Credit card machine charges and merchant fees explained

Updated on 25 April 2024

Understanding credit card processing fees and the costs of card readers can be confusing. But for many businesses, accepting credit cards is a must. Here’s how to work out which reader and provider is the best solution for you.

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Video: Choosing a card payment machine

The use of credit cards in the UK presents with opportunities to make sales both in-store and online.

Table of contents →
Getting a credit card machine for your business
What are the different pricing, charges and merchant fees?
The average costs of credit card processing fees
What are these fees and credit card costs for?
Processing fees or merchant service charge (MSC)
Terminal charges
Authorisation fee
Gateway fee for online transactions
Cheap vs. affordable credit card fees and costs
Credit card readers and processing providers

Getting a credit card machine for your business

There are over 61 million credit cards in use in the UK. On average, the transaction value on credit cards stands at £54.09, over £20 higher than the average spend on debit cards. Contactless purchases are also higher on a credit card as opposed to debit card purchases at just over £10.

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What these statistics tell us is that as a business, investing in a credit card reader, both for PIN and contactless purchases, is a must. 

However, there are costs involved, including the purchase or hire of a card machine, as well as credit card merchant fees. 

Whilst card machine costs may not be prohibitive; they need to be factored in so that offering credit card payment options work for the business as well as your customers.

What are the different pricing, charges and merchant fees?

Offering credit card payments means that your business will need to choose a merchant to provide the card machine, which you can either buy or rent, processing fees and other costs. The list can look long and confusing, but when you know what to look for, understanding the charges and fees is easier.

Take away point

Credit card processing fees, along with the costs of other merchant services, need to be added to card reader price or credit card machine rental costs.

The average costs of credit card processing fees

Credit card transaction chargesUsually between 1% and 3%
Merchant services chargesOn most credit cards, this is around 0.3% but can be as high as 0.9%
Minimum monthly service feesNot always applicable but can be £10 per month
Transaction authorisation feesOn average, 1p to 2p per transaction
Gateway/online transaction fee£10 to £25 for a set number of transaction per month
Credit card machine costs£50 to £80 on average to buy
Set up costsVaries between merchants but expect to pay £40 to £100
PCI Compliance fee£5 per month or £30 a year depending on the merchant
Chargeback feesBetween £10 and £20

These are average figures and give an overall idea of what fees and costs are involved. Merchants charge different fees and costs and will also have attractive offers from time to time. We compare merchants later in the article.

What are these fees and credit card costs for?

Processing fees or merchant service charge (MSC)

This is the cost of accepting different card types. They are charged as %fees, the result of recent regulatory changes.

There are three broad categories: 

  • Debit – the advent of contactless payments has made paying with a debit card much easier for customers and more retailers and businesses too. 
  • Credit (personal) – another common form of payment, the processing fees for credit cards tend to be slightly higher than for debit cards.
  • Commercial – these are cards for B2B customers and represent a smaller sector of the payment processing market. The fees for processing these is higher again, around 1.5% to 2.5%

Take away point

Businesses will accept payment from across these three categories, and so it is important to check the small print for all fees.

Terminal charges

Card readers sometimes referred to as terminals, are an important consideration. There are various types such as wired machines that stay in one place next to the till, for example, as well as mobile and wireless options.

  • Static card reader – this is ideal when you want to bring the customer to a certain point of sale, such as a till or counter. Independent stores often opt for this style of machine.
  • Portable credit card machine – this means that staff can take the card reader to the customer, such as to table in restaurants or cafes.
  • Mobile card terminal – this is ideal where you are more than 150 metres away from your base such as at a trade show, festival or fair. They work via Wi-Fi or data packages, costs you will also need to factor in.

Take away point

Choosing the right machine is not just about price point but the convenience that it offers you and your customers. Mobile card machines tend to be the most expensive, with wired or static terminals being the cheapest. You’ll also need to factor in the cost of any hire contract too if you are choosing to rent a terminal rather than buy.

Authorisation fee

This fee is becoming more common and is often tagged on my processing merchants onto online and terminal transactions. Normally a Penny per Transaction (PPT) will be taken for every payment accepted.

In practice, if you were to process 10,000 credit card transaction per month on credit card transaction and you were charged an authorisation fee of 2p per transaction, you would be paying an additional £20 a month.

Take away point

Check the level of this fee as some merchants can charge up to 6p per transaction, leading to an additional monthly charge you were not expecting.

Gateway fee for online transactions

If you operate online and choose to take payments online via credit cards, you’ll need to bear in mind that you will also be charged a fee for processing online payments.

Most merchants charge a monthly fee for a set number of monthly transactions, for example, £25 a month for 1000 transactions. But check how merchants apply this charge as some will charge a % of your online turnover, leading to a much higher cost. 

Take away point

Look for a merchant who charges a fair fee for a set number of transactions per month. If you exceed the number of online transactions per month, charges can be as high as 10p per online payment!

PCI Compliance fee

PCI compliance is defined as a set of requirements intended to ensure that all companies process, store, or transmit credit card information in a secure environment.

It sounds daunting, but as a business, you’ll be keen to preserve your good record if information security management. To stay secure, merchants charge their business customers a PCI compliance fee. This can be applied as a monthly fee and can be as low as £3.50 or as high as £20.

Take away point

Credit card merchants can charge this fee per business, but others will charge each outlet. In other words, if you have more than one selling outlet, e.g. stores on the high street and online, you may have to pay PCI Compliance fee for each one.

Cheap vs. affordable credit card reader fees and costs

It is true to say that there are many different fees and costs. Like all retailers, card processing merchants will create packages that on the face of it, look enticing and cheap. However, there is a difference between cheap and affordable.

Deals that seem too good to be true probably are, with many hidden fees and costs that you were not expecting. Look out for fees and costs for chargebacks, e-invoices and foreign card transaction fees. These services will often add fees.

Ask about discounts on car reader machines too, especially if you need several machines across a range of bases. Like all industries, credit card processing companies and merchants operate in a competitive marketplace and may be willing to negotiate on some fees

Credit card readers and processing providers

Package prices change all the time, so always check with a provider for up to date fees and costs.

Terminals can be as cheap as £30 to buy, or you can hire a credit card reader for around £15 or more a month.

Ideal for…Cost (excl. VAT)Transaction fees
SumUp*Best all-round provider with the simplest pricing plan*

The cheapest transaction fees. There are no contractual obligations either. There is no charge for declined payments either. 
£29 + VAT for the Air Card Reader. 1.69%

2.5% for online payments

No monthly costs, no fixed fees.
iZettleBeing the best all-rounder card reader provider and processing of payments. Has a separate package for food and drink retailers. £29 current offer1.75%2.5% invoice transactions2.5% payment link transactions
SquareA great card machine packed full of features. Compatible with iPad. Will need to open a Square account to access payments.From £19 depending on reader selected1.75%
WorldpayFlexible packages and deals. Two packages: Gateway Standard from £19 per month and Gateway Advanced for £45 per month£69 + VAT, one-off purchase and fees apply

Or rent for £4.99 a month (+VAT)
PCI Compliance £29.99 per year 

£15 per chargeback

No setup fees

Pay as you go – 2.75% transaction fee + 20p

PCI Compliance £9.99 a month
PayPalGrowing businesses and startups £45 + VAT but look out for offers2.75% to 1% based on sales volume
BarclaysA trusted, well-known brand. Has a range of options including Smartphone, Countertop, Portable and Mobile card readers and services as well as for online payments. Contracts are between 12 and 18 months.£601.25% to 1.75% depending on the package chosen

PCI compliance fee £25 per month per outlet + £4.80 DSM fee.


How much does it cost to run a card machine?

Card machines are a staple in many businesses. Offering customers a convenient way to pay for goods and services, it also offers the seller security and protection too. As well as purchase cost, you’ll need to think about card machine ‘running costs too’. This means bearing in mind the % transaction fee you’ll pay every time someone uses their card to pay for something. You’ll also need to be PCI compliant, a fee that card merchants provide for a monthly or annual fee. There is also the option to rent a card machine too. Monthly costs vary from £12 to £25 + VAT. The more features your machine has, the more it will cost.

How much is the usual transaction fee for taking debit card payments?

Transaction fees do vary between merchants, and so it is important to check. As a ballpark figure, transaction fees vary between 1.6% and 1.75%. Some providers are as high as 2.75%, but within this transaction fee will be other costs that you may pay for separately.

Providers also have packages from time to time to entice new business customers. PayPal, for example, have a sliding scale when it comes to transaction fees. The higher the sales volume, the lower the transaction fee. It can fall as low as 1%, the tool they use to entice customers and to encourage businesses to put as many transactions through the system as possible. 

What card machine has the cheapest fees?

SumUp has a clear pricing system. Every time you use the system to accept a credit card payment from a customer, you’ll pay 1.69% per transaction, whether it is for £1 a month in sales volume or £100,000.

iZettle also has a similar fee structure of 1.75%, as does Square. Other providers, including WorldPay and Barclays, offer packages that on first glance, can seem complicated. That said, they have simply broken down the all-in-one fee so that they can offer customers the equipment and deals that work best for them.

The cheapest fees may not always the flexibility you need, so check out Barclays, PayPal and WorldPay because for a slightly higher transaction fee, you may be getting a better card reader and service for less. 

How are merchant account transaction fees calculated?

It’s simple to work out transaction fees and how much you will owe at the end of the month, along with other fixed fees you’ll pay your credit card processing provider or merchant.

If a customer makes a purchase of £35 and uses their credit card to pay for it, the processer will apply their transaction fee of 1.69% in the case of Sum Up. That’s 0.02p. Some providers will also charge a flat fee per transaction on top such as 20p. That means for this £35 transaction paid for on credit card, you’ll pay 22p in transaction fees. 

These fees and costs are a fact when it comes to offering customers the opportunity to pay by credit card, both contactless and by chip and pin. They allow them to pay securely and for you to process the payments securely too.

Reviewed by , Managing Director

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