What Are Card Processing Fees?
Card processing fees are the charges a business pays every time a customer pays by debit or credit card. They are not a single fee - they are a stack of costs that combine to produce your effective rate: the true percentage of your card turnover that goes to your payment provider and the card networks.
Understanding each component helps you identify where your costs are high, what is negotiable, and which pricing model is most favourable for your business.
The Main Fee Types on Your Merchant Statement
Interchange Fees
Interchange is the largest component of most card processing costs. It is paid to the bank that issued the customer's card and is set by Visa and Mastercard, not by your payment provider. Rates vary by card type: UK consumer debit cards attract the lowest interchange, while premium credit cards, business cards, and non-UK cards are significantly higher.
Post-Brexit, UK interchange caps remain: 0.2% for consumer debit and 0.3% for consumer credit. Business cards and non-UK cards are uncapped.
Interchange Fees UK: What They Are and What UK Businesses Pay
Scheme Fees
Scheme fees are charged by Visa and Mastercard for use of their payment networks. They are passed through by your acquirer and appear as separate line items on interchange-plus contracts, or are bundled into your rate on blended pricing.
Typical scheme fees range from 0.05% to 0.25% depending on card type and whether the transaction is domestic or cross-border. They are set by the card networks and are largely non-negotiable at source.
Authorisation, Scheme and Minimum Fees Explained for UK Merchants
Authorisation Fees
A fixed charge applied every time a card transaction is sent for authorisation, regardless of whether it is approved or declined. Typically 1p to 3p per transaction. For businesses with high transaction volumes and low average values - cafes, fast food, convenience retail - authorisation fees can represent a meaningful annual cost.
At 2p per authorisation and 2,000 transactions per month, that is £480 per year in authorisation fees alone.
PCI Compliance Fees
A monthly charge covering your annual Payment Card Industry Data Security Standard (PCI DSS) security assessment. Typically £5 to £35 per month. Some providers charge separately for non-compliance if you have not completed your annual self-assessment questionnaire.
PCI Compliance Fees UK: What Merchants Pay and How to Reduce Them
Minimum Monthly Service Charge
A floor on monthly transaction fees. If your card turnover is low and your transaction fees do not reach a set threshold, you pay the minimum instead. Typically £15 to £25 per month. Businesses with low or seasonal card volumes can find this charge disproportionate - it is worth raising in any negotiation.
Terminal Rental
If you rent your card machine from your provider rather than purchasing it outright, this monthly fee - typically £15 to £35 per terminal - adds to your total cost. Factor it into your effective rate calculation when comparing providers.
Blended Pricing vs Interchange-Plus: Which Are You On?
Most UK businesses are on one of two pricing models, and the difference affects both what you pay and how transparent your costs are.
Why Debit and Credit Card Fees Are Different
UK consumer debit cards attract significantly lower interchange rates than credit cards. Consumer debit cards are capped at 0.2% interchange; consumer credit cards at 0.3%. Business cards, premium cards, and non-UK-issued cards are not subject to these caps.
If most of your customers pay by UK debit card, your effective rate should be lower than a business processing mostly credit or business cards. If it is not, your pricing model or negotiated rate may not reflect your actual card mix.
Debit vs Credit Card Fees UK: Why You Pay Different Rates
How to Read Your Merchant Statement
Most UK businesses receive a monthly merchant statement but few read it in detail. Your statement is the only place where your true costs are visible - including any fees that were not prominently disclosed at the point of sale.
Key things to look for: your effective rate (total fees divided by total card turnover), PCI compliance charges, minimum monthly service charges, and any scheme fee line items.
How to Read Your Merchant Statement: Every Line Item Explained
Card Processing Fees by Business Type
What you should be paying depends significantly on your sector, card mix, and monthly volume. Indicative UK effective rates:
How to Negotiate Lower Card Processing Fees
Card processing fees are negotiable, particularly for businesses processing over £5,000 per month. The most effective approach is to obtain competing quotes before approaching your current provider - a concrete alternative offer is more persuasive than a general request for a discount.
Key negotiating points: your effective rate, the minimum monthly service charge, PCI compliance fee, and terminal rental. Providers have more flexibility than their standard pricing suggests, especially if you have a clean chargeback record and consistent volume.
How to Negotiate Lower Card Processing Fees: Scripts and Benchmarks
Early Termination Fees and Contract Costs
Most traditional merchant accounts are tied to 12 to 36 month contracts. Exiting before the end of the term typically incurs an early termination fee, usually £150 to £500 for standard contracts, though some providers charge the equivalent of remaining monthly fees.
Understanding your exit terms is essential before comparing alternatives - the saving available from switching needs to be weighed against the cost of leaving.
Early Termination Fees: What UK Merchant Contracts Actually Cost to Exit
