What Is The Wholesale Rate For Credit Card Processing?

Using the term “wholesale” when referring to credit card processing rates can be confusing, that’s why understanding what is the wholesale rate for credit card processing is so important. Usually when we think about buying wholesale, what comes to mind is buying in bulk to resell, or buying direct from the manufacturer, thus avoiding any markup in the price by a middleman.

The wholesale rate for credit card processing actually refers to the fees charged by the credit card issuing banks (called interchange fees) and the fees charged by the credit card brand associations (called assessment fees) for the role they play in processing your credit card transactions. In truth, a more descriptive term would be “base rate” or “pre-markup rate”. In other words, when a processor refers to a wholesale rate for credit card processing, they’re quoting a figure for your fixed costs before they add their transaction and other service fees.

Knowing what is the wholesale rate for credit card processing it is important to understand the credit card brands and their issuing banks set their own interchange and assessments fees. These fees are listed on the brand association websites. These fees are non-negotiable, meaning they are the same for all processors, and most processors simply pass these fees along to you at no extra cost. Hence the term “wholesale rate”.

Understanding Basic Credit Card Processing Fees

To better understand credit card processing costs, you have to understand the fees that make up your rate. There are three basic fees for processing credit card transactions. Simply stated they are:

  1. Interchange Fees: The fee your bank pays your customer’s bank (the bank that issued the card) for processing a credit card transaction.
  2. Assessment Fees: The fee your customer’s bank pays to the credit card associations (Visa, MasterCard, etc.) for the privilege of handling their brand card.

When learning what is the wholesale rate for credit card processing, you should know that interchange and assessment fees are in total approximately 75 – 80% of your processing costs. Interchange fees and assessment fees are fixed and non-negotiable. However, there’s no rule that says a credit card processor can’t add a markup to the interchange and assessment fees charged to them. In today’s market, it would certainly be hard to do that and remain competitive. But since these fees are public record, you can check to see if your processor is adding anything to either of these fees.

Also keep in mind the card brands and issuing banks review their rates regularly. These rates are subject to change twice a year, in April and October. And just as there are no rules preventing credit card processors from marking up interchange rates and assessment fees, there are no rules stating that a credit card processor has to lower the rate set out in your contract if the card brand associations or the issuing banks lower their fees. So it’s in your best interest to read your monthly credit card processing statement carefully and check the internet for any rate changes.

  1. When taking into consideration what is the wholesale rate for credit card processing, you should know what are the merchant account fees: Everything else you pay for the privilege of being able to accept credit cards at your place of business. They can include: Transaction Fees, Processing Fees above Interchange, Annual Fees, Monthly Fees, Minimum Fees, Statement Fees, Termination Fees, and more!
  2. Merchant account fees, or markup fees, make up the other 15 to 20% of your credit card processing costs. These fees are to cover the services provided by your processor and is the source of their profits. Merchant account fees vary from processor to processor and rates and markups associated with these fees are not always made transparent. However, these fees ARE negotiable, and you should have a list of these rates to compare before choosing a processor.

So It’s Buyer Beware!

When you think about it, the term “wholesale rate” does make sense. The credit card brands and issuing banks charge your processor interchange and assessment fees. Your processor, acting as the middleman passes these fees on to you at cost, and makes a profit from adding service fees. And the combination of these fees add up to your cost for processing credit card transactions.

Just remember, when researching what is the wholesale rate for credit card processing “wholesale” rates, or fees, are fixed by the credit card associations and issuing banks and processors are charged the same rate across the board. So don’t be taken in by processors who claim they can get you a lower wholesale rate!