From consistent flat fees to popular payment providers and varying transaction charges, we’ll delve into the details of the credit card fees UK-based businesses frequently encounter.
Let’s start by explaining payment rates and fees.
What Are Payment Rates and Fees?
Payment rates and fees are expenses that businesses must pay when processing transactions through their point-of-sale (POS) devices.
Nowadays, the rates and fees for credit card payments are higher than those for debit card payments. Typically, in-person payments tend to have lower associated fees than those conducted online.
There’s not one fee amount that businesses must pay; the fees vary depending on the credit and debit card used by the customer.
On average, the general processing rates and fees for credit and debit cards fall within the 1.5% to 3.5% range. However, in some cases, it can go even higher, but usually not more than 6%.
Here’s the average payment fee for all major credit and debit cards (Visa, Visa Electron, Diners Club, MasterCard, Maestro, etc.) issued in the UK:
- Credit bank cards: 1.5% up to 3.5%
- Credit bank cards owned by business entities: 1.6% up to 1.8%
- Debit bank cards: 0.25% up to 0.35%
As an exception to most major credit and debit cards, American Express (AMEX) credit cards have a higher transaction fee. To process Amex transactions, businesses have to use a separate American Express app, and this typically involves credit card transaction fees that are 1-2% higher than the average ones. This additional cost is often the reason why numerous small UK businesses opt out of accepting American Express cards.
Average Rates and Fees of Debit and Credit Card Companies
The fees that businesses must pay to debit and credit card companies include the following:
General Rates and Fees
On average, the prevailing processing rates and fees for credit and debit cards fall within the range of 1.5% to 3.5% per transaction. However, in some cases, it can go even higher, but usually not more than 6%.
Authorisation Rates and Fees
These types of fees are charged by banks whenever a transaction is processed. Each bank has different rates and fees, but usually, they fall within the range of 1 to 2 pounds.
Merchant Rates and Fees
Businesses must pay these fees regardless of the type of card used by the customer. These transaction fees are the lowest out of all and usually fall between 0.25% to 0.35% for each transaction.
Rates and Fees for PCI DSS Adherence
When companies process credit or debit card transactions, they must adhere to the Payment Card Industry Data Security Standard (PCI DSS). Being compliant with PCI DSS is essential for the secure storage and transmission of the customer’s card information. Typically, the expenses for maintaining PCI compliance span from £2 but not more than £20 monthly.
Optional Administrative Rates and Fees
Some payment processing companies could impose extra administrative costs regularly. For instance, some companies might charge their new clients for the initial payment processing setup as a one-time occurrence. Another frequent expense is the so-called chargeback fees.
Chargeback Rates and Fees
In cases when a customer wants to get a refund, the business usually has to pay a chargeback fee. This fee can vary, as it depends on the card payment processor used by the business. In most cases, the chargeback fees are fixed.
Usually, UK retail businesses are obliged to pay chargeback fees in the range of £15 to £50 per transaction, but these amounts always depend on the payment processor.
Termination of Contract Rates and Fees
In case you want to stop using the services from your POS provider, you’ll need to terminate your contract before its termination date. Almost all payment providers charge a fee when a business wants to terminate the contract early, and the price can vary, starting from approximately £200.
Some companies offer tailor-made transaction fees. If the company doesn’t clearly specify their fees, particularly for early contract termination, you should always inquire about the approximate costs before signing a contract.
Although these rates and fees don’t seem very high, as time goes by, they can turn into substantial costs, especially for small-sized retail businesses that don’t have a high daily sales revenue.
While mid and large-sized companies usually have the capacity to pay off these expenses without any difficulties, smaller companies often try to reduce their impact by setting a minimum spending threshold for card-based purchases. The easiest way to do so is by setting a minimum price per transaction.
How are Card Payments Processed?
The first step of the debit or credit card payment process is authorisation of the card. The customer can either swipe or insert their credit or debit card into the card reader. The card reader’s POS will automatically send the payment request to the processing bank.
Then, the transaction will be forwarded to the bank that issued the credit or debit card, ensuring the card has enough funds for the transaction. Additionally, the issuing bank runs a quick obligatory check to see if the transaction is legal and safe. This procedure doesn’t take longer than one or two seconds.
If the transaction is safe, then the bank will continue with the batching process, which means that it will deposit the transaction into the business’ POS merchant account.
The third step is the transaction’s settlement, i.e., when the business receives the payment into their bank account.
Fees and Rates of Card Processing Providers
The debit and credit card processing fees can vary depending on the type of transaction, the payment methods used, and the specific terms and conditions set by the POS provider.
Here’s a list of several leading card processing providers that operate in the UK and their transaction fees.
WorldPay is one of the most prominent internationally-used companies that offer affordable transaction processing options for merchants of all sizes.
The company’s services are used by more than 400.000 businesses globally, and approximately 26 million payments are being processed by WorldPay’s software daily.
WorldPay’s transaction rates for credit and debit cards are fixed at 2.75%, with £0.20 per transaction. The fees are fixed both for cards issued in the UK and international cards. There’s also a monthly subscription pay rate, which costs £19.
One of the company’s most significant advantages is not charging customers with refund rates and fees. Also, there are no extra hidden rates and fees that retail businesses need to pay monthly.
In order to use WorldPay’s payment processing software, businesses can opt to buy a card reader terminal. Card readers offered by this company can be rented for 18 months and have a fixed price of £49.99. There’s an additional monthly rate customised for each business, depending on their wants and needs, starting from £17.50. Chargebacks also have a fixed rate of £15.
Smartpay Anywhere by Barclaycard is a mobile POS payment solution designed for retail and hospitality businesses. The POS software is part of Barclaycard’s vast range of payment processing tools and features.
In order to use Smartpay Anywhere, businesses have to buy the card reading device, which has a fixed price of £29, plus additional VAT expenses. The card reader accepts international credit and debit cards from all major banks.
The transaction rates and fees for credit and debit card payments are 1.6%, but they are not fixed since the company offers personalised rates per transaction depending on the business type. The chargeback price is fixed to £20.
Each time a payment is processed with Smartpay anywhere, the card reader will automatically update the POS software connected to your bank account. The payment will be automatically transferred to your bank account after a 24-hour period during work days.
There are no additional rates and fees businesses have to pay to use the terminal or process payments with it. If payment is not processed or there are some difficulties with the card reader’s functionality, Barclaycard offers free 24/7 technical support 365 days a year for all their customers.
Square offers affordable and user-friendly POS software and hardware solutions for businesses that provide hospitality and retail services.
Customers can pay with the following credit and debit cards, either by using the card or with a digital wallet (Android and Apple):
- Visa Electron
- American Express (AMEX)
There is a standard fee of 2.6% plus an additional 10-cent rate that businesses must pay each time they process payment with a card reader that accepts credit or debit cards, chip & pin payments, digital wallets, or magstripes. Each payment is automatically processed with Square’s Card on File.
On the other hand, if a customer’s payment is processed with Square’s Virtual Terminal, the fee is a bit higher – 3.5% with an additional rate of 15 cents.
The company doesn’t charge any extra fees for gift and discount certificates or checks, nor are there any hidden monthly rates and costs.
TakePayments is a POS software, card terminal, and online payment provider with over 75.000 clients worldwide. The company initially operated under the name Payzone, but in 2019, it went through a rebranding stage and switched its name to TakePayments. This shift allowed the Payzone brand to concentrate on card payment solutions.
The POS software can process payments from all major credit and debit cards, and the transaction fees are customised to meet the specific wants and needs of the POS user. They can fall in the range from 0.3% up to 2.5% with an additional flat rate.
The setup rate for the Easy Deal subscription package is £150, and the rest of the card reader packages are free of charge. Businesses can choose to rent card readers for a tailor-made offer, with the lowest price being £7.50 with additional VAT expenses.
It’s good to consider that companies that process a low amount of transactions per day won’t benefit from TakePayments’ POS software since the personalised quota can come out quite high for their budget. There’s also an obligatory monthly charge that costs £10. Chargeback rates are fixed at £9 and are lower compared to other POS providers. On the other hand, refund fees are a bit higher – £30.
Zettle by PayPal
Zettle, previously called iZettle, is a POS solution created by the worldwide-known payment provider PayPal. The company offers free-of-charge POS solutions for businesses of all sizes, making it the best option for businesses that would like to save up and spend as little as they can.
Another great thing about Zettle is that businesses are not obliged to rent or buy Zettle’s hardware and can install the POS into the one they already have. However, the company’s card reader is not a bad option at all since it’s affordable and costs only £29.
The rate per transaction with any major debit or credit card, including American Express and digital wallets, is fixed at 1.75%, plus additional VAT expenses.
On the other hand, payment links’ transactions cost a bit more – the rate is 2.5% plus VAT expenses per transaction, but can be changed if the business is interested in receiving a tailor-made quote. There aren’t any hidden fees.
Additionally, Zettle will cover all chargebacks that are not higher than £250 monthly and doesn’t charge anything for refunds. All of these advantages make it the most cost-effective POS provider, which can be an ideal solution for small-sized retail businesses.
As you can see, credit and debit card payment processing rates and fees vary. Some POS providers offer accessible features and affordable rates and fees, and others can provide businesses with tailor-made POS package plans with a plethora of features.
Therefore, it all comes down to your preference and how much your company’s budget allows you to spend on a POS provider.
If you’d like to learn more about the POS providers on this list, read our separate reviews on each, which you can find here.