Credit Card Processing Fees & Rates for UK Merchants 2023

Any small business that accepts card payments has to also contend with the costly issue of merchant processing fees – which can quickly get confusing and expensive.

You can expect to pay anything from 1.5% to 3.5% with each payment, depending on the credit card your customer uses. There are also transaction fees which usually amount to 1-3% of sales, authorisation fees that take around 1-3p per sale, as well as merchant service fees of 0.25 to 0.35%.

The most important thing is to understand the exact rates you'll be dealing with for your own business. To help with this, you can use our 🔍free comparison tool to compare quotes from brands like Zettle, Square and more.

Below, we round up the typical credit card processing fees you'll encounter from the top card processing services:

The cost of living crisis is still gripping most businesses across the country. With that in mind, business owners are rightly asking themselves how to save even the slightest amount on fees and overheads.

As the below chart shows, rates vary dramatically depending on the provider you choose:

The type of business you run will also impact how much you'll spend on fees. If you're running an ecommerce website for example, then Square has the lowest online rates. But Smartpay Anywhere (from Barclaycard) would likely be the best choice for a local brick-and-mortar store, since it has the cheapest flat-rate for CHIP and contactless payments.

For a more detailed breakdown of how credit card fees work, read on. Our expert guide will take you through what credit card processing fees are, how and when to pay them, and some handy tips on reducing them.

What are payment processing fees?

The Sumup card reader at Jerry's in London

Payment processing fees refer to the costs incurred by business owners when processing customer payments.

These fees are charged by payment processors, which are the companies or services that handle the transaction, to business owners who are responsible for paying these fees as part of their payment processing operations.

The specific costs depend on factors such as the level of risk associated with the transaction, the type of card being used, and the pricing model chosen by the payment processor.

How much are card processing fees?

The average credit card processing fee ranges between 1.5% and 3.5%, but can reach up to as much as 6% of each sale when you include all other transaction fees, such as authorisation fees.

What credit card processing fees do I have to pay?

Particularly post-Covid, the UK has become a largely cashless society. Consumers now expect to be able to pay for every product and service with plastic money – so card machines are an important technology to have in your small business.

Credit card machines like the card reader from Zettle or Square are devices that are now making credit card processing more affordable than ever for small businesses, thanks to their low price and credit card processing charges.

Still, there are a range of fees that you will inevitably encounter when taking card payments, even with the best small business merchant service providers. We've listed the main ones below:

Credit card processing fees: explained

The Zettle card reader at Shrubs And Dubs in London

So now you know the credit card fees you're likely to be charged when taking card payments. But what exactly are you being charged for?

What is a transaction charge?

Every time you take a debit or credit card payment, there'll be a small charge, usually not more than 3.5%.

There is no hard and fast rule for credit card transaction fees for merchants – they tend to vary according to the type of card used and the payment method.

As a general rule:

• Charges for credit cards are higher than debit cards
• In-person payments are usually lower than online

There are further implications depending on the different payment types. For example:

• Credit cards: 1.5% and 3.5%
• Business credit cards: 1.6% to 1.8%
• Debit cards: 0.25% to 0.35%

Square charges 1.75% for card payments, but 2.5% for cardless payments. 

Has Brexit impacted transaction fees?

Many card merchants charge more for transactions completed outside the EU. Luckily for UK sellers, most big-name providers including Square and Mastercard have extended this policy to UK card transactions post-Brexit. However, it's worth checking this with your provider beforehand.

What is an Amex fee?

You'll be charged an Amex fee if you accept American Express credit cards. With Amex, you need to apply separately to the company itself, and you’ll be paying 1-2% percent more in your credit card transaction charges. That’s why many small business choose not to accept Amex. 

What is a 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 security 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. That's why Square charges 1.25% higher in transaction fees for cardless payments.

What are merchant account fees?

Merchant accounts are a checking bank account which you need to have to be able to take card payments. Many charge fees of around £5 to £15 a month. Some (such as Zettle by PayPal and Square) have no monthly fees which could keep costs lower for small businesses, but then often their transaction fees are slightly higher.

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 process usually takes a couple of working days, but can be instant with services such as PayPal Here, for example.

Want to find the best merchant account quotes? Use our specially-designed 🔍free comparison tool to get a bespoke recommendation based on your industry and business needs.

What is a merchant service charge?

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. They typically range between 0.2-0.3%.

How much do card machines cost?

Card machine costs range from £19.20 (Square card reader) to as much as £100. The number of card payment terminals you require will affect these upfront costs – for example if you’re running a busy restaurant, you may need more than one license which can result in additional costs.

When it comes to the cost of card readers, different providers offer various pricing models. Some may require an upfront payment, while others offer reader rental options for a monthly fee.

Card readers can range from around £80 to £100 or more if you pay upfront.

This style of payment is ideal for businesses that have a steady cash flow and available upfront capital. It offers long-term cost savings by eliminating recurring monthly fees. This option is particularly advantageous for businesses with high transaction volumes, as it often results in lower per-transaction fees compared to rental plans.

Monthly card reader rentals typically range from £19 to £29 per month, depending on the provider, type of reader, and additional services included. This style would be well-suited for businesses that have limited upfront capital or experience uncertain cash flow, and allows for a lower initial investment by spreading the cost over time.

Monthly rental plans often come with additional benefits such as equipment upgrades, maintenance, or customer support included in the rental fee. This also can prevent small businesses from paying for unused equipment and provides flexibility to adapt as their needs evolve.

Ultimately, the decision should be based on factors such as your budget, transaction volume, flexibility needs, and long-term financial goals. It can be helpful to compare the costs, features, and terms offered by different providers to determine which option aligns best with your business requirements.

Here are some examples of card reader fees:

• Worldpay: £19 per month
• Square: £19 + VAT
• Zettle: £29 + VAT
• SumUp: £29 + VAT
• Smartpay Anywhere: £29 per month

What are minimum monthly service fees?

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

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

What are transaction authorisation fees?

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.

What are setup costs?

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

This can range from £50 to £100, although few credit card processing companies charge these nowadays.

What is a PCI compliance fee?

PCI compliance is a countrywide fraud prevention method. It 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.

Some providers, like Square and Zettle, take on the PCI risk themselves. Purchasing a plan with these providers is an easy way to save money.

Are there any hidden fees?

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 (when a bank has to withdraw money from your account to return it to a customer) generally cost between £10 and £20
• Invoices and foreign card processing often add a percentage point to the credit card processing fee
• Refunds (when you voluntarily return money from your business account to a customer) generally cost between 30p to £1

Next steps

The Square card reader at ‘Got That Crystal' shop in London

Now you know what the main card processing fees are, how much you can typically expect to have to spend, as well as what some of the most common hidden charges are. Your next step now is to find the right provider to save you the most money when taking payments.

PayPal and Square are great for growing businesses, while companies like Barclaycard and Worldpay (voted the best payment gateway provider this year) are generally more appropriate for larger companies with consistently high revenue.

But to find the best, most suitable provider for your business, it is important to 🔍compare quotes from as many merchant account service providers as possible.