Payment Processing Fees Guide for the UK

If you’re a business owner taking customer card payments, there are likely to be payment processing fees to cover, which go to the company or companies which handle the transaction on your behalf. UK payment processing costs can be a percentage or flat fee per transaction, a monthly cost or all three.

Join us as we explore payment processing fees from the perspective of businesses in the UK. Plus, we’ll introduce Wise Business which offers low cost international business accounts with local and SWIFT account details in several different global currencies, which make it easier to take customer payments directly or through marketplaces and PSPs.

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What are payment processing fees?

Payment processing fees are the fees paid to the payment processing company which processes your customer card transaction.

There are many different payment processing options in the UK, including some standalone PSPs like Stripe and some services like Shopify which offer payment processing alongside ecommerce features. The exact merchant processing fees you pay can vary a lot depending on the provider you pick. For example, there may be different credit card processing fees compared to debit card transaction fees, plus the country the customer’s card was issued in might matter.

Because payment processing fees can mount up quickly it is crucial that you understand the costs your provider will levy - this guide walks through what to look out for.

Types of payment processing costs

There are several different types of fees charged by payment processors in the UK.

Firstly, some payment processors have monthly charges which can include some extra features or discounts on processing fees, while others offer a pay as you go model.

Then, there are the specific card payment processing charges, which can also vary based on several factors. The type of card and the card issuer may mean a different fee, plus whether the card was issued in the UK or overseas matters. Generally, overseas cards cost more in processing fees, and may mean paying a currency conversion charge too.

Other fees may or may not apply to you depending on how your business works, but can include chargeback or dispute fees if customers ask for a refund, or equipment fees if you take in person payments and need a payment terminal.

To give a couple of payment processing fees examples - Shopify¹ offers UK businesses the choice of 3 core monthly plans, which all offer different payment processing fees. If you pay a smaller monthly charge you’ll pay a higher per transaction charge - or you could trade up if you manage higher volumes of payments, to pay a higher fixed monthly fee and get lower per transaction costs.

Stripe² doesn’t have a monthly fee for most payment services, but does have an array of payment processing costs which vary depending on where the card was issued and the currencies involved. There are also options to receive payments with local payment methods like Klarna which have their own fees.

Each provider sets their own payment processing fees, so doing your research and comparing your options is the only way to find a good fit for your specific needs.

Credit card processing fees

The credit card processing fees you pay might depend on the card network and where it was issued. It’s often the case that payment processing providers have different card processing fees for Visa and Mastercard - usually lower - compared to American Express for example, which is usually fairly high. This is because of different costs passed on to them by the individual networks.

The type of payment also often matters. In person payments are generally considered to be lower fraud risk and therefore might have a lower cost associated. Because card fraud is easier online, you might find you pay more for processing online and in-app payments to mitigate the risk of chargebacks and other disputes.

Finally, the currency involved can also make a difference to costs. If you need currency conversion you may find there’s an extra fee of 1% - 2% depending on the payment processing provider you pick.

Debit card transaction fees

In general, debit card transaction fees will follow a similar pattern to credit card transaction fees, with variable costs depending on the card type, currency and country of issue. Again, in person payments might have a lower cost compared to online transactions.

One final point to note on both debit and credit card transaction fees. In some cases, if you use a provider like Shopify to build your ecommerce website, but then choose a third party provider to process your payments, you may need to pay processing fees to both the platform (Shopify in this case) and the third party processing provider. Make sure you’ve read all your account terms and conditions carefully to avoid unexpected fees for payment processing.

FAQs - payment processing fees

Can I pass payment processing fees to customers?

You can pass payment processing fees to customers as long as you clearly state what fees will apply for different payment methods. Some merchants choose to add a surcharge for more expensive payment methods for example, while offering a selection of other payment options with low or no extra fees. Before you take this step consider the impact on customers, and whether this will make your services less appealing in the end.

Are payment processing fees refundable?

If you pay a payment processing fee and the customer then asks for a refund, you can not usually reclaim your payment processing fee. In fact, you may end up needing to pay the processing provider to support in the case of chargebacks or disputes if you can not amicably resolve any customer issues as they arise.

Is it possible to avoid payment processing fees?

Payment processing fees generally arise when taking customer card payments. It may not be possible to avoid payment processing fees if you choose to offer card payment options to customers, but you could do so by using other low cost payment methods such as bank transfers.

What’s available may depend on the nature of your business, but adding local bank details to an invoice should make it easy for a customer to pay - and can end up cheaper for them, too, particularly if they pay from overseas, as this will avoid foreign transaction fees. A solid choice here is the Wise Business account which has local account details for 8+ currencies and which lets you get paid from abroad easily and often with low or no fees for either you or the customer.

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How to minimise payment processing costs?

Read the cost schedule for your payment processing provider really carefully. Because fee structures tend to be quite complex, they may have a great headline number, but additional costs which apply on some payment types for example. To minimise the overall amount you pay you’ll want to pick a provider which has low fees for the type of payment you take most regularly, and encourage customers to pay using the method which incurs the lowest cost for you.

Receive payments in multiple currencies with Wise Business

Wise can help UK businesses to receive payments in multiple currencies, with low fees and the mid-market exchange rate.

A Wise Business account comes with local account details to get paid in 8+ major foreign currencies like Euros and US Dollars just as easily as you do in Pounds, these payments can come directly from your customers, from PSPs like Stripe and Amazon, or from platforms like Shopify.

All you need to do is add the relevant currency account details to the platform you need to withdraw the funds. Once you receive the payment in Euros, Dollars or other supported currencies, you can hold this money into your multi-currency account, send with Wise Business debit card or convert back to Pounds with low fees and the mid-market exchange rate.

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If you take UK customer card payments for your business, the chances are that you’ll need to pay payment processing fees to either a PSP or your website host if they offer integrated payment processing services. Keeping these costs as low as possible is essential to make sure you protect your profits - which means shopping around and comparing your options carefully.

Sources used in this article:

Sources last checked November 11, 2024