Merchant Fees Explained UK: Every Cost Broken Down
The Three Layers of Merchant Fees
Every card payment you accept involves three layers of fees. Understanding these is the key to negotiating better rates:
1. Interchange Fees (Paid to the Card-Issuing Bank)
Interchange is set by Visa and Mastercard — your processor has no control over it. In the UK:
- UK consumer debit cards — 0.2% (capped by EU regulation, still applied post-Brexit)
- UK consumer credit cards — 0.3% (capped)
- UK commercial/business cards — 1.5%–1.9% (uncapped)
- EU cards — 0.2%–0.3% (capped)
- Non-EU international cards — 1.15%–1.85% (uncapped)
These rates are updated twice yearly (April and October). Commercial and international cards are by far the most expensive — one of the reasons your effective rate may be higher than quoted.
2. Scheme Fees (Paid to Visa/Mastercard)
Card schemes charge their own fees for network access, brand licensing, and fraud prevention. These are small individually (0.02%–0.05% plus fixed fees) but add up. They're rarely itemised on merchant statements.
3. Processor/Acquirer Markup
This is the fee your payment processor charges on top of interchange and scheme fees. It's the only negotiable part and varies from 0.1% to 1%+ depending on your provider, volume, and negotiating strength.
Pricing Models Compared
| Model | How It Works | Transparency | Best For |
|---|---|---|---|
| Interchange-plus (IC++) | IC + scheme + fixed markup | High | Businesses over £5K/month |
| Blended rate | Single % per transaction | Medium | Low volume / simplicity |
| Tiered pricing | Qualified / mid / non-qualified tiers | Low | Avoid if possible |
Common Hidden Fees on Your Statement
- Authorisation fees — 1p–3p per transaction on top of the percentage rate.
- PCI compliance fee — £30–£100/year for maintaining security standards.
- PCI non-compliance fee — £30–£50/month if you haven't completed your annual SAQ.
- Minimum monthly service charge — if fees don't reach a threshold (e.g. £25), you pay the difference.
- Statement fee — £2–£5/month for paper or electronic statements.
- Gateway fee — £15–£25/month for online payment gateway access.
- Chargeback fee — £15–£25 per chargeback, regardless of outcome.
- Early termination fee — £200–£500+ for leaving before contract end.
How to Read Your Merchant Statement
Your monthly statement should show: total transactions processed, total fees deducted, a breakdown by card type (if on IC++), and any additional charges. If your statement doesn't break down fees by card type, you're likely on a blended or tiered model — and potentially overpaying.
Upload your statement to our comparison tool or request a free fee review to find out if you're paying too much.
Frequently Asked Questions
What fees do merchants pay on card payments?
Merchants pay a combination of interchange fees (set by Visa/Mastercard, typically 0.2%–0.3% for UK debit, 0.3%–0.6% for credit), scheme fees (0.02%–0.05%), and processor markup (0.1%–1%+). The total depends on your pricing model and card types accepted.
What is interchange-plus pricing?
IC++ passes the actual interchange fee through to you transparently, plus a fixed processor markup. For example: interchange (0.2%) + scheme fee (0.03%) + markup (0.3%) = 0.53% total. This is the most transparent and usually cheapest model for established businesses.
What is a blended rate?
A blended rate combines all fees into a single percentage — e.g. Square's 1.75%. It's simpler to understand but typically more expensive than IC++ for businesses processing over £5,000/month.
What are PCI compliance fees?
PCI DSS (Payment Card Industry Data Security Standard) compliance fees cover the cost of maintaining security standards for card data. Most providers charge £30–£100/year. Non-compliance fees can be £30–£50/month if you don't complete the annual SAQ questionnaire.
Why did my card processing fees increase?
Common reasons: Visa/Mastercard raise interchange twice yearly (April and October), your provider applied a rate review, your contract rolled over onto higher rates, or you're now processing more premium/international cards which carry higher interchange.