Tier Method

The Tier Method is one of the types of systems used by Merchant Services Companies to charge Business Owners for accepting credit cards.

If you have a Three (3) Tier method on your statement, you are not being given proper credit for a Debit Card charge. A typical Four (4) Tier method on your statement is more accurate to Industry standards and you are "probably" getting credit for Debit Cards.

Before we go any further, there are easily over 100 types of credit cards issued by the major companies - Visa and MasterCard.

The structure is:

  • First Tier = Qualified Rate. This will be the lowest rate charged to you on a "credit card" type of transaction. It will usually be a "Swiped" card and it will be more like a "personal credit card" versus a Rewards/Travel/Corporate card.
  • Second Tier = Mid-Qualified. This will be a middle rate charged for a credit card transaction. Perhaps it is taken over the phone (card not present), a Corporate Card or rewards card. Or perhaps the address wasn't verified on a keyed entry.
  • Third Tier = Non-Qualified. These are the most expensive rates charged to Merchants. Many Corporate or Rewards cards are in this area. Perhaps no address verification and it was keyed. Also, if the Merchant does NOT Settle out within 48 hours of initial processing, all cards will be charged the Third Tier Rate.

Debit Cards are more unique. In the beginning, they required a special PIN PAD to be entered with the "swipe" to process the card. A Debit Card removes actual cash from your customer's account into the Merchant's Bank Account immediately upon settlement. The technology has advanced enough now that a PIN PAD isn't needed to still obtain a very low Fee.

If you have a Three (3) Tier system, all your Debit Cards are being charged to your First Tier Rate - usually a FULL POINT above the actual cost of a Four tier system.

Example - a Four Tier System could be charged to the Merchant as such:

  • Debit Card Transaction - 20 Basis Points
  • Qualified CC Transaction - 160 Basis Points
  • Mid Qualified CC Transaction - 215 Basis Points
  • Non Qualified CC Transaction - 325 Basis Points

That same business on a Three (3) Tier system would have all their Debit Cards wrapped into the First Tier charge of 160 Basis Points. Not very fair to the business owner. They would be paying 140 Basis Points for "nothing" on every Debit Card accepted!!

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