Wholesale vs Mark-up Payment Fees – What’s the Difference?

There’s an old saying which applies to businesses of all sizes – a penny saved is a penny earned. When it comes to payment processing, it’s imperative you understand what fees you are paying and whether you can avoid them. Payment fees can be broken two into two categories, wholesale, and mark-up. Read on to learn more about the differences and why they are important terms to know.

Wholesale Fees

Wholesale payment fees are largely considered payment processors “buy rates.” These rates are set by card brands – Visa, Mastercard, American Express, and Discover – merchant acquirers and then “sold” to other payment providers. In essence, it is the base cost of a payment transaction and offers little to no wiggle room to negotiate.  If your merchant account is set up on a wholesale basis, consider yourself lucky! The majority of businesses cannot say the same.

Mark-Up Fees

The second set of fees to be aware of are mark-up fees. These fees are negotiable, and it’s worth your while knowing what’s what. A processor takes its wholesale rates and adds a mark-up to earn a profit. Expect a typical markup between 15%-25%. Check out the following fees and see if you can reduce your costs:

Transaction Fees – This is typically a flat fee assessed each time a payment is processed. Average transaction fees range between $0.10 and $0.30. It is important to note, a transaction fee is charged on top of your discount rate.

Terminal Fees – If you have a brick-and-mortar store, customers most likely swipe their cards on a payment terminal. This piece of equipment is typically leased, and you are responsible for the monthly fees. If you have the option to buy the equipment, we recommend you do so. It will be a higher upfront cost investment but capable of saving you thousands in the long run.

Payment Gateway Fees – A payment gateway virtually connects your merchant account to your payment processor. Typically a flat monthly fee is assessed for this required piece of software.

PCI Fees – These fees are paid to the payment card industry and typically relate to a merchant’s PCI NON-compliance. These fees are assessed monthly until your business is PCI compliant. The costs can add up quickly, so be sure to learn how your business can gain compliance and drop the fee assessment.

Annual Fees – Typically, this minimal fee covers the cost of maintaining your merchant account. Expect to pay between $25-$100 annually. In some instances, this fee may not be assessed at all.

Statement Fees – A typical administrative fee is the statement fee. This covers the “costs” of printing and mailing statements or emailing them electronically every month.

Early Termination Fees – These come into force if you end your merchant contract early. They can be hefty, so be sure to read the fine print before canceling your services mid-term. Expect to see either a flat-rate assessed or a percentage of your average monthly volume will be charged.

Monthly Minimum Fees – Processors charge monthly minimums to prevent businesses from opening a merchant account and not using it. Should you not process a payment for an entire month, expect a monthly minimum fee. These can be a nominal $25.00 or more exorbitant if the merchant deems it necessary.

The sheer number of these fees can be a complicating factor. What’s more confusing is that they are not always easily defined on your monthly statements. Indeed, it is often in the provider’s interests to be as opaque as possible as it helps them add a little extra onto their bills. Before you sign up with any provider, it’s a good idea to check you understand their entire payment and billing structures. At Payment Savvy, our goal is to be transparent and help our merchants create a custom and scalable payment solution. Interested in more payment terms? Check out this recent blog for more 4-1-1.