Largely unregulated, processing fees imposed on businesses for taking credit card payments have soared by a staggering 600% over the last 10 years. This is according to Axe the Card Tax, an industry lobby group set up in October 2022 which is calling on the Payments System Regulator to crack down on these costs and facilitate the use of cheaper alternatives.


What are credit card processing fees?

A credit card processing fee is the total fee or charge which a business must pay every time it accepts a credit card payment from a customer.

To accept credit card payments small businesses must use a merchant services provider, such as Elavon, Paypal, Revolut and Square, for example.  These are the companies that supply the accounts and payment channels for card transactions, as well as the hardware, such as contactless card readers for face-to-face payments.

The merchant services provider charges the business a fee for its services. But this includes number of other fees and charges, as well as its own transaction and service fees.

For example, there will be fees charged by the card issuer (the bank, lender or card provider) and the credit card network (such as Visa, Mastercard or American Express), which are all passed on through the merchant services provider’s bill to the small business.

What are the different fees associated with credit card payments?

The main fees for a small businesses accepting credit card payments, include the following:

Interchange fees

The interchange fee is a payment charged by the card issuer (the bank, credit card provider or lender, for example) for the swiped transaction. But the fee is set by the card network (Visa or Mastercard, for example).

The fee will vary based on the type of card being used (credit or debit) but for card issuers in the UK, is capped at 0.3% for credit cards (and 0.2% for debit cards) under UK payment systems regulation. This is the only part of the credit card processing fee that is controlled by regulation.

Card processing fees

The merchant services provider, or payment processor, will charge a fee to facilitate the credit card transaction. Processing fees can range from 1.5% to 3.5% typically, but in some cases can be as high at 6% per sale.

These fees can include monthly fees, per-transaction fees, equipment lease or purchase fees (for contactless payment terminals and card readers) and statement fees as well as fees applied when a merchant needs to carry out a refund or chargeback onto a customer’s card, among other charges.

Scheme fees

Scheme fees, sometimes known as assessment fees, are the fees paid directly to the credit card network (usually Visa and Mastercard) so that a business can accept customer’s payments with those credit cards.

The fee can be as low as 0.01% per transaction, but can go up to 1% depending on a range of factors including the payment type and transaction volumes, per month or per year, for example.

Businesses with high card transaction volumes may be able to negotiate lower scheme fees with the card networks. But this is likely to be difficult for smaller-sized businesses.

Typical costs for credit card processing

The costs to a small business for credit card processing will depend on the merchant services provider you choose. But they can start from as low as 0.8% (plus 2p) per card transaction made in person (see table below).

In some cases there may be an interchange-plus scenario where the interchange and scheme fees are charged along with a flat monthly service fee, as well as a per-transaction charge. In contrast other providers roll up these fees into one transaction charge.

Merchant services provider Monthly fee Processing fee: (in-person card payment) Processing fee: (online payment)
Revolut Business £0 0.8% plus 2p 1% plus 20p
PayPal £0 1.75% 1.2% plus 30p
Square £0 1.75% 1.4% to 2.5% plus 25 pence per transaction
Stripe £0 2.9% plus 10p 1.5% plus 20p

Source: Provider websites, February 2024. Fees relate to UK credit card transactions.

Can I pass on the processing costs to the customer?

Since new regulations came into place in 2018, merchants, businesses and traders are not permitted to add a surcharge to customers using a credit card to cover processing or other fees.

How can I find the right merchant services plan for my business?

It’s important to consider the service and pricing structure that will best suit your business and the way it receives the majority of payments (for example online via your website, through an app or in-person at a premises such as a cafe or shop). Our pick of the best merchant service providers can help narrow your search, helping you to compare the services more easily.

Some companies prefer to use flat rates that combine all required fees into one simple transaction fee. This is often seen with online processors, such as PayPal and even Stripe. The online fee may be different than a retail transaction because the card is presented to the cashier.


Is there a way to avoid payment processing fees?

It is against the law to pass on the cost of credit card transactions to customers, so this is a cost that must be absorbed by the business.

Many businesses offer incentives, such as discounts, to customers who pay in cash or with a debit card (which tends to be cheaper than the transaction fees on credit cards).

How to reduce the payment processing fees?

If you already have a payment processing provider, you may be able to negotiate with them to cut your fee and reduce what you’re paying.

It’s always worth shopping around and comparing services on offer from competitors to see if you can make cost savings by switching.

Will the fees be higher for non-UK credit card transactions?

If someone wants to make a payment to you using a credit card registered or issued overseas, and the transaction will need to be converted into pound Sterling, you’re likely to incur higher card processing fees.

These fees will vary depending on your credit card payment processor you use.

If your business handles a high volume of international credit card transactions it is worth comparing providers to see which is most competitive.

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