Card processing fees: What will taking card payments cost my business?

Tues July 03 2018

You’re a small business owner; so we don’t need to tell you that every penny counts. Instead, we thought it might be useful to see the main card processing fees (also known as merchant service fees) associated with giving your customers the option to pay by card, online and in person.

It’ll hopefully help you decide if you should look into accepting card payments, think about switching payment partners, or simply keep doing what you’re already doing.

Before we dive in, it’s worth knowing that accepting card payments can have significant positive impact on everything from turnover to profit to customer loyalty. Did you know, for example, that SMEs are missing out on £8.8bn a year by not taking card payments?

So if you already take card payments but you want a refresher on the merchant service fees you might be paying, read on. And if you’re considering taking card payments, here’s a straightforward breakdown of what card processing and transaction fees you can expect to pay. We’ve broken it into face-to-face (i.e. customers paying by card in your shop or restaurant, for example) and eCommerce (i.e. selling online). 

The exact cost of accepting payments (in other words the merchant service fees you’ll pay) depends on a few things. These include:

1. how many face-to-face (F2F) and/or eCommerce transactions you take each month;
2. the value of card payments that you take each month;
3. the value of each card transaction; and
4. the type of cards you are accepting (i.e. debit, credit, commercial etc.).

The above four factors will help your payment provider determine what solution you need. For example, if you’re looking to take face-to-face (F2F) payments, you’ll need card machines (also known as card terminals and card readers). For online transactions, you’ll need an online payment gateway solution. For both, you’ll need, well, both. The card transaction fees of these solutions will be different, and based on the four main factors above.

 

Accepting F2F and over-the-phone card payments

The following merchant services fees and charges will be paid to your acquirer (e.g. Barclaycard) who’s there to help you with processing payments:

Merchant Service Charges (MSC)

This is the cost of taking card payments, based on the transaction rate agreed with your payment provider and the four points above. You’ll pay the MSC monthly. The transaction rate is different for each card type, for example accepting debit card payments will be at a different rate and therefore cost you a different amount than credit card payments. The rate is set as a percentage of the value of each transaction.

Authorisation fees

This is the charge to authorise every payment (e.g. check there’s enough money in a customer’s account to fulfil the purchase). It’s set at 0p for contactless card transactions and between 2p & 4p for chip & PIN debit and credit card transactions.

Minimum billing

This is only charged if the monthly service fees associated with taking card payments (your MSC and authorisation fees) fall below what you’ve agreed with your payment provider as part of your contract. This is typically set at around £20 per month.

 

Card machine hire

This is a monthly rental charge for a card machine, which you’ll need if you want to take chip and PIN, contactless and mobile wallet payments F2F and to take payments over the phone. The monthly rental charge amount will depend on the type(s) of card machine or ePOS system you choose. Here are the main options open to you:

Desktop card machines – also known as counter-top card machines, or card readers, these are fixed at a particular location, i.e. at a till point in a shop, or the check-in/reception desk at a hotel. The monthly charge for this card machine type is typically around £15 per month + VAT depending on which payment provider you choose. Then there’s the cost per transaction – the authorisation fee (explained above), and the MSC (see above), which are worked out based on the number of card payments you take per month and the value of each transaction.

Portable card machines – these have a fixed base unit, i.e. at the back of a bar, and a removable card machine that can be taken to the customer, for example at the front of the bar or at their restaurant table. The monthly charge for this card reader type is typically around £20 per month + VAT, depending on which payment provider you choose. The cost per transaction will be as explained for desktop card machines (above).

Fully mobile card machines  – these are completely portable card machines with built in SIM cards. These allow you to take card payments on the road and in different locations, i.e. at pop-up events or when making home deliveries. The monthly charge for this card machine type is typically around £25 per month + VAT, depending on which payment provider you choose. The cost per transaction will be as explained for desktop card machines (above).

There are other card machine types that you pay a one-off fee for – basically you buy it, rather than hire it. They work in a similar way to a pay as you go mobile phone contract. Our version of this type of card machine is Barclaycard Anywhere. It’s a SIM-free, fully mobile and portable card machine which works by being connected to a smartphone or tablet. As with the fully mobile card machines (see above), these are for accepting card payments on the road and in different locations. To buy this machine is typically between £50 and £70.

Set up fee

This is a one-off fee that a payment provider may charge to set up the F2F card facility, which will include delivery of the terminals.


Accepting online and over-the-phone card payments

The following charges will be paid to your online gateway provider. This company could be your acquirer (e.g. Barclaycard – see above) or another partner.

Merchant Service Charges (MSC)

Just as with accepting card payments F2F, the MSC for taking payments online is the cost of taking card payments, based on the transaction rate agreed with your payment provider. You’ll pay the MSC monthly, plus your monthly package fee.

Monthly package fee

How much you pay for this depends on the package that you’ve decided is right for your business. To give you an idea of what this fee might be, at Barclaycard, we have three different online payment gateway packages. One is £12 per month, one is £20 per month and the other is £25 per month.

Authorisation fees

This is the charge to authorise every payment (e.g. check there’s enough money in a customer’s account to fulfil the purchase). It’s set at 3p for online debit and credit card transactions. There’s an additional 10p authorisation fee for each payment taken online. Depending on your package, a certain number of transactions could be exempt from the 10p charge.

Minimum billing

This is only charged if the monthly costs associated with taking card payments (your MSC and authorisation fees) fall below what you’ve agreed with your payment provider as part of your contract.

For example, you may have agreed that you’ll take at least £20 per calendar month in fees associated with taking card payments. If you don’t achieve this in any month during the length of your contract, you’ll be charged the difference.

So, say your merchant service fees (MSC and authorisation fees per outlet/location) were £18 in that month, you can expect to be charged £20, so the £18 plus £2 difference. If, however, your costs were £21.50, you would be charged £21.50. This minimum billing charge relates to your costs, not how much you have agreed to take in card payments.

Set up fee

Set up fees – this is quite simply the one-off fee that a payment provider may charge to set up the card facility. Think of it like the installation fee for a new boiler, for example.

If you’re interested in setting up an eCommerce site, find out how to start selling online.

 

Additional fees

PCI Compliance fee – it’s crucial to be PCI DSS-compliant. This is a level of protection against fraud. Barclaycard charges a monthly fee of £2.40, which covers the admin costs of reminding you to complete your annual PCI self-certification questionnaire and compliance certificate, and sending this on to the necessary regulatory body each year.

Potential charges, which you may or may not have to pay

There are some charges and fees which you’ll only have to pay in particular circumstances, or you might never have to pay. Examples of these include:

Chargeback fees – An administration fee, usually of around £10, that’s charged to you if a customer requests a chargeback. You’ll only be charged this if a payment you’ve taken is then rejected by either the cardholder (customer) or the card issuer. See what chargebacks are from a customer perspective.

Non-secure transaction fees – these only apply when you accept a payment that’s not categorised by your payment provider as secure. There should be an explanation of what’s secure and what’s not in your contract. With us, this fee is 0.85% of the value of the transaction you’re accepting.

Cancellation fee – per card reader/online gateway + VAT – this is only charged if you decide to cancel your contract before the minimum term is up. For F2F card payments, it’s charged per card machine and a typical cancellation fee for a desktop card machine, for example, might be between £100 and £150+VAT, depending on who your payment provider is. To cancel an online payment gateway solution, it’s around £115+VAT.

So now you’ve got a good idea what accepting card payments costs, get in touch if you want to start taking card payments. Or take advantage of our current offer.

Want to accept card payments?

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0800 096 8237

 

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