To help you make sense of what you’re paying for, let’s look at two of the major fees you’ll have to pay: interchange fees and card brand fees.
Wholesale vs. Markup
Before we get into interchange and card brand, let’s compare wholesale costs and markup costs.
Markup costs are fees paid to your credit card processor or payment gateway company. When you sign up for a merchant account (a bank account that allows you to accept credit and debit cards), you’ll be quoted your markup costs. Every company will quote you something different. But, the amounts are based on things like
The good thing is that these costs are negotiable.
Wholesale costs are fees paid to the card banks (Wells Fargo, Chase, Bank of America, etc.) and card brands (Discover, MasterCard, Visa, American Express). You’ll pay these to your credit card processor, who will then pass them on to the right place. Unfortunately, these fees are not negotiable.
Both interchange fees and card brand fees are wholesale costs. So, these fees do not go to your card processing company and cannot be negotiated. Instead, the fee amounts are set by the credit card companies.
Interchange fees will make up the bulk of your costs and are paid to the credit card’s bank. For example, if your customer used a Visa Rewards card backed Wells Fargo, the interchange fee for that transaction will go to Wells Fargo.
The amount of each fee is based on the type of card (Rewards, Corporate, Personal, etc.), the way the card is processed (swiped, keyed-in, etc.), and even where the card was used (supermarket, gas station, retail, etc.).
Because so many factors affect the interchange fee, there are tons and tons of fees. Luckily, Visa and MasterCard both publish their interchange fees. Unfortunately, Discover and American Express require you to get permission from your merchant bank to see their fees.
Card Brand Fees
Now, remember, interchange fees are going to banks, not the credit card companies. Card brand fees do go to the credit card company.
Unfortunately, card brand fees are not published anywhere, but your card processor might be able to help you find out what your fees are. These fees are typically a percentage of your transactions or a flat amount per transaction. Sometimes, the fee could be a combination of the two.
Card brand fees are smaller than interchange fees, but they can add up very quickly.
You might also see them called card association fees or network access and brand usage fees.