Any business accepting credit card payments must face the costly transaction of merchant card processing fees. Depending on the type of card your customer uses, you must pay a processing fee between 1.5% and 3.5%. After adding transaction, authorization, and merchant services fees, credit card payments start getting expensive for small businesses.
With the increased cost of living and running a business, entrepreneurs are looking for ways to save money. You can reduce credit card fees with an intelligent step.
This comprehensive guide covers credit card charges UK and processing fees and rates for UK merchants in 2024!
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What are credit card processing fees?
Every business accepting a card payment must pay credit card processing fees to the provider. Usually, it ranges between 1.5 – 3.5% but can be as high as 6% on each sale, including all other transaction fees.
Most consumers today expect to purchase a product or service with plastic money, which urges the need for card machines in small businesses. These are card readers, a device that makes payment processing more affordable for small businesses.
More about credit card processing fees in the UK
Now that you have understood about paying a fee for every card payment, you need to find out why you are charged.
1. Card Transaction fees
Every time there is a card payment, a small part, about 3% or less, is charged. It is not the same for all and depends on the type of card used and the payment method.
If you accept American Express credit cards, you will be charged an Amex fee more than your standard credit card transaction fees.
The card processing charges depend on how your customer is paying retailers. You can pay via credit cards by tapping, inserting, swiping or keying; each comes with different security risks. There’s more risk when there is no physical card, and the credit card company charges more to merchants.
2. Merchant account fees
Merchant Fees: Merchant accounts are your business bank account that you must have for accepting card payments, and it charges you around £5 to £15 per month. However, some companies like Square and Zettle by PayPal keep the costs low for small businesses.
3. Merchant service charge
Merchant service charges can be interchange rates or Discount rates. Banks charge merchant service fees to cover the cost of accepting credit card transactions. The price typically ranges between 0.2% to 0.3%.
4. Cost of card machine
The cost of a card reader machine ranges between £19.20 to £80, depending on the number of card payment terminals required in your business.
Businesses dealing with clients face-to-face must think about the terminal charges. It is a cost that varies by the type and quality of the terminal. Usually, you get three categories to choose from, but the prices may differ:
- Fixed countertop terminal: £14-£20
- Portable terminal: £16-£25
- Mobile terminal: £20-£35
5. Monthly service fees
A merchant pays monthly service fees depending on the type of contract they have with the processor. Usually, the cost is kept minimum for small businesses and ranges between £10 and £20 per month.
6. Transaction authorisation fees
When the card issuer authorises a payment, the transaction authorisation fees are charged, which cost merchants around 1p to 3p per transaction.
7. Setup costs
The setup cost is usually a fixed fee your provider charges depending on the nature of your merchant account for setting up card processing. It usually ranges between £50 to £100, and today only a few companies charge setup costs.
8. PCI compliance fee
Merchants must pay a small amount for PCI compliance, a countrywide fraud prevention method. The fee ranges between £2.50 to £5 monthly. It ensures you are compliant with the data security measures of the payment card industry.
9. Administrative fees
You must pay a few more charges like chargebacks, sending invoices, foreign card processing, and refunds.
When the bank withdraws money from your account to return it to a customer, chargeback fees are asked. It ranges between £10 to £20.
When you voluntarily return money from a business account to a customer, known as a refund, it costs you between 30p to £1.
Invoices and foreign card processing add an extra number to your card processing fee.
How to save money on credit card processing fees?
You can save money on Credit card processing charges by comparing the offerings from different providers in the market.
Not all companies will offer the same merchant services, and there will always be some add-ons. If you need additional service, ask the provider if it is included with the standard package or will cost you to add them. If not required, don’t buy with extra money.
You can never compromise with the PCI compliance levels to save money. Compare between providers for anti-fraud measures offered, contract length, range of cards accepted, setup costs, account fees, retail transaction charges, online transaction charges, and other fees.
Here are a few companies you can choose for small businesses.
| Different service providers | Device costs | Transaction fees | PCI compliance | Other fees |
| Zettle by PayPal | Starts from £29 + VAT | 1.75% for contactless or card payments and PayPal payments,2.5% for invoice transactions | Free | Upto £250 Chargebacks per month is freeNo refund fees required |
| Square Reader | £16 + VAT | 1.75% for inserted CHIP cards and contactless payments2.5% for other payments | Free | No minimum monthly transaction feesNo refund feesNo early termination feesNo chargeback fees |
| SumUp | Starts from £29+VAT | 1.69% for all card payments2.5% for all invoice payments | Free | No minimum monthly feesNo contractual obligations |
| Worldpay Reader | Terminal fee £17.50 per month | 0.75% -2.75% | £29.99 per year | Minimum monthly service charge: £15PCI non-compliance fee per year: £29.99Chargeback fee: £15 |
Conclusion
You can look for ways to save on your credit card payment fees, but if you allow card payments, you must bear its processing costs.
An expert can help you make a good pricing strategy to help you cover these charges without affecting your business operations. However, sit back and decide on the right credit card company for your business.
