4 Types of Payment Processing (Explained)


Merchant service payment processing can be difficult to understand, especially if you are not familiar with the back ends or financial terms of the industry. At RGR Consulting Inc., our job is to make everything clear and transparent so that you can clearly understand your own merchant contract and all the fees that are associated with your payment processing statement.

In the merchant services industry, there are 4 main systems of pricing. In some cases, different providers will refer to these 4 pricing methods by different names but they all stem down to the same way of calculating your processing fees. These four pricing structures and their methods are:


Interchange Plus or Cost Plus Pricing

A single markup percentage is added on top of your processing volume. This is the most clear & transparent pricing with the lowest markup and therefore the lowest cost to the merchant. Most processors prefer not to use this pricing method as it usually means lower profit margins.


Flat Discount Pricing

A flat, consolidated rate based on your processing history and the industry being serviced. The rate remains constant no matter what type of card is used or how the transaction is performed. Many online payment processors, such as PayPal and Square, use this type of pricing structure.

Tiered Pricing

Tiered pricing breaks down the marking into different percentage rates used for “Qualified” or “Non-Qualified” cards. Depending on which type of card is used for payment, the rates change. Each processor has its own different lists as to which cards are deemed “Qualified” and which are deemed “Non-Qualified” and therefore it is important to keep in mind that while one processor may consider a specific card as “Qualified” and offer a lower cost rate, a different processor may deem the same card as “Non-Qualified” and have a higher cost rate.

Differential Pricing

This is the most common pricing structure used in Canada and unfortunately it is also the most expensive to merchants. It is very similar to Tiered Pricing with different rates, however there are many added interchange costs and fees that are usually hidden within the contract agreement. Merchants that do not clearly understand their statements or agreements may not realize that they are paying extra “fluff” fees that are unnecessary. 


As consultants, our goal is to evaluate the individual needs of your business and find the right pricing solution for your company that will reduce costs and provide true value to your bottom line. Our approach is highly contrarian when compared to the traditional “How much money can I make from you?” approach that most payment processors take.

If you are looking to better understand your current merchant contract, are feeling fed-up with confusing fees, or even want to explore updated machinery at little or no cost – contact RGR Consulting today. Our team of experts are ready and waiting to work for you.

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