The 3 Types of Restaurant Credit Card Processing

By: Julia Beebe

2 Minute Read

Nov 20, 2017

Credit Card Payment Lifecycle

You set up credit card processing in your restaurant because it's crucial to your customer's experience, but how much do you really understand about how you're being charged?

You might recall from our earlier post on how credit card processing works that there are several players when it comes to where your customer's money goes. Here is a quick refresher:


Now let's cover the different types of rates.

1. Interchange-Plus Pricing

Interchange-plus pricing consists of three fees set by the credit card processor, the issuing banks, and the card associations, as shown in the graph above. All fees vary by card type, except for the processor’s markup, which is negotiable.

The level of detail in interchange-plus statements will vary greatly by processor. The most important takeaway? While you can review exact fees you’ve paid in past months, you cannot plan for future costs, as you’ll never know which cards your customers will be using.

2. Flat-Rate Pricing

Flat-rate pricing is a new type of pricing that is catching on. It's similar to interchange-plus, because both interchange and processor markup fees are considered. However, the fees you’re paying won’t fluctuate by card type. The pricing stays flat.

Flat-rate pricing finds the median rate you should be paying, based on several different factors, and charges just that. There are no surprises with flat rates; if the interchange rate or your transaction volume fluctuated one week, you still pay the same amount per transaction. This gives you a finer level of control, allowing you to better project restaurant costs.

3. Tiered Pricing

With tiered credit card processing pricing, the credit card processor bundles the interchange rate into a variety of buckets, or tiers. Processors can create as many tiers as they want, but a three-tiered system is the most common.

Typically, the three tiers are qualified, mid-qualified, and non-qualified. Qualified rates are the lowest, and transaction rates increase for mid-qualified and for non-qualified transactions. Qualified transactions must meet all of the processor’s criteria for processing, and failure to meet one or more standards may result in a ‘downgrade’ to mid-qualified or non-qualified tiers.

The credit card processor sets the rates and fees for mid- and non-qualified payments as they see fit. However, VISA, MasterCard, and other card associations do not recognize tiered rates. They are completely constructed by processors.

Plus, in a contract, processors often fail to disclose which tiers the merchant’s transactions are falling into, making it near impossible to determine the markup rates.

Read the Ebook Learn About Your Credit Card Processing Fees

Want to better understand these rates (with handy images!) , what fees you can avoid, and how your customer's credit card types could be costing you more money?

Read the ebook The Restaurant Guide to Credit Card Processing Simplified to learn more about how credit card processing could be effecting your bottom line.

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