For small and medium-sized businesses in the UK, accepting card payments is a necessity. Yet, while card payments provide convenience for your customers, the associated fees can quietly erode your profit margins. Many business owners simply glance at their monthly statement, see a single figure, and accept it as an unavoidable cost. However, the reality is that you could be paying much more than necessary in card payment fees.
The Different Types of Card Payment Fees
Card processing is never free. Multiple parties are involved in moving funds from your customer’s account to your business, and each one takes a share. Understanding the main types of fees can help you spot unnecessary charges and take action to reduce them.
- Transaction Fees: Charged every time a card is used, and typically range from as little as 0.5p up to 5p or more per transaction, depending on your provider and agreement. These low per-transaction fees are standard across most providers, and can add up quickly for high-volume businesses. Percentage-based fees may also apply, especially with some providers.
- Monthly or Terminal Fees: If you rent a card machine, expect to pay a monthly fee per terminal—usually between £10 and £30.
- Gateway Fees (for Online Payments): Online sellers may incur monthly gateway charges plus transaction fees for each payment processed.
- Authorisation Fees: A small fee, often just a few pence, charged each time a transaction is authorised. For businesses with high sales volumes, these can accumulate rapidly.
- Chargeback Fees: If a customer disputes a transaction, you may face a chargeback fee, in addition to refunding the original payment.
- PCI Compliance Fees: Some providers add charges for maintaining required security standards.
- Early Termination Fees: Long-term contracts often include penalties for leaving before the end date—a costly surprise for many businesses.
Why Businesses Overpay
Many businesses sign up with the first payment provider they encounter, often without negotiating or comparing options. Others are locked into lengthy contracts with rates that were initially attractive but no longer suit their turnover or transaction profile. Some simply don’t check their statements closely enough to catch creeping costs or hidden fees.
It’s not uncommon for a business to pay thousands of pounds more each year than necessary, simply by neglecting to review or renegotiate their card processing arrangements.
Fixed-Rate Services: When Are They Right (and When Are They Not)?
Popular fixed-rate solutions like EPOS Now, Square, iZettle, and SumUp offer simplicity and easy onboarding—especially attractive for new or smaller businesses. These providers usually charge a single, predictable rate per transaction, with no monthly contract or terminal rental. This can be ideal in your first few months of trading, or if your turnover is low.
However, as your business grows and your annual card turnover exceeds £150,000, these fixed-rate services often become expensive. Their percentage-based fees are typically higher than those available through contracted terminals. At this point, it’s usually more cost-effective to switch to a contracted terminal with a lower fee structure and a monthly payment. In many cases, Nexpay has helped clients save thousands of pounds per year by moving away from fixed-rate providers to tailored, contract-based solutions that better match their transaction volume and business needs.
How to Reduce Your Card Payment Fees
The good news is that there are practical ways to reduce your card payment fees, without sacrificing service quality:
- Review Your Statements Regularly: Familiarise yourself with every charge to ensure you’re only paying for what you need.
- Negotiate Rates: Providers are often willing to offer better deals to businesses that ask.
- Consider Switching Providers: A specialist broker can compare the market and recommend solutions tailored to your sales patterns.
- Match Pricing Models to Your Business: For example, flat fees may benefit businesses with many small transactions, while percentage-based fees could be more cost-effective for higher-value sales.
While card payment fees are a fact of life for most businesses, overpaying doesn’t have to be. By understanding the various charges, reviewing your setup, and comparing providers, you can ensure you keep more of your hard-earned revenue.
At Nexpay, we specialise in helping businesses uncover hidden card payment fees and switch to fairer, more cost-effective solutions. Our clients routinely save thousands of pounds each year—money that’s far better invested in your business than in your provider’s pocket.
Need advice on card payment solutions, backup options, or PCI compliance? Contact Nexpay or call us on 0333 305 2270; because every transaction matters.