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How much are credit card merchant fees?

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Last editedApr 20232 min read

As cash transactions dwindle in popularity, it’s more important than ever to accept cashless payments, including credit cards. However, these do come with some added cost for businesses that need to be considered in your budget. From flat rates to transaction fees, here’s a closer look at what you can expect to pay in credit card fees.

Types of credit card charges

Credit card merchant fees include transaction fees as well as charges for one-off or monthly payments. You’ll also need to work the cost of a card machine into the equation if you have a physical retail location, along with various processing fees. Here’s a breakdown of what you might expect to pay within the UK for card payment services.

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Merchant service charge (MSC)

The bulk of your business credit card charges boil down to the merchant service charge (MSC), covering the cost of processing payments. This is the transaction fee added to every sale. It’s usually charged as a percentage and the rate will depend on the type of card used.

  • Debit cards: 0.25% to 0.6%

  • Credit cards: 0.3% to 0.9%

  • Commercial credit cards: 1.5% to 2.5%

For UK-based SMEs, debit cards will be used for most transactions. However, this will vary by industry and B2B companies might see a higher percentage of commercial cards.

Terminal charges

Businesses operating completely online won’t need to worry about paying for a payment terminal. However, any business that deals face-to-face with clients will need to think about terminal hire fees. This is the charge for a chip and PIN machine, with prices varying by the type and quality of the terminal. There are three options to choose from:

  • Fixed countertop terminal – £14 to £20

  • Portable terminal – £16 to £25

  • Mobile terminal – £20 to £35

If you sign up for a longer rental contract, your monthly fees will be lower accordingly. Contracts tend to be quite long, typically lasting between four and six years.

Gateway fee

Another cost to consider is the payment gateway fee. This is a must-have for businesses doing business online, covering the cost of processing transactions. Fees vary widely, with some providers charging by the transaction and others a flat monthly rate.

  • Transaction fees – 6p to 10p per transaction

  • Fixed fees – £10 to £20 per month

When you opt into a fixed rate, it usually comes with a number of transactions included. For example, a company might pay £25 per month which covers 1000 transactions.

Authorisation fee

There’s another transaction fee added on top of those mentioned above – the cost of authorisation. This ensures the payment will go through, testing the card for validity. You can expect to pay anywhere between 1p and 6p per transaction for authorisation.

PCI compliance fee

If your business is taking credit card payments, you’re responsible for complying with the payment card industry data security standard, or PCI DSS. This ensures that all customer data is stored and transmitted securely. The cost of PCI compliance tends to range between £2 and £20 per month.

Additional administrative fees

Depending on the payment processor you choose, you may be charged additional administrative fees. For example, some processors charge set-up fees for new merchants as a one-off. Chargeback fees are another common example, with an added cost between £10 and £20 each time a customer asks for a chargeback.

Cutting the cost of credit card processing

As you can see, the monthly cost of credit card processing can really add up for any small business. These fees should be worked into your pricing strategy accordingly. One option has been to add a surcharge to any purchases made with a credit card to cover the cost of credit card processing. However, surcharging is now banned in many areas, including the EU.

If you’re looking for ways to save on credit card fees, another option is to work out a deal with your payment processor. For example, you can often receive discounts for purchasing card machines in bulk. It’s also a good idea to shop around to see which deals are available to you. Merchant account providers offer scalable pricing schemes to suit your business as it grows, so be sure to get several quotes.

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Interested in automating the way you get paid? GoCardless can help

Interested in automating the way you get paid? GoCardless can help

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