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/EEA cards in person — 0.2% debit / 0.3% credit (capped by Visa and Mastercard's commitments to the European Commission)
- EU/EEA cards online — 1.15% debit / 1.5% credit (raised fivefold after Brexit; the Payment Systems Regulator is consulting on a cap)
- 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.
Interchange figures last checked against Payment Systems Regulator publications on 15 October 2026.
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.