Compare UK Merchant Account Fees and Credit Card Processing Costs in 2021

By Rob Binns | Senior Writer | Updated: 11 January 2021

We shed some light on the confusing world of card processing fees to help you find the cheapest merchant services provider for your business

When it comes to prices, merchant account providers are about as transparent as an Oak tree. But don’t worry, Expert Market is here to make things crystal clear for you.

Read our guide for an up to date breakdown of merchant account fees, or click on one of the icons below to sign up to our merchant account comparison service to receive bespoke quotes from up to four leading suppliers.

Comparing transaction fees

Customer using contactless card machine at a bar

Transaction fees are made up of a percentage charge and a fixed “authorisation fee”. As a general rule, the more you take in card payments, the less you pay in transaction fees.

We obtained sample quotes for a small to medium-sized UK business processing around £90k in card payments annually. Helpful bunch that we are, we entered these quotes into several well formatted table for your viewing pleasure. So enjoy!

Merchant account fees comparison

Worldpay logo FirstData logo Lloyds Cardnet logo PaymentSense logo
Debit card transaction fees 1% 10p 0.75% 0.75%
Credit card transaction fees 2% 1.25% 0.96% 0.96%
Authorisation fee* 4p 2p 3p 3p
These fees are intended to be estimates only, designed to give you an outline of the fees involved when you open a merchant account.

Merchant account fees are almost always bespoke, meaning your rate will depend on your business's size, sales volume, and average sales value. Rates here are accurate as of 11th January, 2021.

*Per transaction

Okay we know, unless you’re a maths genius these figures on their own aren’t much help. So let’s crunch the numbers and do a real-world comparison.

Transaction fees case study

Imagine for a moment that your business processes 1,000 card transactions each month. These transactions have an average value of £5. Of the 1,000, 800 were made using debit cards and 200 using credit cards.

With each provider, this works out at:

Transaction fees: real-world comparison

Worldpay logo FirstData logo Lloyds Cardnet logo PaymentSense logo
Debit card transaction fees
£40 £80 £30 £14
Credit card transaction fees
£20 £12.50 £9.60 £9.50
Authorisation fees
£20 £20 £30 £38.50
Total fees
£100 £112.50 £69.60 £62.0
Your take home (of £5,000)
£4,900 £4,887.50 £4,930.40 £4,938

So based on this comparison, PaymentSense comes out on top. But there’s more to consider than transaction fees alone when comparing merchant accounts…

Hidden fees

Not one of the providers we spoke to offered up the charges below in their initial quote unprompted. Not one of them. So it’s easy to think you’re getting a great deal on transaction fees when in fact that’s only half the story. Beware hidden fees…

Merchant account hidden fees

Worldpay logo FirstData logo Lloyds Cardnet logo PaymentSense logo
Minimum merchant service charge *
£15 £5 £15 £24.95
PCI compliance *
£2.50 £4.99 £5.50 £4.95
Set up fee
Contract termination fee

* Monthly charge

Monthly Minimum Service Charge (MMSC)

This is the minimum amount in merchant fees you will be required to pay each month. So, if your monthly service charge is £10 and you only rack up £7 in fees, you will still be billed £10 by your provider.

It goes without saying, then, that if your business processes a low volume of card transactions (less than 500 monthly) you’ll want to choose a merchant account with a low monthly service charge.

PCI compliance fees

Set up by the worldwide Payment Card Industry Data Security Standard — or the PCI DSS if you’re on first names terms with them — PCI compliance is a legal requirement for all businesses that accept card payments. It’s a series of checks to ensure you’re not exposing your customers to potential fraud risks.

These checks range from a simple questionnaire to full computer network scans, depending on the size and nature of your business.

We recommend paying a small monthly fee of around £5 per month to have your merchant account provider do it for you.

Setup fees

Setup fees are rare but some providers do still charge them. Lloyds, for example, charge a whopping £50 activation fee.

Unless the rates on offer are out-of-this-world good then it’s worth steering clear of providers that charge for setup — there are plenty out there who don’t.

Early termination fees

This charge relates to the termination of your merchant account contract, and that alone.

Bear in mind that if you want out early and you’ve rented a card machine from your merchant account provider you will be required to pay the remainder of that rental contract.

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Merchant account contracts and rental fees

Fees aren’t the whole story. There are other factors to consider too…

Other factors to consider

Worldpay logo FirstData logo Lloyds Cardnet logo PaymentSense logo
Minimum rental contract 18 months 36 months 48 months 18 months
Card machine rental* £22.99 £15.63 £25.11 £25
Payment gateway* £20 £15 £20 £24.95
Virtual terminal* £9.95 Price N/A £200 Price N/A

*Charged monthly

Card machine rental fees

Most merchant service providers offer to include card machine rental with their credit card charges to retailers. Costs vary depending on the type of card reader you want.

Expect to pay:

  • £10 to £20 for a countertop terminal
  • £15 to £25 for a wireless terminal
  • £25 for mobile card reader

Of course, if you don't know which card reader you want yet, that's fine too – because we have just the thing. Head over to our guide to the best credit card machines for small businesses to get started.

Oh, and to find out more about what your card machine will stand to cost you, head to our article on PDQ machine costs – it won't disappoint!

Payment gateway fees

A payment gateway is a vital piece of (virtual) kit for any business that wants to sell online. Linked to the shopping cart of your website, it’s a clever piece of software that encrypts customer payment details and transmits them to the merchant bank securely.

Ecommerce transactions carry a higher fraud risk than in-store card processing, where the transaction takes place face-to-face. And for this reason online transaction charges are slightly higher.

Virtual terminal fees

If you want to take card payments from customers over the phone then you’ll need a virtual terminal. Accessed via your web browser, a virtual terminal is a secure way of storing and encrypting payment information. The customer calls, you answer the phone. They read you their card details, you enter these details into the virtual terminal. It’s that simple.

Chargeback fees

Chargebacks are a source of much grumbling among businesses – and anyone with a high risk merchant account will be all too familiar with why. A chargeback can occur when a customer disputes a transaction because they don’t recognise the charge on their statement ie. because of fraud. Or because they’re dissatisfied with the service or product received and have been unable to resolve the situation with you (the merchant) to their satisfaction.

In both scenarios, the full transaction amount will be taken from your bank account pending an investigation.

In most cases, the bank will side with the customer and you will be forced to pay a full refund as well as a £15 chargeback fee for being so darn reckless.

Interchange fees

Interchange is set by the card association — that’s Visa, Mastercard and Discover. Forming a portion of the transaction fees charged by providers, it’s a mandatory charge capped at 0.2% per transaction for debit cards and 0.3% for credit card processing fees.

Did You Know?

The average merchant account contract length in the UK is 18 months. Don’t tie your business into a rotten deal — do your research and choose your provider wisely.

In our experience, takepayments offers some of the industry's shortest contracts, with agreements for as short as one year available. You can read our takepayments review here.

Five killer cost-saving tips for comparing merchant accounts

Are you looking for the cheapest merchant services for your business? Of course you are! Why wouldn’t you be?

Well, we’ve got you covered. Here are five killer tips for keeping merchant account costs to a minimum:

  1. Know your business: If you can’t give accurate figures for turnover and volume of card transactions then you’re not going to get an accurate quote. Make sure give the same figures to all the providers you speak to.
  2. Do your homework: Read up about providers before picking up the phone so you know exactly what they can offer your business.
  3. Make a checklist: List all the fees we’ve covered in this article and be sure to ask about them. Don’t assume there won’t be required to pay certain fees just because the merchant service provider doesn’t them mention in their initial quote.
  4. Contact multiple providers and compare quotes: To compare merchant account fees for your business, simply click on one of the icons below and complete our webform to receive free quotes from up to four leading providers.
  5. Don’t be afraid to negotiate: Remember, these guys want your business and merchant accounts is a competitive industry. Don’t be afraid to play one provider off against another.

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Rob Binns Expert Market
Rob Binns Senior Writer

Rob writes mainly about the payments industry, but also brings to the table industry-specific knowledge of CRM software, business loans, fulfilment, and invoice finance. When not exasperating his editor with bad puns, he can be found relaxing in a sunny (socially-distanced) corner, with a beer and a battered copy of Dostoevsky.

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