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How much does Card Processing cost?

Average Price
1.5%-3% of total transaction + additional fees

What is the price of Card Payment Processing for my business?

Want your business to be able to accept card payments? Read our handy guide to find out how much your card payment processing provider will charge for their services.

What is Card Processing?

Card processing is a specialist type of bank account known as a merchant account. It allows retailers to be able to process customer card transactions safely and securely. 

How card processing works is that a customer will first attempt payment. This can be via a payment terminal in-store, on your website or over the phone. The card details are checked along with the availability of funds. When everything has been confirmed, the funds are transferred to your merchant account. A confirmation message will then be presented on the card machine or your website to your customer, letting them know the payment has gone through. 

The funds will be held within the merchant account and will be made available when the transactions have been processed. Normally, the merchant account will transfer the funds to your business bank account on a daily or weekly basis. 

Without a merchant account, businesses are unable to process card payments. This is because returns or refunds are always possible, and so the money needs to be available to facilitate this. 

Having a merchant account makes reconciliation easier for your accountant, which is the process of checking your bookkeeping against your bank account activity. 

A merchant account also gives an added layer of security for businesses against fraudulent transactions, making it beneficial for both business owners and customers alike.  

How much does Card Processing cost? 

Average cost of Card Processing Payments (based on interchange/transaction fees)
Average cost1.5% + 15p
Minimum cost1% + 10p
Maximum cost3% + 30p

The cost of card processing has a complex fee structure. However, interchange fees are the most common charges you’ll encounter as they are issued by the bank and are non-negotiable. 

The rate at which you will be charged depends on how the customer paid for their goods i.e through swiping their card, keying in their details on a card machine or through contactless payment. The type of card the customer uses including debit, credit card, reward cards etc also affects the interchange fee rate.

Interchange fees consist of charging a percentage of the item’s value in addition to a flat rate on top. The average percentages range from 1% to 3% of the total cost, with flat-rate fees normally hovering between 10p and 30p.

It’s possible to find some card processors who charge as low as 0.3%. However, now the UK is no longer a part of the EU, a previous lower cap on interchange fees no longer applies. This means fees of between 1.5% and 3% are more likely. 

Extremely high-risk merchants may be subject to interchange fees as high as 5%, though this is the exception rather than the rule. 

Additional fees may also apply, though these very much depend on your provider along with the conditions of your business. 

What changes the price of Card Processing? 

The cost of card processing varies depending on several factors, including: 

  • Business type

  • Business financial history

  • Personal credit history of business owner

  • Card acceptance

  • Additional fees

Business type

Merchant providers are going to assess whether your business is ‘high risk’ or ‘secure’ depending on what it is that you do. 

The type of business you operate matters as some industries are perceived to have less stability than others. If your business is considered high risk, then you will be subjected to higher card processing fees (interchange/transaction fees) by your merchant account provider. 

Merchants are specifically looking out for the chances of fraud or returns when calculating risk. Elements for consideration include the age of the business, whether it has mostly international transactions, the credit rating of the owner, whether the business has multi-currency acceptance among much more. 

Business types classed as high risk can include: 

  • Adult entertainment

  • Affiliate marketing and advertising services

  • Alcohol or tobacco 

  • Charities and nonprofits

  • Debt collection or payday loans

  • Events and ticketing services

  • Foreign exchange (Forex)

  • Gambling

  • Online auctions

  • Pharmaceuticals

  • Subscription services

  • Timeshares or pyramid schemes

  • Travel and tourism

Business financial history

Merchant account providers are going to want to know more about your business’s financial history. That’s not to say you will necessarily pay more like a startup business, especially if it’s considered low risk. 

From the merchant’s perspective, they will be trying to calculate how much administrative work will be involved in processing all of your transactions, based on the level of outgoings on your account. If you have a lot of refunds, returns and similar outgoings, the charges may be higher because this will create more work for the merchant.

Personal credit history of business owner

If you’re a startup business, then your personal credit history will likely be taken into account in the absence of a business financial history. A great credit score and healthy bank balance will cast you in the best light when it comes to calculating your merchant fees. 

Card acceptance

The more payment methods you wish to accept the higher your merchant fees will likely be. This is because it involves the merchant communicating with more parties to complete your transactions.

In addition, each additional card provider set their rates which will mean you pay different fees depending on which providers you opt for. 

Card providers currently include Visa, Mastercard, American Express, PayPal, Apple Pay and various forms of cryptocurrency.

Additional fees

The type of additional fees is at the discretion of the merchant and card providers. However, the following fees are some of the most common you will come across as a business looking to set up card payments for your customers.

Additional fees included with Card Processing
ServiceMinimum fee costHighest fee cost
Chargeback fee£15£70
Transaction (interchange) fee10p30p
Gateway fee£10 p/m£20 p/m
Setup fee£0£100
Annual fee£0£300

As mentioned, the most common fees are interchange fees which are also known as transaction fees. The exact costs are 10p to 30p per purchase on average, in addition to an agreed percentage rate. The percentage rate will depend on the merchant and if your business is deemed to be secure or high risk, and will likely change over time. 

Chargeback fees occur when a customer disputes a transaction that took place, and the disagreement has reached the point of arbitration. Fees for chargebacks can range between £15 and £70 on average. The cost is deliberately steep because many different parties are involved in settling such cases to determine if the customer or business is at fault. Merchants will also have a strict limit about the number of chargebacks they will process (about 1%) before terminating your account. 

Not all merchants charge annual fees, but those that do charge around £300 on average. Many instead charge a monthly fee of between £5 and £100. Thankfully, monthly fees are usually on the lower side of the scale. It may be the case you are charged a monthly fee if your business is deemed so high risk only a select number of merchants will accept you. 

Likewise, setup fees aren’t always charged either. But when setup fees do apply, they can be as much as £100.

Is it worth getting Card Processing?

To process transitions safely and securely, getting a merchant account is highly recommended. To get the best experience, you’ll need to shop around to ensure the provider and the deal you are offered meets your specific needs. Given the peace of mind it will give you as a business owner, plus the ease of financial management it will provide for your accountant, card processing is a worthy investment for all businesses. 

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