The tiered processing rate is just what it sounds like. The tiers are the various levels of pricing set up for specific cards being accepted. Several rates can fall into this tiered bracket structure. Tiered pricing is a merchant account rate structure that merchant service providers use to assess charges based on the card that was used for the transaction such as debit and credit, reward cards.

As the business owner, you would pay the rate that type of card into in the tiered pricing structure. For the sake of merchant services, (credit card processing) we have outlined a few levels here for your reference:

• Debit PIN: swiped debit cards with a PIN 1.29%
• Qualified: swiped credit / debit non-reward cards transactions 1.29%.
• Mid-qualified: rewards / membership, loyalty cards and manually keyed-in transactions 2.69%
• Non-qualified: corporate card, high-reward credit card, international card and card-not-present transactions 2.99%
• eCommerce: online only transactions on a website 3.49%

What is padding for tiered credit card processing rates? When you are looking at your merchant service statement, it will show the pure cost rate (interchange rate) listed for each tiered rate. Then it will show the fee the processor is charging for their service.

Often the processor will inflate (add padding) to the interchange rate rather than listing the true cost of the rate that is specified by the card issuer. The provider is increasing the rate and making it appear as the pure cost of the rate.

i.e. 1.89% interchange rate charged when the actual interchange rate should be 1.69%, so this rate was padded by .20% which is 20 basis points.