The most common way merchant accounts are priced is called Tiered Pricing.
The price of each transaction is calculated based on several factors, including the type of card used, the kind of business the card was used at and the circumstances of the transaction.
Credit card processors typically group those transactions into groups, called tiers or categories. Some of the transactions are given the Qualified Rate (typically this is the lowest rate that was negotiated when the merchant account was opened) and the others are given a Mid-Qualified or Non-Qualified rate.
Most processors market a very low qualified rate to make merchants feel like they're getting a great deal.
They reason they do this is because more often than not the majority of the cards collected will downgrade.
Mid & Non Qualified are where most processors make their money.
Common transactions such as debit & rewards transactions are frequently “downgraded” to a lower level of qualification, meaning the merchant loses more money in the transaction.
In theory, grouping transactions into categories to make merchant statements simpler is a valid idea.
In practice, however, it reduces transparency and often results in a bad deal for the business owner IF they only focus on the low qualified rate.