Understanding UK Merchant Account Fees

Friday, September 14th, 2018

Accepting card payments is increasingly becoming a necessity for small businesses, and merchants are coming to terms with how much it can impact turnover, profits and customer loyalty. In fact, statistics show that SMEs that don’t take card payments miss out on £8.8bn every year.

That said, credit card processing services don’t come free of charge. As a business owner, a merchant account is an investment that you need to make to stay competitive. On the other hand, not taking the charges that come with it seriously can lead to detrimental surprises down the road. It is therefore crucial that you only start looking for a merchant provider when you know the processing fees to expect.

Transaction Fees

Payment processors charge transaction fees depending on the card payments a merchant receives. These charges comprise of a percentage of the total value of payments processed weekly, monthly or annually, and a fixed “authorization” charge. The general rule is that the more sales you make, the less you will pay.

Transaction fees for debit card payments are typically higher than those charged against credit card transactions. So, if you reckon your business will be accepting a good number of debit cards every day, go with a processor that offers the fairest debit card transaction rates, even if they’re not the cheapest in credit card fees.

Hidden Fees

Merchant account providers are known for omitting or obscuring some charges in their quotes, and only revealing them after you’ve signed the papers. A processor may offer you an excellent deal in transaction fees, when in truth, they’re looking to make a killing with hidden charges.

Some of the most common hidden fees include:

Minimum Service Charge

Most processors require their clients to pay a set minimum amount in merchant fees each month, regardless of the number of payments processed. If your business handles a low volume of transactions, choose a merchant account provider with a small minimum monthly charge.

Set-up Fees

Most providers don’t charge activation fees, but you’ll still want to be careful not to land one that does unless of course, their transaction rates are good enough to tip the scale.

Early Termination Charges

Some merchant account providers will include a fee in the contract that you will be required to pay if you decide to opt out of their services before a set period. If you’re only looking to try out a processor and aren’t sure you’ll commit for the long term, insist on one that doesn’t charge early termination fees.

PCI Compliance

PCI Compliance is a legal requirement set up by the worldwide PCI DSS (Payment Card Industry Data Security Standard) for all businesses that accept card payments to ensure they’re not exposing their customers to potential fraud. Merchant account providers usually charge a small monthly fee to help keep their clients compliant.

Rental and Service Fees

Rental fees depend on the utilities you deploy to enable customers to make card payments. Most merchant account providers offer to rent out card machines to clients that own physical stores and the rates can range from £10 for a countertop terminal to £25 for a wireless terminal or a mobile card reader.

If you want your customers to buy right from your website, you’ll need a payment gateway, and if you’re targeting mobile phone users, you’ll want to set up a virtual terminal. Make a proper merchant account comparison and find a provider that offers precisely what your business needs at the best price.

Getting the Best Deal

Merchant accounts come at a cost, and that means landing fair rates must be at the top of your head. When looking for a provider, therefore, make a checklist of all the fees above, and ensure you ask about them. Don’t assume that you won’t be required to pay some charges just because they’re not on the initial quote.