The high street banks make it tough for you to sort through the noise and really know how much each bank charges in fees associated with merchant accounts. In this guide, we try to make it easy to compare the different fees and costs. We’ve broken down all the merchant account providers (including their fees which are sometimes hard to find).
Merchant Account & Credit Card Processing Fees Compared – 2019 How to Make a Fair Comparison Between UK Merchant Account Providers Typical Add-ons PCI Compliance: What Do You Need to Know? Are Anti-Fraud Measures Built In? Anti-fraud features Deciding on Contract Length Range of Cards Accepted Other Costs & Account Fees Initial Setup Fees Online Transaction Fees Retail Transaction Charges Monthly Minimum Fees Monthly Account Fees How to Compare Merchant Account Providers
|Feature||Merchant Account (General Costs)||PayPal||Stripe||Square||iZettle|
|Credit Card Transaction Fees||From 0.65% + 2p||3.4% + 20p||1.4% + 20p||1.75%||1.75%|
|Monthly Fees||From £15||None||None||None||None|
|Online Payments Accepted?||Yes||Yes||Yes||Yes, with a higher transaction fee||Yes|
|In Person Payments Accepted?||Yes||Optional, using a card reader available for £65.95||No||Yes, the card reader is available for £39.||Yes|
|Accepts Payments via Phone?||Yes||Optional, requires an additional application||No||Yes, with a higher transaction fee||Optional, for an additional fee|
By using the table above, we can easily compare UK merchant accounts and the services they provide. The merchant account column refers to the generalized costs of acquiring a merchant account from a bank, of course the transaction fees will vary depending on a number of factors including the providing bank, for example well-known high street bank Lloyds offers a 0.96% credit card transaction fee.
Looking at the transaction rate purely in terms of percentages can be a confusing and unclear system. To help give these percentages some meaning we can take a look at how much money your business will have left after the transaction fees are applied. Let’s take an example, if we were to process 100 transactions which were £30 each, this would come to £3000, let’s take a look at their respective processing fees:
|Provider||Total Fees||Total Kept|
These figures show the amount you will get to keep from the £3000 income on the rates stated in the comparison table. You can see how the amount can change quite substantially based on the provider and even within that, based on the rate that provider offers to your business. Remember to use this as a guide as, due to several factors, accurate merchant service comparison can be difficult.
As not all merchant service offers are the same, all of them have different product offering. Some providers will offer just the merchant account while others will offer add on services as part of the package delivered. The below list are the typical add-ons you may see, for the merchant services (features) you are in need of be sure to find out whether or not they are included in the deal. This way you will be able to get an overall picture on costings.
- EPOS Systems (electronic point of sale systems for retail environments)
- PDQ Systems (credit card terminal for face-to-face payments)
- Payment Gateway (for paying online)
- Virtual Terminals (for paying via phone)
- Online Shopping Carts (for eCommerce)
- SSL Certificates (for online payments)
- Recurring Billing (for ongoing subscriptions)
- Real Time Processing (for faster processing & transaction times)
You need to make sure you are PCI DSS compliant if you are handling transactions via card within the U.K. Usually, the payment processing providers will offer compliance to make it easy for you. When looking at the PCI compliance level, there are 4 levels to keep in mind. 4 is the lowest level offered and 1 is the highest, so to stay safe look for the higher levels from the supplier.
Fraud is a serious risk which means it is something that needs to be considered when choosing a merchant account provider. The last thing you want is to find out payments have been made fraudulently leaving you out of pocket. There are two key anti-fraud features which are commonly seen:
1) CVV2 Verification – This is the 3 digit security code that is found on the back of the bank card. This is used to help secure online purchases and for payments when the card is not being physically presented.
2) Address Verification – This is a system that allows a merchant to verify a match between a credit cards given address and the address in the card issuers system.
The contract length is the amount of time you agree to stay with the company before you can switch to another provider. Contract lengths can differ and there is commonly an early termination fee associated with these.
- Typical Contract Length: Zero – Three Years
- Early Cancellation Fees: Can be anywhere between zero – £1,000 +
When accepting card payments, it is important to be able to accept as many of the different card types as possible. The most common card type is debit (Visa and MasterCard) and these are widely accepted by most UK merchant accounts. Credit card processing fees compared to debit card processing fees are usually higher as the two card types are processed in different ways; when a customer pays via a debit card it is linked directly to their bank account and does not require going through the credit card processing networks. You will often find credit card fees are slightly higher due to this.
If your business is taking payments online and does commerce globally, you will likely benefit from accepting American Express too. Although, this comes with fees that are often higher than domestic cards.
There are many fees that you may encounter and they often depend on how the transaction is processed and who the transaction is from. Here are the other charges that are involved according to the type of account that your business requires.
The setup of a merchant account can cost anywhere up to £100.
If you take online payments you will benefit from an integrated payment gateway. These have a fixed fee per transaction which can be anything up to £2. A transaction fee is also taken as a percentage which can be between 1% and 3.5%, with the percentage being higher for high risk merchants.
If you take face-to-face transactions in a shop you will be required to pay a percentage of the total transaction as well as a fixed fee on each transaction. The fixed fee is generally anything up to £1 and the percentage fee can vary anywhere between 1 and 3.5%, this can be higher if you are a high risk merchant.
If you process a volume of transactions that is below the agreed minimum amount, you will have to pay a penalty fee which can be up to £50 for the month.
Some merchant accounts are charged via monthly fees, almost like a minimum fee, which can be up to £100/ month, just to keep the account open, much like how business bank accounts cost around £5 a month.
There are a few things you should always keep in mind when choosing merchant account providers:
- Estimate the volume & value of the transactions – if you can provide a rough idea of the transactions you may be able to benefit from lower transactions fees as the more you process the lower the fees will be.
- Know the type of cards you’ll be processing and the method of accepting cards you’ll be using – with this information you’ll be able to accurately compare the fees you’ll be subject too.
- Know if your business is considered high risk or not – if you run a high risk business you will likely experience higher fees or difficulty opening a merchant account.
- Be able to handle customer data safely – a data breach is something you want to avoid at all costs. It is expensive and if you have measures in place to handle the data you may experience lower rates.
- Only invest in the services you need – Don’t pay for services you will not utilize.