Credit card merchant fees: what UK businesses pay and how to lower them

Credit card merchant fees are the charges your business pays each time a customer pays you by card. They are usually a percentage of each sale, sometimes with a small fixed charge per transaction on top, and they cover three costs: the card issuer's interchange fee, the card scheme's fees and your payment provider's own margin.

Card fees are now a regular running cost for most businesses that sell to the public. Debit cards alone accounted for 54% of all UK payments in 2025, while cash fell to just 8%. As more of your takings arrive by card, even a small difference in the rate you pay can add up to a significant sum over a year.

What are credit card merchant fees?

Credit card merchant fees are the costs a business pays to accept card payments. They are taken from the value of each transaction before the money reaches your account, and you may also see them called card processing fees or merchant service charges. Three parties are involved in every card payment, and each one takes a share of the fee:

• The card issuer is the bank or card provider that gave your customer their card.

• The card scheme, such as Visa or Mastercard, runs the network that connects the issuer to your provider.

• The acquirer, or payment provider, processes the payment for you and pays the money into your business account.

Visa and Mastercard account for 99% of debit and credit card payments in the UK, so the fees they set shape what almost every UK business pays to take cards.

What makes up a credit card merchant fee?

A credit card merchant fee is made up of three parts: the interchange fee, scheme fees and your provider's markup. Of these, only interchange is capped by law, and only on UK consumer cards.

Your provider pays interchange and scheme fees on your behalf and passes the cost on to you, so you cannot negotiate these directly. Your provider's markup is different. It depends on the deal you agree, which makes it the part of the fee you have most control over.

How much are credit card merchant fees in the UK?

How much you pay in credit card merchant fees depends on the type of card your customer uses, where that card was issued, whether the customer pays in person or online and the deal you have with your provider. The interchange part of the fee, however, sits within clear legal limits for most everyday payments Under the UK's interchange fee rules, interchange on a UK consumer credit card payment is capped at 0.3% of the transaction value, and on a consumer debit card payment it is capped at 0.2%. On a £50 sale paid by consumer credit card, the issuer's interchange can therefore be no more than 15p. Some payments sit outside these caps, and they can cost you more to accept:

• Commercial cards, meaning business and corporate cards, are excluded from the interchange caps.

• Cards issued by three party schemes such as American Express, where the same company runs the network and issues the card, are also excluded.

• Online and phone payments made with consumer cards issued in the European Economic Area (EEA) are no longer covered by a cap, and since the UK left the EU, Visa and Mastercard have raised these fees from 0.3% to 1.5% for credit cards and from 0.2% to 1.15% for debit cards.

Because your total rate combines interchange, scheme fees and your provider's markup, the figure on your statement will always be higher than the interchange cap alone. The clearest way to understand what you actually pay is to work out your effective rate, which is your total card fees for the month divided by your total card sales for the same month. The table below shows how much the effective rate matters for a business taking £20,000 a month in card payments. The rates are illustrative examples only, since your actual rate will depend on your provider and the cards your customers use.

In this example, a difference of half a percentage point on the same sales adds up to £1,200 a year. That is why it pays to check your effective rate regularly, rather than relying on the headline rate you were quoted when you first signed up.

Why do credit card fees cost more than debit card fees?

Credit card fees usually cost more than debit card fees because the interchange cap is higher for credit cards. On UK consumer cards, interchange is capped at 0.3% for credit cards and 0.2% for debit cards, so the maximum interchange on a credit card sale is 50% higher than on the same sale paid by debit card.

The gap can be wider still when customers pay with business cards or American Express, since neither is covered by the cap. If a large share of your sales come from trade customers paying on company cards, your effective rate can end up noticeably higher than that of a business whose customers mostly pay by consumer debit card. This means your card mix has a direct effect on your costs. Unless you pay one flat rate for every card, two businesses with the same sales and the same provider can pay different amounts simply because their customers pay in different ways.

Which pricing models do card payment providers use?

Card payment providers use four main pricing models. The right one for you depends on how much you take by card and the mix of cards your customers use.

• Flat rate pricing charges the same percentage on every card payment, sometimes with a fixed charge per transaction, which makes costs easy to predict but means you may pay more than necessary on cheaper debit card payments.

• Blended pricing groups card types into a few bands, such as consumer debit, consumer credit and commercial cards, and charges a set rate for each band.

• Interchange plus pricing passes the actual interchange fee straight through to you, then adds a second charge that covers both the scheme fees and the provider's markup.

• Interchange plus plus pricing shows the interchange fee, scheme fees and provider's markup as three separate charges, giving you the clearest view of what you are paying for.

Flat rate pricing often suits smaller or newer businesses that value simplicity, since there are no detailed statements to work through. As your card sales grow, interchange plus or interchange plus plus pricing can give you more transparency and a clearer basis for negotiating the markup.

What other card processing fees should you check?

Beyond the percentage taken from each sale, many providers charge other fees that add to your overall cost. These vary from provider to provider, but common ones include:

• Terminal rental or purchase costs cover your card machine, and point of sale terminal contracts with the largest providers cannot run for more than 18 months.

• Monthly account or service fees may apply whether or not you take any payments that month.

• Minimum monthly charges may top up your fees to a set amount if your card sales fall below an agreed level.

• Chargeback fees may be charged when a customer disputes a payment with their card issuer.

• Payment Card Industry Data Security Standard (PCI DSS) fees may apply, either for help meeting the card security standard or as a penalty if you have not confirmed that you meet it.

• Early termination fees may apply if you leave a contract before it ends.

• Faster payout fees may be charged if you want your money settled sooner than the standard timescale.

Many providers also set different rates for payments taken in person, online, over the phone or keyed in manually, with online and keyed payments often costing more. If a large share of your sales come through your website, check how your provider prices each payment type before you compare quotes.

Can you pass card fees on to your customers?

UK businesses cannot pass card fees on to consumers by adding a surcharge. Surcharges on payments made with consumer debit and credit cards have been banned since 13 January 2018, and the ban also covers similar methods such as mobile phone payments and electronic payment services. The rules are different for commercial cards. You can add a surcharge when a customer pays with a business or corporate card, as long as the surcharge is no more than it costs you to accept that card. Keeping a record of your actual card costs will help you show that any surcharge is justified. What matters is the type of card used rather than who is buying. A sole trader paying with a personal card is still protected by the consumer card ban, even if the purchase is for their business.

What is the regulator doing about rising card fees?

The Payment Systems Regulator (PSR), which oversees UK payment systems, has carried out several reviews of card fees and found that some of the costs paid by UK businesses have risen without clear justification. In its final report on card scheme and processing fees, published in March 2025, the PSR found that Mastercard and Visa had increased their core scheme and processing fees to acquirers by at least 25% since 2017, costing businesses at least £170 million extra per year. In July 2026 the PSR finalised new rules for Mastercard and Visa. These require the two schemes to give acquirers clearer and more detailed information about the fees they charge, which applies from the end of July 2027, and to strengthen how they make and evidence pricing decisions.

The PSR has also concluded that interchange on online payments made with consumer cards issued in the EEA is unduly high. In January 2026 the High Court upheld the PSR's powers to cap these fees, and the regulator is continuing its work on setting the level of a cap. Earlier action has already made it easier to compare deals. Following its review of the card acquiring market, the PSR required the largest providers to give businesses a summary of the card fees they are charged, an online quotation tool for key charges and a reminder at the end of their contract that they could get a better deal by shopping around.

How can you reduce your credit card merchant fees?

You can reduce your credit card merchant fees by understanding exactly what you pay today, comparing it with what other providers offer and making sure your contract and pricing model still suit the way your business takes payments.

• Work out your effective rate each month by dividing your total card fees by your total card sales, so you can spot rising costs early.

• Ask your provider for a summary of your card fees so you can see which charges make up your bill, then compare it with quotes from other providers.

• Note when your card processing contract and terminal agreement end, so you can switch or renegotiate without paying an early termination fee.

• Ask your provider about interchange plus or interchange plus plus pricing once your card sales are large enough to make the extra detail worthwhile.

• Negotiate your provider's markup, since this is the only part of the fee that is not set by the card issuer or the card scheme.

• Reduce chargebacks by using a recognisable business name on customer statements, keeping proof of delivery and dealing with complaints promptly.

• Cut services you do not need, such as faster payouts or extra card machines that rarely get used.

• Consider adding a surcharge on commercial card payments if many of your customers pay with business cards, as long as it does not exceed your cost.

Small savings on each transaction can make a noticeable difference to your margins over a year. If card costs are putting pressure on your finances, our cash flow management tips cover other ways to keep more money in your business.

Turn your card sales into funding with a merchant cash advance

If your business takes a large share of its revenue by card, those card sales can also help you access funding. A merchant cash advance gives you a lump sum upfront in return for a share of your future card takings, which is repaid automatically as a percentage of each sale. You repay more when trade is busy and less when it is quiet, and most providers work with your existing card machine.

With Capitalise, you can compare merchant cash advance offers from our panel of 130+ lenders in one application, so you can find funding that fits the way your card sales move through the year. Apply for a merchant cash advance with Capitalise today to see how much your card takings could unlock for your business.