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Subscription vs. Markup Pricing: Which One is Cheaper?

When you’re running a small business, every dollar counts. One of the biggest expenses that many companies overlook is their payment processing. Every time you run a customer’s credit card, your payment processing company charges you a small transaction fee. While this charge may seem negligible, it quickly adds up if you’re processing hundreds or thousands of daily transactions. 

But not all payment processors are equal. Every company has its own pricing structure that appeals to different businesses. So, if you don’t research and find the cheapest payment processing available, you can quickly lose thousands of dollars by paying unnecessary fees. So, to help you better grasp which processing model makes sense for you, here is a breakdown of the two most common types of payment processing: subscription and markup pricing. 

Understanding Payment Processing: Subscription vs Markup Pricing 

Although each payment processor has unique quirks in its pricing structure, the two big categories are subscription and markup. A subscription model means that you pay a set monthly amount—as with any other subscription service—in exchange for a lower processing fee per transaction. 

With a markup pricing model, you have some fixed upfront costs, but the biggest difference is that you pay a higher percentage per transaction. This is the model you’ll encounter with companies like Square and Stripe. 

Understanding subscription vs. markup pricing may be easier if you look at two examples side by side. Synapse Payment Systems is a subscription-based payment processor that does not charge a transaction markup. Square is another popular payment processor that uses markup pricing and does not charge a monthly subscription fee. Here is a look at how they compare. 

  Synapse Payment Systems Square
Subscription Cost $49.99 – 149.99 per month $0
Markup Cost $0 2.6% + $0.10 (card present)

3.5% + $0.15 (card not present)

2.9% + $0.30 (online transaction)


Interchange Hard Cost (0.3 – 2.0%) Included

So, as you can see, the subscription vs. markup pricing structures are nearly opposites. The final monthly fee will vary either way simply because the Interchange rate fluctuates. Interchange is a fee imposed by a specific credit or debit card, which can vary greatly depending on the type of card. For instance, a rewards card will include higher interchange fees than a non-rewards card.

While Interchange may vary, with Synapse, you will always know how much you’re paying your processor—this is the flat subscription rate. With a markup model, the amount you’re paying the processor (their profit) can vary month to month.

Which Type is the Cheapest Payment Processing? 

At the end of the day, most businesses just want to know this: Which one is cheaper?

It can be challenging to assess which is the cheapest payment processing for your business because it depends on several factors—notably, your monthly sales volume and average transaction size. 

Markup pricing is usually cheaper if you do a low sales volume and primarily process card present transactions. If you’re a freelancer or you sell products at trade shows, for example, markup will often be your most affordable option.

But the more sales volume you do, the more expensive markup pricing becomes. If you have a physical storefront or sell products online—especially if you’re taking dozens or even hundreds of transactions each day—the higher fees per card swipe will eventually exceed the monthly subscription costs, even with the interchange fee. In other words, there is a threshold for every business that determines which is the cheapest payment processing.  

While it will vary from business to business, a markup model generally is the cheapest payment processing for merchants who process less than $5,000 in monthly payments. If your business sees more than that, a subscription model is typically more cost-effective.

It’s also worth noting that Square does not charge a monthly fee in addition to its markup pricing, but other processing companies do. While this example uses Square, take note that other markup-based processing companies are less cost-effective for small-volume merchants. 

Examples of Subscription vs Markup Pricing 

To make the subscription vs markup pricing differences concrete, here are a few examples. 

Imagine you run a small woodworking business from your home. To keep it simple, say you sell your pieces for $100 each and generally make about ten sales per month, all of which are card present transactions. 

Here is a breakdown of subscription vs markup for your business: 

  Synapse Square
Subscription Cost $49.99 $0
Mark Up Cost $0 $27 = ($1,000 x 0.026) + (10 x 0.10)
Interchange $3 – $20 $0
Total Cost $52.99 – $69.00 $27

In this scenario, the cheapest payment processing is Square because your revenue does not exceed the threshold where it makes sense to pay a monthly subscription cost. 

But, say you decide to move the business out of your garage and invest in a storefront. You begin to scale your business and enlist the help of other artisans to produce your products. Now you start selling 100 furniture pieces per month (or $10,000 in revenue). 

Here is what the transaction costs would look like for subscription vs markup pricing: 

  Synapse Square  
Subscription Cost $49.99 $0
Mark Up Cost $0 $270 ($10,000 x 0.026) + (100 x 0.10)
Interchange $30 – $200 $0
Total Cost $79.99 – $249.99 $270

With this added volume, the subscription model is now the cheapest payment processing model. Even if the interchange fee is assessed at the highest rate for every transaction (which would be quite rare), you’re still paying less than the markup model. This margin will only get more significant the greater the volume of sales you do. 

But sales volume isn’t the only factor to consider. Say your business keeps growing, and you decide to start an online store or take orders from customers over the phone, resulting in numerous card-not-present transactions. Your in-store sales remain the same, but you make an additional 30 online sales and 20 sales over the phone. 

Here is a breakdown of what the subscription vs markup pricing would look like: 

  Synapse Square
Subscription Cost $49.99 $0
Card Present Markup $0 $270
Card Not Present Markup $0 Over the phone: $73 = (0.035 x $2,000) + (0.15 x 20)


Online: $90 (0.029 x $3,000) + (0.30 x 30)

Interchange $45 – $300 $0
Total Cost $94.99 – 349.99 $433

 The cheapest payment processing is still the subscription model, but the margin is growing wider. Whereas before you may have saved $100 per month with a subscription model, now you’d be saving double that—or more—and the savings keep increasing every month that your business grows. 

Cheapest Payment Processing Bottom Line 

Ultimately, the subscription vs markup pricing debate boils down to what makes the most sense for your business. The markup model may be the cheapest payment processing for freelancers and small businesses that aren’t expecting a high monthly sales volume. 

But, for those who are doing more than $5,000 in monthly revenue or small business owners looking to scale quickly, the subscription model will save you money and provide a much clearer picture of how much you can expect to pay per month. 

If you’re still on the fence, our experts are happy to review your current statement and tell you exactly how much you can save by switching to Synapse. Get in touch today by filling out the contact form or calling us directly at 800-925-5191. 

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