A beginner’s guide to payment processing fees
If your company accepts payment, you are now paying the payment processing fee.
Most company owners ignore these fees and write them off as one of the costs of running a business.
When you start comparing payment processing deals, there is actually a lot of diversity in the industry. Although the difference in deals may seem small – maybe one or two percent – it can add up to thousands of pounds of lost revenue each year.
This may not surprise you, but I think business owners should pay more attention to their payment processing agreements. However, to do this, you need to understand what a payment processor will actually charge you.
And that’s clever.
You see, even though your supplier will send you a large bill, it’s not actually a big fee. Instead, it has a lot of little fees and charges, which bundle together and charge you in a big alley.
So for the rest of it, I’m going through the main payment processing costs, explaining what they are and how much. Should Stay.
# 1 Merchant Service Charge
The Merchant Service Charge (MSC) is the percentage you pay for each credit or debit card transaction you receive. If you are not a very low volume trader, MSC will make up a large portion of your payment processing costs.
How much is it usually?
- Debit Card (0.25% to 0.35%)
- Consumer Credit Cards (0.7% to 0.9%)
- Commercial credit cards (1.6% to 1.8%)
Watch for what
If you contact a company for a payment processing quote, they Usually Only quote face-to-face transaction rates for your personal card. These rates are the lowest they offer so present an artificially low estimate.
For example, your cardholder-not-present (CNP) transactions will be charged at significantly higher rates. Online and over-the-phone payments also fall into a higher bracket.
Then there are company cards, purchase cards, fleet cards and other premium cards, all of which attract a high payment processing fee.
I recommend you Always Ask for a complete list of fees covering all the payment modes you plan to accept.
# 2 Terminal rental
If you want to accept card payments, you need to have your customers plug in their cards. That’s something called a Terminal And his To rent To merchants by providers.
Because terminals are expensive, rental agreements usually last for more than a year and come with a hefty closing cost if you want to get out early.
How much is it usually?
- Countertop terminal: £ 14 to £ 16 per month
- Portable terminal: £ 17 to £ 21
- Mobile terminal: £ 20 to £ 24
Watch for what
Terminal rental agreements are long, usually lasting three or four years. If you want to exit your contract before the expiration of the contract or before the specified minimum period, you will usually be stunned by the cost of the initial termination.
The initial completion cost is usually only the terminal rental cost although there is a long contract or minimum term remaining.
While some providers will offer a discount for early payment of your contract, others will charge an additional fee.
# 4 Approval fee
Some providers will charge an additional fee for each transaction for the purpose of approval. Approval fees are usually a few bucks so don’t bother many traders.
However, if your transaction volume is low, certain approvals for free can really increase your costs.
For example, if your average transaction value is £ 5 and all your other processing fees fall to 5p, that approval fee increases your overall costs by 60%.
How much is it usually?
Average approval fee: 3p per transaction
Watch for what
Ask your provider if authorization charges are included or if you pay them separately. You don’t want to get your first bill and discover an amazing new charge.
# 5 PCI compliance fee
Let me be honest with you, PCI compliance fee is an administrative charge. Although PCI requirements have been in place for several years, the charges are fairly new.
How much is it usually?
Average PCI compliance fee: £ 30 to £ 50 per year
Watch for what
First of all, if you do not obtain PCI compliance, you will be charged a higher fee for non-compliance. Exactly how much the fee depends on your provider.
In addition to the physical PCI compliance charges, some providers will charge a separate fee for online PCI compliance so be aware.
# 6 Minimum monthly service charge
Suppliers invest a lot of cash in advance traders. There are terminal costs, installation and all related admin costs. So they want to know if they will (eventually) get their investment back.
Suppliers will set the standard of profitability of traders and there is a cutoff point, below which a trader is unprofitable. If a merchant falls below this level, a supplier probably does not want their company because they are spending their money.
MMSC is designed to ensure that all merchants make a profit above the minimum threshold.
If your monthly transaction charges are higher than MMSC, your supplier will not add any additional charges. If your transaction charges fall below the threshold, your supplier will add additional charges to bring your monthly bill up to MMSC.
How much is it usually?
Average MMSC: £ 20 to £ 25 per month
Watch for what
Although most suppliers will have an MMSC, you probably won’t see it because your volume is probably above the threshold.
Before agreeing to an agreement, I suggest you calculate your own monthly transaction amount and estimate what you will have to pay for the payment processing costs. If your volume is constantly falling below the threshold, it may be worth your while investigating other payment methods.
# 7 Set up the fee
The set up fee says exactly what on the tin. A fee for setting up your payment facility.
In all honesty, this is an arbitrary fee that some suppliers prefer to charge. The justification is that it costs them and takes time to process your application. I’ll let you decide if it’s fair.
The good news is that most suppliers do not charge a set up fee because the market is so competitive.
How much is it usually?
Average set up fee: £ 75 to £ 200
Watch for what
Set up fees are the easiest charge to negotiate. Before you talk to a salesperson, do your research and note which competitors charge a set up fee and which do not. When you are ready to buy, present the salesperson with all the competitors who do not charge a set up fee and are ready to leave.
# 8 Chargeback fee
A chargeback is a formally disputed transaction between you and a customer that is mediated by the acquiring and issuing bank. If the chargeback is successful, the transaction is reversed and the customer’s money is refunded to his account. If the chargeback fails, you keep the money.
Suppliers will charge a small (ish) fee for each chargeback you receive to cover administration costs.
How much is it usually?
Average chargeback fee: £ 15 per chargeback
Watch for what
It’s a standard fee and you don’t have to pay too much for it.
# 9 Annual admin charge
The annual admin charge is a fee that some providers have to cover the cost of maintaining an account.
How much is it usually?
Average annual admin charge: £ 5 per month
Watch for what
Most providers do not charge an annual admin charge. Among them, we advise you to try and discuss the reduction of charges. Most suppliers will if you kick up a noise.
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