Compare UK merchant account fees and credit card processing costs

By Rob Binns | Senior Writer | Updated: 26 March 2020

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

compare uk merchant account-fees and credit card proccessing costs

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.

▶ Read more: PDQ machine costs

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 well formatted table for your viewing pleasure:

Merchant account fees comparison

Worldpay logoFirstData logoLloyds Cardnet logotakepayments logo smallPaymentSense logo
Debit card transaction fees1%10p0.75%0.65% + 1p0.75%
Credit card transaction fees2%1.25%0.96%1.3%0.96%
Authorisation fee*4p2p3p3p3p

*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 logoFirstData logoLloyds Cardnet logotakepayments logo smallPaymentSense logo
Debit card transaction fees
Credit card transaction fees
Authorisation fees
Total fees
Your take home (of £5,000)

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 logoFirstData logoLloyds Cardnet logotakepayments logo smallPaymentSense logo
Minimum merchant service charge *
PCI compliance *
Set up fee
Contract termination fee

* Monthly charge

Minimum merchant service charge

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

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.

Set up fees

Set-up 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.

Merchant account contracts and rental fees

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

Other factors to consider

Worldpay logoFirstData logoLloyds Cardnet logotakepayments logo smallPaymentSense logo
Minimum rental contract18 months36 months48 months12 months18 months
Card machine rental*£22.99£15.63£25.11£17£25
Payment gateway*£20£15£20£19£24.95
Virtual terminal*£9.95Price N/A£200Price N/APrice N/A

*Charged monthly

Card machine rental

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

Payment gateway

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

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 merchants. 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.

▶ Read more: HSBC payment gateway

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.

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. We’ve got a handy article to help you compare top UK providers here: Top UK merchant account providers
  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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