Merchant Account Fees Explained

> Make A Quick Enquiry

Understanding your card processing costs can be a real headache, but not doing so can eat away at your bottom-line and reduce your profit margins. Here we look at the individual types of card payments charges, what they mean and how they work whilst providing tips on things to look out for to help you to make informed decisions.

Before we get into it…

Before we get into it

It’s important to understand that many card payments costs vary between provider and are often negotiable. There are many elements of your business which will affect the pricing you are offered, including:

  • Industry type
  • Trading history
  • Method in which you take payments; i.e MOTO, Face-to-face via a card machine or ecommerce.
  • Chargeback rates
  • Types of card you accept; for instance consumer credit cards are cheaper than commercial
  • Location; accepting card payments from international clients

If you think you might be getting offered a bad deal get in touch with us and we’ll put you in touch with somebody that can offer something better. We won’t charge you a single penny for the recommendation either.

What is a merchant service charge (MSC)?

There is a lot of complex terminology in merchant services, so it’s understandable that business owners get confused. Comparing statements which aren’t set out in a standard format is a nightmare and providers are all different.

But what is an MSC, and how does it work? The merchant service charge is made up of three factors.

  • Acquirer fees
  • Interchange fees
  • Scheme fees
What is a merchant service charge (MSC)?
Let’s look at what that means in plain English.
What does acquirer fees mean?

What does acquirer fees mean?

The biggest part of the transaction cost is normally the acquiring fees, but what are acquiring fees? And why can they be so hefty?

These are the fees charged by the processing bank (known as the acquirer in the world of payments). The costs tend to cover their overheads, with some profit margin, and they bit they add significantly extra in order to try to insure themselves against risk when dealing with higher risk industriesThis means that there is often room for negotiation when it comes to this particular part of the transaction fee. It’s the part our unbiased Brokers love to work on to drive costs down (hint hint).

Get a Quote
Merchant Account Fees Explained Decoration

How much should you pay for acquiring fees?

It’s really difficult to give exact figures, due to the variable factors listed above. However, depending on the risk surrounding your business you can look to pay anything between 0.6% and 6% (reserved for the most high-risk companies) in acquiring costs.

It’s worthwhile noting that costs can be higher if you go through an ISO (independent sales organisation) such as Takepayments, Paymentsense etc. This is due to the fact companies like this add their profit margin onto the acquiring fees – so despite often not charging a fee for their service, commission is paid from the acquirer to the ISO, thus increasing the cost incurred per transaction.

How much should you pay for acquiring fees?
Merchant Account Fees Explained Decoration

What are interchange fees?

Most banks offer interchange pricing. However, some offer blended rates which include acquiring fees and interchange fees. The interchange costs are the fee which the acquiring bank pays to the card issuer every time a transaction is made. Put simply, the issuer is the customer’s bank; i.e HSBC, Santander, Barclays etc etc. These costs are a fixed cost, so no room for negation here I’m afraid, and normally charged at a percentage rate. Comparatively speaking normally, the smallest/cheapest part of the transaction overhead.

Typical costs for interchange are 0.2% for debit cards and 0.3% for credit, commercial cards (company business cards) are charged slightly higher.

Charge Type
Interchange Fee
Visa me-to-me [UK Domestic, Prepaid- secure and non-secure]
Visa Consumer [Credit, Deferred Debit,]
Visa Consumer [Debit, Prepaid,]
Visa Business Credit and Deferred Debit – Card Present – Contactless
Visa Business Credit and Deferred Debit – Card Present – EMV Chip
Visa Business Debit and Deferred Debit – Card Not Present
Visa Business Debit and Deferred Debit – Standard
Visa Corporate – Card Present – Contactless or EMV Chip
Visa Corporate – Card Not Present or Standard
Mastercard Consumer Credit
Mastercard Consumer Debit Debit, Consumer, Consumer Prepaid
Mastercard Corporate, Mastercard Electronic Corporate – EMV Chip
Mastercard BusinessCard, Mastercard Electronic BusinessCard, Mastercard Professional Card, Mastercard Prepaid Commercial – EMV Chip

What are scheme fees and how do they work?

Scheme fees are another name for the card company, ie Visa, Mastercard, UnionPay etc. These are charged to cover the cost of providing their payment network, like a maintenance fee. Scheme fees include; assessment and clearing costs, settlement fees, and cross border fees (if relevant). Scheme fees are affected by a number of factors. These include:


Get a Quote
  • Location of the acquiring bank and type of card used for the transaction. Although influenced by many of similar factors as interchange rates, scheme fees are a FIXED AND NON-NEGOTIABLE cost.
  • Customer card type
  • How the transaction is made
  • Authorisation costs
  • Transaction amount
  • Number of transactions
  • Licensing costs (if applicable)
  • Cross-border transaction costs (if applicable)
  • Scheme fees for reports
  • Fraud and anti-money laundering prevention
  • Innovation and growth funds
  • Marketing
Next we’ll look at these in a little bit more detail for context.
What is a merchant category code and what does it mean for my business?
Commercial cards vs Consumer
Transaction location
Card authentication
Rewards cards
Interchange rate cap – how it works

Need help choosing the right merchant account?

Contact Us
We’re rated 4.9 stars via Google
Ratings Star Ratings Star Ratings Star Ratings Star Ratings Star
Need help choosing the right merchant account?

What other merchant account fees will I be charged?

If you are already accepting card payments, or you’ve received a quote from an acquiring bank, you may be thinking that some of the costs listed on your transaction statement haven’t been mentioned yet. This is due to the fact there are several non-transactional fees that are charged. To make this easy for you we’ve listed them here.

What Is It?
Typical Fees
Terminal Rental
The rental charge for the chip and PIN card machines
£14-35 per month
Payment Gateway
Integration of hosted checkout pages and an API for custom development
£20-£75 per month
Virtual Terminal
Software to support telephone and mail order transactions
£15-£75 per month
Early Termination Fee
This fee is charged if the contract is terminated early – will depend on the length remaining on the contract
Setup Fee
Fixed cost at the start of the contract
Minimum Monthly Service Charge (MMSC)
Min amount charged each month on transaction fees
£5 – £25 per month
PCI Compliance
Monthly Fee charged to meet PCI compliance standards
£2 – £20 per month
PCI Non-Compliance
One off fine for failing to keep your account compliant with PCI DSS standards
Fee for each transaction reversed
Fee for processing refunds
30p – 50p
Now let’s look at each cost and what it means to you as a business.
Terminal hire
Payment Gateway monthly fees
Virtual terminal fees
Early termination fees
Merchant services set up fees
Minimum monthly service charge
PCI Compliance fees
PCI DSS non-compliance fee
Chargeback fees
Refund fees

What can I expect to pay in card payment costs?

Most acquiring banks and ISO’s do not publish pricing, unlike payment facilitators like Zettle, SUMUP and PayPay. The reason for this is that the pricing is bespoke to each business. However, it’s worthwhile knowing that there is a strong link between card turnover and how cheap card payments become. Other elements considered before pricing is offered include;

  • MCC – merchant category code
  • Average transaction size – ATV
  • Total transaction volumes annually
  • Methods used to accept transactions
  • Transaction history
  • Location of business and customers
  • Product/service type – low, medium or high risk
What can I expect to pay in card payment costs?
Merchant Account Fees Explained Decoration
How to get cheap card processing

How to get cheap card processing

Despite pricing not being published, most ISO’s and acquiring banks have the ability to negotiate within reason. Card turnover and the profit margins of accepting ongoing transactions has a huge part to play in pricing structure. Understandably you’re going to want to achieve the best price possible, however important elements such as security, functionality and suitability shouldn’t go a miss.

When comparing merchant accounts you should do so on a pound for pound basis – to do so use your transaction statement from your existing provider to see where overheads can be reduced.

Get a Quote
Merchant Account Fees Explained Decoration

Comparing blended rates to IC+ and fixed fees

Transaction fees offered to businesses processing payments fall into four pricing categories;


(standard pricing)
Blended pricing commonly known as standard pricing means that the bank or ISO offer one rate to you the business (merchant). Interchange and scheme fees will not be listed on transaction statements.


(fixed pricing)
Offered by the likes of Paypal, SumUp and Square (known as payment facilitators) fixed pricing is popular amongst smaller businesses and start-ups, enabling them to plan processing costs effectively. A fixed amount is charged, if transaction turnover stays within limits.

IC +

(interchange plus)
Interchange costs relevant to the transaction are automatically passed on to you the business by the acquiring bank. Important note – scheme fees are not always passed on at cost price.

IC ++

(interchange plus plus)
Both interchange and scheme fees for transactions are contractually passed onto the business. This means that the acquiring banks cost and profit margin are recovered in the processing fee.

The majority of businesses are on standard pricing known as blended rates. Here we look at each costing and what it means.

Make A Quick Enquiry

Speak to us directly and get any questions you have answered. Submit your details and we’ll be in touch shortly.

Alternatively you can contact us directly using:0800 304 78 75

Just so you know, we take your privacy seriously and will only use your personal information to contact you via phone, email or text with updates on the progress of your enquiry and provide information only on relevant products and services.