Tiered, Interchange Plus, Subscription, Flat Rate, or No-Fee Merchant Services Account. What’s the difference?

When I first started in the “Merchant Services Industry” in 2003, the vast majority of business owners were set up on what is called a Tiered pricing model. At the time we were able to provide some merchants with an Interchange Plus program, but only a few business owners asked about it and even fewer understood it. Today, it is not uncommon for a business owner to ask about any one of the several models currently being used for payment solutions for business owners.

While the following is not a complete list of the different types of pricing models, these are the ones that I discuss the most when talking about merchant accounts with business owners. This is not an all inclusive breakdown of the costs of each one as well, but rather an overview of the different programs. As with anything, I strongly encourage you to do your own research and make an educated decision based on your own unique business situation.

Tiered Programs

This is one of the easiest programs for a business owner to understand. With this program you know that you will be charged one of three different TIERED or bundled rates. The terms you will commonly hear is qualified, mid-qualified, and non-qualified transactions. Your rates in a program could look like 1.49% and $0.25 for qualified transactions, 2.49% and $0.35 for mid-qualified transactions, and 3.49% and $0.35 for non-qualified transactions.

This program is typically what new business owners are signed up on. Once you start consistently processing over $2,500 a month, you really should look into an Interchange Plus program. The more you do in credit card sales a month, the better your negotiating power will be to get better rates for your merchant services account.

Interchange Plus Programs

This is by far the most transparent of all the pricing models out there. It is a bit harder to understand for some business owners, but in my opinion, it really is not. It all comes down to how you look at it. Your provider passes through the true cost of INTERCHANGE fees and assessments straight to the business owner PLUS a percentage (basis points) and transaction fee for their services.  Your rates in a program could be 0.30% and $0.25 plus interchange fees and assessments.

This program typically has the lowest margins for the Merchant Services Provider and is typically reserved for those who are consistently accepting larger volumes of credit card sales each month. I personally believe that this is the best program to be on as a business owner once you are consistently processing higher credit card sales a month.

Subscription Programs

This is one of the newest programs to be offered to business owners. It is interesting in the way that is being implemented and is worth taking a look at to understand what it offers. Depending on the amount of credit card sales you do in a month you would pay a monthly SUBSCRIPTION or membership fee as well as a per transaction fee. This is not the only fees you will pay to accept credit cards. You still have to pay the cost of interchange fees and assessments. Subscription fees for this service could range from $70 or higher a month plus $0.25 per transaction on top of your interchange fees and assessments.

This program is similar to the Interchange Plus Program but with a steady profit stream for the Merchant Services Provider each month. Regardless of the volume of credit card sales you have a month, you are guaranteeing to pay $70 or more a month to accept credit cards on top of interchange fees and assessments. While this pricing model may work for some, I would not recommend this program for a new business.

Flat Rate Programs

This program has a large following since it is so easy to understand. You pay a single FLAT RATE percentage or a Flat Rate percentage AND a transaction fee for all of your credit card transactions. The Flat Rate percentage for accepting credit cards can be around 2.75% for card present transactions or 3.5% and $0.15 for keyed transactions.

This program is popular because of how simple it appears. The problem with this program is that you are overpaying for the majority of the cards you are accepting. Think of this program like the tiered program but instead of having three different fees, you only have one. Some programs have no additional fees of any kind, while others have a myriad of monthly and/or annual fees.

If you have a business that has an average sale of around $100 or less, you are definitely paying more per transaction than you should since people typically use their debit or check cards for these types of transactions. Once you consistently have credit card sales of more than $2,500 a month, your business would definitely benefit financially from another program. While other programs like Interchange Plus may have a more complicated statement, you can rest assured that you are paying less per transaction than those on a Flat Rate program.

No-Fee Programs

This program is not for every business and typically has only been seen in the Government and Education markets until recently. There are three ways that you as a business owner can do this program and the beauty is that you can choose how it works with every sale. As a business owner, you can choose to have the customer pay the entire fee, half of the fee, or none of the fee for using a credit card at purchase instead of cash. The business owner charges a service fee, around 3.5%, to the customer to accept a credit card and the merchant would receive 100% of the entire transaction.

For example, on a $100 sale, the merchant would receive the entire $100 and the customer would be charged $103.50. The business owner incurs No-Fee for the transaction since the customer is paying the fee of 3.5% for choosing to pay with a credit card instead of using cash. Now you can also choose to split the fee with the customer where on that same $100 sale, the business owner would receive $98.25 and the customer would be charged $101.75 or if the owner wanted to, they could absorb the entire service fee and only receive $96.50 and the customer would be charged $100.

This program is typically reserved for businesses with a credit card volume of $10,000 or more a month. Some of the businesses that could benefit from this type of pricing program would be higher ticket sales typical of Jewelers, Gun Stores, Bail Bonds, Furniture, monthly billing, the list goes on and on. It could also be used for smaller average ticket places as well with a custom program with both a percentage and transaction fee or just a transaction fee and no percentage.


New business owners seem to flock to the Flat Fee programs offered by companies like Square, PayPal, and Clover Go. While it may be easier to know exactly what each credit card payment will cost you, it will cost you more than the other programs. The Tiered program is just as popular if not more than the Flat Fee Program with new businesses, but will save you money over the Flat Fee but not as much as a Interchange Plus program.

Interchange Plus programs are typically offered to merchants accepting $2,500 or more a month and the more you process in credit cards, the better your rates will be and the lower your cost will be for accepting credit cards. With the Subscription program I really do not see the cost savings for new businesses and I would be hesitant as an established business to switch. I would have to see if paying a monthly fee would be justified over an Interchange Plus program.

The newest No-Fee programs are definitely appealing to business owners since they are able to make the cost of accepting credit cards the same as cash. While it is a program that can be used with any type of business, there typically is a minimum monthly credit sales volume of $10,000 a month to qualify.

Final Thoughts

Personally, I prefer to set up merchants on the Interchange Plus program since I never want to lose a client because they were “Paying way too much” to accept credit cards. I still have clients who like to be on the Tiered program since that is just what they are used to and/or they just understand it better.  Our newest Zero-fee program has generated a lot of interest and I expect it will become one of our fastest growing segments this year.

In the end, whatever program you choose has its own unique benefits and drawbacks. Do your due diligence and find out the costs and fees involved and make the decision based on what is best for your business. If you are still not sure which program is right for you, give me a call or email me. I am more than happy to discuss the needs of your business and help you to decide.

Steve Kelly



Steve Kelly is a Dad, former U.S. Marine, Drexel University Alumnus, Blue Belt at South Jersey Brazilian Jiu Jitsu, and is always looking forward to his next epic adventure with his family.

EMS Merchant Services Inc. is a registered MSP / ISO of Elavon Inc. Georgia.


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