Credit Card Processing Fees Explained
Transaction Fees
These can vary wildly depending on which bank issued the card, and which card processing platform you (as the merchant) are using.
Typical Transaction Fees: Average estimates vary. Visa and Mastercard transactions will carry the base credit card processing fee, but Amex cards will cost more. Generally between 1% and 3% with an average of around 1.5%.
Interchange Fees
This fee comes from the credit card association that issued the card, typically Visa, Mastercard or American Express. In June 2015 the EU brought out legislation that prevented card issuers from charging more than 0.3% in merchant service fees for credit card payments.
Typical Interchange Fees: 0.2% for debit cards and 0.3% for credit cards.
Authorisation Fees
Your card processor will need to authorise the transaction with the issuing bank, and this incurs a small fee for each sale.
Typical authorisation Fees: 1-3p per transaction.
Payment Method Fees
The transaction fee can go up if the cardholder is not present when the transaction takes place. For example, if the customer pays online or by phone, the bank is taking on more risk by authorising the transaction and so will charge a higher transaction fee.
Typical Payment Method Fees: Can add around 2% on top of the transaction fee.
Typical Hidden Credit Card Fees
Chargeback Fees
If a customer requests a chargeback (e.g. a refund), then the bank that issued the card will reverse the payment to the merchant. The merchant will be charged an admin fee for this.
Typical Chargeback Fee: £10-20 per chargeback.
Minimum Monthly Service Charge
Most credit card processing providers will demand a minimum monthly service charge (typically around £5-£25) so they can turn a profit from all their business customers.
If your monthly transaction fees are higher than the MMSC, your payment processor will not add any additional charge. However if your transaction charges fall below the threshold, your supplier will add additional charges to bring your monthly bill up to the MMSC.
PCI Compliance Fees
When handling sensitive data, such as customer credit card details, you’ll need to make sure you’re doing so in compliance with Payment Card Industry Data Security Standards. This doesn’t just mean reading up on the latest card fraud protection trends – although you should do that too – there are in fact costs of staying compliant.
Your business will need to undergo a series of checks, to make sure it’s not exposing customers to risk or fraud. What these ‘checks’ look like will depend on the size of your business and how many transactions you process. Many merchant account providers will handle this for you, for a small fee – so make sure you ask!
If you process fewer than 1 million transactions a year (and 20,000 via ecommerce) you can expect to pay around £60 a month in PCI Compliance fees. At the other end of the spectrum, sellers who process more than 6 million transactions a year (or have suffered a data breach or attack) should expect to pay £50,000 a year.
Set Up Fees
A word of warning: some payment processing platforms will charge you an account set up fee. Although you shouldn’t expect to pay more than £99 in set up fees, this is a cost that can be avoided with adequate research and shopping around.
Early Termination Fees
If you want to switch credit card payment processors before the end of your agreed term, you may need to pay an early termination fee. How much you’ll pay will depend on who you are dealing with, and how early you’re terminating the contract. In the worst cases an early termination fee could end up costing you a few hundred pounds.