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Credit card processing fees

Finally understand credit card charges for merchants, and calculate your credit card processing fees using our quick and easy calculator

We know understanding credit card processing fees and calculating credit card charges can be a bit of a headache when you're busy running your small businesses.

But with our credit card processing fee calculator, we're taking the pain out of finding the best credit card charges for merchants.

Read on for a full run-down of all the credit card transaction charges, helping you get your head around everything from interchange rates to merchant account fees. If you'd like to talk directly to suppliers, you can get the best deal with our quote-finder.

In this article, we cover:

  1. Credit card processing fees
  2. Credit card processing fee calculator
  3. Credit card processing fees explained
  4. Compare credit card charges
  5. Compare quotes

1. Credit card processing fees

The credit card processing costs include the credit card transaction charges, as well as one-time fees and monthly fees.

To work out the credit card charges to retailers, you just need to add the card machine price to the credit card processing fees. Sound easy? Well, you also need to do a bit more brainwork to calculate the credit card processing costs for your individual business.

Before we call on our trusty interactive calculator for help, let's just understand what costs are involved in the credit card fees for retailers and small businesses.

The credit card charges for merchants will include:

  1. Credit card transaction charges – Usually between 1% and 3%
  2. Merchant service charges – 0.2% for debit cards and 0.3% for credit cards
  3. Minimum monthly service fees – around £10 (if applicable)
  4. Transaction authorisation fees – 2p per transaction
  5. Card machine price – £50 – £80 on average
  6. Set-up cost – £50 – £100 on average (one-off fee)
  7. PCI compliance fee – £3.50 per month
  8. Chargeback fees – Usually between £10 and £20

2. Credit card processing fee calculator

Calculate your credit card charges in seconds using our simple three-question calculator.

Now you understand credit card processing fees that bit more, you'll have a better idea of what taking card payments will cost you.

The more you know now, the more accurate the credit card processing fee calculator will be, but don't worry if you don't yet have all these credit card charges worked out.

This credit card rate calculator is designed around you, so you can just enter your best guesses for a good estimate of your total credit card processing costs.

3. Credit card processing fees explained

1) Credit card transaction charges: Between 1% and 3% on average

Every time you take a debit or credit card payment, there'll be a small charge, usually not more than 3%.

There is no hard and fast rule for credit card transaction fees for merchants – major banks like NatWest quoted us a rough figure of 3% per transaction, but with iZettle or Square it's a flat rate of 1.75%.

Remember, credit card processing fees vary according to a couple more factors too: the type of card used and the payment method.

The most common credit and debit cards used (Visa and Mastercard) generally carry the base rate credit card transaction fees in your contract, whereas American Express is often more expensive for small businesses to accept.

American Express merchant fees

Depending on the nature of your business, you may want to think about accepting American Express. With Amex, you need to apply separately to the company itself, and you’ll be paying one to two percent more in your credit card transaction charges.

That’s why many small business choose not to accept Amex. Alternatively, some people put in a cost differential for Amex, as Jim Bissett, MD of computer seller EQ Consultants, notes: ‘It doesn’t seem to put people who have only Amex off – I expect they are used to surcharges.’

Card payment method

How your customers pay can also impact the credit card processing charges to retailers: with some contracts, it matters whether you are tapping, inserting, swiping or keying in their payment card.

This is because of the different levels of risk associated with various credit card processing methods. When the physical card is not present, for example, the credit card company charges merchants more, as they are accepting more risks.

Merchant account fees

A merchant account is just the checking bank account you need to have to be able to take card payments.

Many merchant accounts charge fees of around £5 to £15 a month, but some (such as iZettle and Square) keep costs low for small businesses with no monthly fees.

Think of the merchant account like a holding pen for your customers’ card payments to sit in, while the cash gets authorised and transferred to your personal or business account. This usually takes a couple of working days, but can be instant with PayPal Here.

2) Merchant service charges: 0.2% or 0.3% of the sale

In the EU, interchange rates do not exceed 0.2% of the sales total for debit cards, and 0.3% for credit cards.

You may have heard of merchant service charges as interchange rates or discount rates. These are the fees charged by banks to cover their costs in accepting credit card transactions.

3) Minimum monthly service fees: Around £15 a month

Typically, this is in the region of £10 to £20 per month.

Depending on the nature of the contract with your processor, you may have a minimum amount you will be charged each month even if your transactions do not raise much in fees.

4) Transaction authorisation fees: 1p to 3p per sale

The first stage of card processing involves the card issuer authorising the payment. There is a charge for this on every transaction. It will typically be around 1p to 3p per transaction.

5) Card machine price: £30 to £80 on average

card machine price

The PDQ machine or card machine price is generally low compared to the credit card processing fees. When making your pick, think about the features you will want.

A chip and PIN terminal offering cashback or phone top-ups may cost a tad more, but if it brings you more loyal customers through your door, it can be a great return on investment.

And of course, the number of card payment terminals you require will affect these upfront costs. If you’re running a busy restaurant, you may just need more than one, so your customers can pay when they’re ready.

6) Set-up costs: Under £100 (if any)

Is there is a set-up cost, it can range from £50 to £100, but fewer and fewer credit card processing companies charge these nowadays.

Depending on the nature of your merchant account and your provider, you may face a one-off fixed fee for setting up card processing – it's just like a membership for joining a gym.

7) PCI compliance fee: Under £5 a month

PCI compliance is a countrywide fraud prevention method, and costs between £2.50 and £5 per month.

This is a small charge to ensure you are compliant with payment card industry data security, and will cover your PCI self-certification questionnaire and compliance certificate.

Any extra costs?

On top of the credit card processing fees, you might like any extra services such as chargebacks, sending invoices or accepting international payment cards.

As you might expect, these optional add-ons will depend on your contract, but to give you an idea, chargebacks generally cost between £10 and £20, and e-invoices and foreign card processing often add a percentage point to the credit card processing fee.

Tip for lowering credit card processing fees: Just ask

If you’re in any professional association at all, don’t be afraid to ask whether there are price breaks available – and as your business grows it’s always worth trying to renegotiate your credit card charges.

Many supermarket chains, petrol outlets and other larger companies, for example, don’t pay the full £15 for each swipe machine – volume discounts are available for businesses, so it’s a good idea to talk to the card processing provider about the best deals.

4. Compare credit card charges

Nowadays, you can get your hands on a cheap chip and pin machine for as little as £30 new or £15 a month rented.

Credit card machines from iZettle, Square, SumUp, Worldpay and PayPal are now making credit card processing more affordable than ever for small businesses, with cheap card machines and low credit card charges.

Here is how their credit card processing fees compare:

Merchant provider Best for Cost (excl. VAT) Transaction fees
SumUp Cheapest transaction fees £59 1.69%
iZettle Best all-rounder £59
£19 on offer here
Square Best card machine for features £39 1.75%
WorldPay Most flexible £39.99 1.95% – 2.75%
PayPal Best for growing businesses £65
£45 on offer here
1% – 2.75%
Barclays Trusted payments brand £60 2.6%

5. Want an even more exact figure for your small business?

Of course, credit card processing costs will vary depending on your monthly sales, the services you use, and the contract you choose.

Some companies like PayPal, for example, offer lower credit card transaction charges for businesses bringing in more cash, and extra services like chargeback and sending invoices often cost a bit more.

If you'd like some help getting the best deals, check out our page to compare quotes from the best card machines for small businesses in the UK today, or go straight to our interactive quote-finder here.

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