Card payment fees explained: what UK businesses really pay to take cards

Most UK customers now pay by card, and with a contactless limit of £100 they rarely think twice. For a shop, café or salon, card fees have become a fixed monthly cost, like energy or rent. Yet many owners don't know exactly what they pay, because merchant statements are hard to read.

What makes up the price?

Every card payment costs you a mix of four things:

• Interchange: a fee paid to your customer's bank. For UK consumer cards it is capped at 0.2% for debit and 0.3% for credit cards.
• Scheme fees: what Visa or Mastercard charge for using their network. These are not capped.
• Your provider's margin: what the company processing your payments adds on top. This is where providers differ most.
• Fixed costs: terminal rental, monthly service fees, minimum monthly charges and, often, a PCI fee.

Blended or interchange++?

• Blended: one rate for everything, for example 1.5% on all cards. Simple, but you pay the same for a cheap debit card as for a premium business card.
• Interchange++ (IC++): interchange and scheme fees are passed through at cost, plus a fixed, visible margin. More transparent, and usually cheaper once your card turnover is meaningful.

Business, overseas and EU cards cost more

The 0.2% and 0.3% caps only apply to UK consumer cards. Business and corporate cards are not capped and cost noticeably more. Cards issued outside the UK also attract higher cross-border and scheme fees. Since Brexit, Visa and Mastercard have also raised interchange on online payments made with cards issued in the EU. If you serve tourists or sell online to European customers, your average rate will be higher.

Watch the extras

UK merchants are often charged extras that are easy to miss:

• a monthly PCI non-compliance fee if a yearly security questionnaire hasn't been completed
• a minimum monthly service charge if your fees fall below a threshold
• authorisation fees per transaction, even when the payment is declined

A simple example

You take £20,000 a month in card payments and pay an average of 1.5% all-in: £300 a month. With a different structure at an average of 1.0%, you'd pay £200. That's £1,200 a year, with nothing changing for your customers.

What to do now

1. Find your latest monthly merchant statement.
2. Divide your total fees (including terminal rental) by your total card turnover. That's your real average rate.
3. Compare it with an offer based on interchange and scheme fees at cost plus a clear margin.