange cost inside the tier. Interchange-plus shows it separately and charges a fixed markup on top.
- Quoting flexibility is a red flag. If a processor offers "1.69% qualified" and refuses to quote interchange-plus, they are betting that downgrades will move most of your volume out of the qualified tier. Ask for interchange-plus first; if they refuse, push for flat-rate pricing at least.
- Your statement will hide this. Tiered statements show "qualified discount," "mid-qualified discount," "non-qualified discount" as three separate lines. Sum them, divide by volume, and you have your true number. That's often 75-150 basis points higher than the qualified rate you were sold.
- Contract + tiered = double lock-in. Processors who push tiered usually pair it with 3-year contracts and $400+ ETFs. Read the back page.
Why multi-brand operators almost never run tiered
Multi-brand portfolios run too much rewards and CNP volume for tiered to be competitive. Once you're at $50k+/mo per brand, interchange-plus is always available and always cheaper. multiflow negotiates interchange-plus across your consolidated volume by default — we won't quote tiered. See our vs-Stripe compare for the full rate math at scale.