What are Card Payment Processing Fees?

What are Card Payment Processing Fees?

From monthly rent payments to capital equipment purchases, all businesses come with a huge number of overheads.

While some of these business costs are constantly in your face, others are easily overlooked. One of the sneakiest is the cost of processing customer payments.

In this blog, I will separate and explain all the individual charges involved with processing credit and debit cards and show you how selecting the right supplier can save you thousands of pounds every single year.

 

Payment Processing Fees

For every credit and debit card payment in the UK, there are a number of players involved throughout the transaction. Whilst there are a number of different players, the merchant pays his or her fees to the credit card processor.

 Card Processing: Who is who?

The illustration above shows where each player gets involved during a transaction. For a full explanation of who everyone is and what they do, check out our blog Card Processing: Who is who?

As we mentioned above, a merchant will pay a number of fees to their credit card processor. The core charges are detailed below with an estimated typical fee calculated for an SME with annual card turnover around £250,000.

 

Merchant Service Charge

Merchant Service Charge

Description: The charge on every credit or debit transaction you accept.

Typical Fee: Debit Cards (0.25% to 0.35%); Consumer Credit Card (0.7% to 0.9%); Commercial Credit Card (1.6% to 1.8%)

 

Terminal Hire

Terminal Hire

Description: The rental charge for your chip and PIN machine.

Typical Fee: Countertop Terminal (£14 to £16 per month); Portable Terminal (£17 to £21); Mobile Terminal (£20 to £24)

 

Authorisation Fees

Authorisation Fees

Description: The additional charge for every authorisation on every transaction.

Typical Fee: 1p to 3p per transaction

 

Monthly Service Charge

Minimum Monthly Service Charge

Description: A charge levied if your transactions fall below a certain level.

Typical Fee: £10 to £20 per month

 

Set Up Fees

Set Up Fees

Description: A (sometimes avoidable) one-off fixed fee for the installation of new merchant facilities.

Typical Fee: £50 to £100

 

Chargeback Fees

Chargeback Fees

Description: An administrative fee charged every time a cardholder requests a chargeback

Typical Fee: £10 – £20

 

PCI Compliance Fee

PCI Compliance Fee

Description: An admin fee for completion of your annual PCI Self Certification Questionnaire and compliance certificate.

Typical Fee: £2.50 to £5.50 per month per MID

 

Bakery24

Case Study: Bakery24*

Background

Jennifer owns a bakery based in the heart of London. Every year, Baker24 turns over approximately £600,000 across 35,000 transactions with an even split between credit and debit cards.

When she first started the business, Jennifer simply didn’t have time to compare payment processing suppliers and took out a contract with one of best-known payment services companies.

Coming to the end of her contract, Jennifer decided to dig into the payment industry and see if she could do better than her current provider.

* Business and customer names have been anonymised.

 

Current Monthly Breakdown

Charge Amount
Terminal Rental: £15.00
PCI Compliance £4.00
Credit Cards £497.50
Debit Cards £175.00
Total £691.50

 

Cardswitcher Challenge

We entered Jennifer’s business details into Cardswitcher and received 13 different quotes from UK-based suppliers. The best deal we came up with was from Card Cutters with a total cost per month of £370.43 — an astounding 42% reduction from her original monthly bill.

That means if Jennifer moved to Card Cutters, she could save Bakery24 an astounding £3,852 every single year.

£691.50

Old Monthly Bill

£370.43

New Monthly Bill

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