Prairie POS Connection Inc. is an Elavon Payments Partner
& Registered MSP/ISO of the Canadian branch of the U.S. Bank National Association & Elavon
An Elavon Payments Partner
WHICH PRICING METHOD IS BEST FOR YOUR BUSINESS?
Tiered Pricing is the most common pricing system available to small to medium sized businesses, although it is not necessarily the most cost effective. With tiered pricing the processor merges all interchange categories into tiers (qualified, rewards, mid-qualified, non-qualified or commercial non-qualified). To build a rate the processor looks at all the card types within a given tier, and comes up with a rate than ensures they cover their margins. An example of tiered pricing: ABC TONER sells ink cartridges, with a tiered system they would have one rate for black ink and one for color. Even though they carry many different brands of ink cartridges, and the cost varies by brand, customers are charged a fixed rate. Obviously as a business you are going to price your products such that your margins are covered.
Tiered + Interchange Differential cost program consists of a 'target qualified rate (based on Consumer Electronic transactions) + interchange differential + a surcharge for rewards and non-qualified cards. Example: with interchange differential pricing ABC TONER would set a base rate for black cartridges, and a surcharge for color. However the base rate is only applicable to one specific brand of ink, all other brands are charged a differential fee. So if the cost of the brand the customer purchases is 25% more than the base brand, the customer would pay the base black rate PLUS 25% (differential) for the difference in base cost. If the merchant purchased a color ink cartridge and the base price on the color is 50% more than the target brand, the customer would pay the base rate + 50% differential + the color surcharge. These extra charges can add up quickly.
Cost Plus Pricing is when interchange and assessment fees are passed through at cost, and then you pay a small processing fee on top. An example of cost plus pricing: ABC TONER would look at the actual cost for each individual ink cartridge and set their price accordingly. This is probably how you price out your products and services now.
We believe it’s important to provide our customers with the best overall cost of service, and we believe that cost plus does just that. Not only does cost plus allow you to take advantage of the lower interchange fees, it will also ensure that you receive real-time cost savings that Visa / MC will be implementing over the next few years. Typically, a cost plus pricing model lowers your overall rates between 5 – 10%.
Annual Rate Review - Monthly Statement Monitoring
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