How much are credit card merchant fees

How much are credit card merchant fees


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You’ll usually pay transaction fees for receiving payments from customers. Credit card charges for businesses involve lots of different fees to process transactions, with one of the most common being credit card merchant fees. These fees can quickly add up if you have a lot of customers that make credit card purchases, so it’s important to be clear about how much they are and how much it might cost you as your business grows

What is a merchant fee on a credit card?

Merchant fees are allocated when customers buy from you using a credit card. These fees are paid to your bank by your card provider and used to cover costs for things like fraud and handling.

Type of credit card fees for merchants

Credit card processing fees can come in a variety of forms, depending on the card being used and the type of purchase being made. For example, some cards charge a flat fee per transaction, while others charge a percentage of the total purchase price. Additionally, some cards charge different rates for different types of purchases, depending on whether the transaction is in-person or online.

Merchant service charge

The merchant service charge (MSC), which covers the cost of processing payments, will make up most of your business credit card fees. This fee, usually charged as a percentage, is charged per sale. The exact rate depends on the type of card used.

  • Debit cards - 0.25% to 0.6%
  • Credit cards - 0.3% to 0.9%
  • Business credit cards - 1.5% to 2.5%

Terminal charge

Businesses that do all of their business online won't need a payment terminal. But brick-and-mortar stores will need a payment terminal to take card payments from customers. There’s usually a terminal hire fee which will vary depending on the type and quality of the chip and PIN terminal. Broadly speaking there are two main types you can choose from:

  • Portable terminal - £16 to £25 per month
  • Mobile terminal - £20 to £35 per month 

You can usually reduce these monthly payments by renting terminals for a longer period of time. Most contracts last between 4 and 6 years.

Gateway fee

You should also think about how much you'll have to pay for your eCommerce payment gateway. Gateways are vital for online businesses as they allow you to process transactions, but fees for these gateways can differ drastically. Some will charge per transaction, others have a flat monthly rate and some do both.

  • Transaction fees - 6p to 10p per transaction
  • Fixed fees - £10 to £20 per month

If you choose a fixed rate, you'll usually get a set number of transactions included. Additional transactions are usually charged as standard.

Authorisation fee

In addition to the fees above, you'll also have to pay for authorisation. Authorisation involves a check to the card being used is not only valid but that the input details match up.

  • Transaction fees - 1p to 6p per transaction

PCI compliance fee

PCI DSS is the payment card industry data security standard. Making sure you're in line with the regulations of PCI DSS as a merchant is non-negotiable. Compliance fees make sure that all customer data is securely stored and sent whenever completing transactions.

  • Compliance fees - £2 and £20 per month

How do credit card fees compare to other business payment methods?

Credit cards are some of the most common ways to pay for goods and services. Here’s our list of the best business credit cards to consider. However, there are lots of payment methods that customers can choose from, each with its own pros and cons.

Bank transfer

Bank-to-bank transfer is often free, which means no credit card processing fees to deal with. Merchant credit card transactions also take longer to process, usually up to three days, whereas bank transfers are typically completed on the same day. However, bank transfers can be particularly cumbersome and prone to human error as you usually need to manually enter bank details - sorting out bank codes and worrying about verification can add friction to the sales process that might not be worth the cost saving.

Debit card

Debit card fees are typically lower than credit card fees for merchants, and sometimes there are no fees at all. Debit cards can be processed within a day or two and are widely accepted, but they may not offer the same level of protection as credit cards. This is because credit cards typically offer more safeguarding against fraud, making shopping online safer.

Online payments

Payment options like PayPal can be an interesting alternative to credit cards. PayPal charges merchants a flat fee of 2.9% + $0.30 per transaction. So, for a $100 purchase, the merchant would pay PayPal a fee of $3.19. For high-volume businesses, PayPal also offers a merchant account with variable rates, which can be as low as 1.9%. All in all, PayPal is generally more expensive for merchants than credit cards, but it does offer some advantages in terms of ease of use and flexibility. 

However, PayPal isn't the only option when it comes to these payment gateways. Some other alternatives include Stripe, 2Checkout, and These providers typically charge similar fees to PayPal. iwocaPay allows you to accept payments at no extra cost.

Digital Wallets

Many small businesses, especially those that offer services or are just getting started, now use digital wallets as their main way to get paid. You'll only need a mobile point-of-sale system to keep track of customer information and print receipts. Using near-field communication (NFC), digital wallets like Google Pay and Apple Pay let people pay with a tap of their phone.

Digital wallets are convenient for consumers, but they have a number of problems for small and medium-sized businesses (SMEs). Businesses always have to deal with problems like high fees and a lot of different wallets that take a lot of time and money to integrate. You will also need a reader that is up-to-date and can handle NFC payments.

How iwocaPay can help to keep fees low

With iwocaPay, you can keep fees low by offering you and your customers free payment processing so you can avoid credit card processing fees altogether. Our Pay Now feature means that your customers can send payments immediately to your bank from theirs - all securely via open banking, without having to enter bank details .

Setting up payees and verifying details can be burdensome for customers. Even worse is having to wait for the money to hit your account. All of this is a thing of the past with iwocaPay - we'll pay you immediately, so you can keep your cash flow steady.

Stop paying to get paid.

Read more on collecting customer payments


Words by
Miles Warner
Article updated on:
February 15, 2024

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How much are credit card merchant fees

Read our definitive guide on credit card merchant fees and how they work. Whether you are interested in terminal fees or gateway fees, we have you covered.

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