Merchant Account Card Processing Fees explained

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Libby James
Merchant Services Expert

Libby James is co-founder, director and an expert in all things merchant services. Libby is the go-to specialist for business with more complex requirements or businesses that are struggling to find a provider that will accept them. Libby is regularly cited in trade, national and international media.

What to know about merchant accounts and the costs involved

What are merchant account fees?

The terminology surrounding opening a merchant account can be mind boggling! We have created a guide for you, as business owners, to understand what you are paying and why those costs exist (or don’t in some cases) on your monthly transaction statement. We will look at the charges you may come across when being quoted by account providers and explain what they mean, enabling you to make a like for like comparison when shopping around.

How to calculate merchant service fees

Merchant account fees can be difficult for most of us to understand, big names such as; PayPal, Barclays, Elavon and Worldpay, have fee structures to suit most business sizes – however how do you know if they are right for you? And most importantly, if there is a way of avoiding some of the fees quoted would you choose a lesser known brand?

Calculating merchant service fees will depend largely on how the payment is taken, i.e. whether it’s a PDQ machine or handheld terminal. Online merchant account fees differ slightly from those transactions taken in person. We have listed out the fees associated with both face-to-face transactions and online payments below, to help keep things really simple.

Merchant Service Charge (MSC)

This is the charge taken on every credit and debit card transaction the business accepts. The majority of businesses compare merchant accounts this way, however read on!! Account providers will quote a percentage fee, which will not be the same for each type of card. There will also be a difference between face to face sales (customer present) and sales taken over the phone or via the internet (customer not present.) Equally, business cards and international cards will be charged separately and smaller costs could be available for contactless payments. Make sure you are quoted all of these before signing on the dotted line.

Terminal hire

The cost of renting a PDQ (link) machine, this is normally paid monthly. Ordinarily, the longer the contract you sign the cheaper the monthly payment. Be aware of potential early termination fees if you want to leave the contract prior to the end date.

Payment gateway fee

This cost is for ecommerce stores only. The gateway is the platform which encrypts customer’s payment information when paying online, to ensure security. Costs are normally quoted per transaction. Gateway providers often try and provide quotes for the merchant account too, however it is quite normal to use two different companies for each – and can often be much more cost effective. We are often asked ‘how many merchant accounts do I need?’ this is because businesses confuse the gateway provider and merchant bank.

Authorisation fee

Additional authorisation fees can be payable on both debit and credit card transactions, however this isn’t always the case. Make sure you are quoted this, if it applies as come can be as high as 20%.

PCI compliance fee

Stands for payment card industry data security standard. This is a set of rules set out to ensure all companies that accept card payments do so in a secure environment. A certification will be arranged through the supplier, at an annual cost.

Minimum monthly service charge

If the merchant is proved to be unprofitable by the provider this charge will be payable. A beach mark will be set by the provider and is designed to make sure all merchants hit their level. It’s important to do your sums and work out if during quieter periods this will be chargeable.

Set up fees

Normally a fixed fee that some (but not all) suppliers charge – for the cost of application. This can be negotiable with some suppliers – if they really want your business!


We speak about chargebacks a lot. Not only are they damaging towards business, but the supplier will also charge for administration of the chargeback. To find out how to avoid chargebacks see here.

Annual fee

An annual fee is charged by some providers, however they may accept monthly payment for this. The majority do not charge an annual fee, so we can use this for negotiation to either reduce the fee quoted or even get it removed.


PayPal transaction fees

We regularly get asked about PayPal merchant fees, this confuses a lot of business owners as it’s free to send or receive money to and from friends and family within the UK, provided a credit card isn’t used. When it comes to companies however, it’s a different story. PayPal charge percentage fees based on the business total sales volume, these fees can also increase if you have a PayPal button on your website. If your company has had a quote from PayPal and you would like a comparison, speak to one of our advisors today for an free consultation.


How to avoid paying too much for your merchant account

Whether you wish to compare merchant services for small businesses or larger corporations, it’s important to consider all fees involved and don’t just compare the rates (MSC) alone. Our experts can tell you what you need to know about merchant accounts and how to compare credit card merchant services with all the details involved, including how to avoid merchant services ‘hidden fees.’ If you have any further questions surrounding the following, give us a call;

  • Credit card transaction fees for merchants
  • Merchant services interchange fees
  • Comparing merchant fees
  • Ecommerce (internet stores) merchant fees

Merchant Accounts with no monthly fees

Now for the good news! We have products available to us with little or no monthly fees. This is brilliant for smaller businesses or start-ups who are unsure of what their initial transaction turnover will be, and even better for larger companies – the savings can be tremendous! Sound too good to be true?? CHALLENGE our experts today. To find out how to avoid overpaying, give our team of experts a call today for a no fee, no obligation quote.

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Libby James

Libby James Co-founded Merchant Advice Service alongside David Bird in 2016. Her finance background, coupled with retail and customer service experience, gave Libby the drive to bring transparency and non-biased advice to the world of merchant services. Having come from the heavily regulated mortgage and insurance industry, Libby found it puzzling that other financial sectors lacked regulation and transparency leaving customers confused and unable to make informed decisions when it came to accepting card payments. This was soon to become Libby’s obsession!

With the help of some of the industry’s best, Libby began to research acquiring banks, complex terminology/regulation, and the problems customers experience within merchant services and payment gateway markets. She spent years on sourcing solutions for complex clients, which previously others were unable to assist with. Libby established relationships with brokers and banks which would soon form the cornerstone of Merchant Advice Service. As a result Libby has been featured in high-profile publications across the web.

Libby is proud to be the entrepreneur’s champion, supporting start-up businesses regularly. Her industry insights can often be found on LinkedIn where she provides free of charge advice and money saving pointers. It’s safe to say she has her finger on the pulse of everything card payments related.

Libby speaks of her experience in founding and running Merchant Advice Service…

‘Merchant Advice Service is one of my greatest achievements to date. We help business owners to overcome card processing issues which can become detrimental to their business. We assist SME’s in finding suitable card payments solutions, helping them create their vision. Each and every day is different, exciting and fore filling. As technology advances I can’t wait to see the way in which the merchant services market advances, and I’m pleased that our business will play a part in educating company owners along the way.’

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