What Are Payment Gateway Fees?
Every card payment your business takes is split between four parties before a penny reaches you: the customer’s bank, the card scheme (Visa or Mastercard), an acquirer, and the gateway that carries the transaction. Each takes a cut. What lands on your statement is the sum of those cuts, shown either as one blended rate or broken out line by line.
Here is why that matters. The rate a salesperson quotes you (“just 1.4%”) and the rate you actually pay once every card type and add-on fee is counted are rarely the same number. We’ve read enough provider contracts to treat a headline rate as the start of the conversation, not the answer. This guide pulls the fee apart into its real components so you can see which are fixed by regulation, which are pure provider margin, and where a quote is quietly more expensive than it looks.
The Three-Layer Fee Structure
Strip away the jargon and every card fee is built from three layers stacked on top of each other. Two of them are out of your provider’s hands entirely. The third is the only one you can negotiate, and knowing which is which is what stops you arguing about the wrong number.
Interchange Fees
Interchange is the fee your acquirer pays to the customer’s bank every time their card is used. Visa and Mastercard set these rates, not your provider, and they vary by card type, transaction type, and geography. We checked the current UK caps: domestic consumer debit interchange is capped at 0.2% by regulation, and domestic consumer credit at 0.3%. That floor is identical whoever you sign with, so no provider can beat it and any quote claiming to is bundling something back in elsewhere.
Commercial cards are where it bites. Business and corporate cards carry no cap and can reach 1.5–2% or higher, so if your customers are mostly other businesses, your blended cost will sit well above the consumer figures. The caps also only cover UK-issued cards used at UK merchants. Since Brexit, an EU-issued card counts as international, with interchange typically in the 0.2–1.15% range depending on card and scheme. Take a steady stream of EU cards and that gap shows up on your statement whether you priced for it or not.
Scheme Fees
On top of interchange sit the scheme fees (also called assessment or network fees) that Visa and Mastercard charge for running and guaranteeing the transaction. These are small: roughly 0.1–0.2% plus a few pence per transaction. You’ll only see them itemised on an interchange-plus statement; on a blended rate they’re folded invisibly into the single percentage. Small as they are, they’re non-negotiable, so treat them as part of the fixed floor alongside interchange rather than something a provider can trim for you.
Acquirer / Processor Mark-Up
The acquirer’s mark-up is everything the processor charges on top of interchange and scheme fees: fraud screening, settlement, reporting, dispute handling, and their own profit. This is the one layer that is actually yours to negotiate, and the one a blended quote hides completely. When SumUp quotes 1.69% or Square quotes 1.75%, all three layers are bundled into that single number. That is convenient to budget against, but it tells you nothing about whether your particular mix of cards is being charged fairly. That’s the trade-off you’re accepting in exchange for simplicity, and for a lot of small businesses it is the right trade to make. We’d just want you to know you’re making it.
Blended vs Interchange-Plus Pricing
This is the choice that decides most of what you pay, and most quotes are built so you never quite have to make it consciously. Here is the honest version of both sides.
Blended (Flat-Rate) Pricing
One percentage on every transaction, whatever the card: 1.75% whether the customer taps a basic Visa debit or a premium Mastercard World Elite credit card.
What you get is predictability. The same rate every day, easy to budget, simple to reconcile, and no nasty surprise when someone pays on a high-interchange commercial card. What you give up only shows when your card mix is cheap. If most of your customers pay by basic debit (interchange just 0.2%), a flat 1.75% means you’re effectively subsidising the handful who pay on premium cards. At a few hundred pounds of takings a month that overpayment is noise. At £30,000 a month of mostly-debit sales it is real money you’re handing over for nothing in return.
Blended pricing is the standard model from SumUp (1.69%), Square (1.75%), Zettle (1.75%) and myPOS (1.10% + £0.07). For most businesses turning over under roughly £15,000 a month, we’d start here. At that scale the simplicity is worth more than the marginal saving a more complex deal would unlock.
Interchange-Plus (IC+) Pricing
Interchange-plus pulls the layers apart. You pay the interchange (set by the scheme, varies by card) plus the scheme fee plus a fixed acquirer margin in pence and/or percent. Nothing is hidden inside an average.
Say your deal is interchange + 0.3% + 10p. A basic Visa debit card (0.2% interchange) costs you 0.5% + 10p. A premium Visa credit card (0.8% interchange) costs you 1.1% + 10p. You pay more for the expensive cards, but for the first time you can see exactly why, and you pocket the difference directly every time a customer reaches for a cheap one.
The catch is that the bill moves. It is less predictable month to month, harder to reconcile, and it asks more of whoever keeps your books. IC+ is what acquirers such as Dojo, Worldpay, Elavon and TakePayments offer, usually once you’re processing somewhere north of £5,000–£10,000 a month. Above that volume, on a debit-heavy mix, we think the transparency nearly always pays for itself. Below it, the flat rate is the calmer choice and you lose very little by taking it.
Other Fees to Watch in Payment Gateway Contracts
The rate is only the part everyone quotes. The fees that quietly decide whether a deal is actually cheap are the ones buried further down the contract, and these are where we’d spend your reading time before you sign anything.
Monthly or Annual Fees
Some providers add a fixed monthly platform, software or service fee on top of every transaction. It might be labelled a “gateway fee”, “monthly minimum” or “service charge”. SumUp, Square and Zettle charge nothing monthly on their standard plans. Dojo runs around £20–£25 a month for terminal rental. Worldpay and Elavon vary by contract. The figure itself matters far less than your volume: £25 a month is a rounding error at £50,000 of takings and a painful 2.5% surcharge at £1,000. Always read a monthly fee as a percentage of your turnover, not as a number on its own.
PCI DSS Compliance Fees
PCI DSS compliance is mandatory for every business that accepts card payments; there is no opting out. Some providers charge a monthly PCI fee (usually £2–£10) for administering your status, while others fold it into the standard monthly fee. Watch for the sting in the tail: a separate non-compliance fee if you don’t complete the annual self-assessment questionnaire. It is an easy obligation to forget and an annoying one to pay for, so diarise the renewal the day you sign.
Chargeback Fees
If a customer disputes a payment and their bank raises a chargeback, most providers charge you a fee whatever the outcome, win or lose: typically £10–£25 a time. It covers the admin of handling the dispute. If you sell anything dispute-prone, that number compounds faster than you’d expect, so it is worth more than a glance. Enterprise providers like Dojo and TakePayments fold chargeback management into their service rather than billing you for each one.
Refund Fees
Refund policies split providers more than people expect. Square hands back the original transaction fee when you process a refund. SumUp keeps it: refund a £200 sale and you’re still out the fee you paid to take it in the first place. If you run a business with a high return rate (fashion, seasonal goods, anything bought on impulse and sent back), model this at your real refund volume before you commit. On a handful of refunds a year it is irrelevant. On hundreds, it quietly picks a winner for you.
Early Termination Fees
No-contract providers (SumUp, Square, Zettle, myPOS) let you walk away whenever you like, with no exit fee. Acquirers such as Worldpay, Dojo and TakePayments usually tie you into a 12–36 month term with an early termination fee if you leave before it ends. Those can run to several hundred pounds. The trap is rarely the fee itself; it is signing a three-year deal to shave 0.2% off your rate and then watching your needs change in year one. Read the term length and the exit clause as carefully as you read the headline percentage.
Setup and Integration Fees
Most gateways don’t charge a setup fee for a standard integration, and you shouldn’t accept one without a clear reason. A few legacy acquirers still bill a setup or activation charge. Genuine custom work, such as wiring a gateway into a bespoke checkout, may be billed by your own developers rather than the provider, so don’t confuse the two when you’re lining up quotes side by side.
How to Compare Payment Gateway Fees Fairly
Here is the thing every quote is designed to stop you doing: comparing on total annual cost instead of headline rate. The only number that matters is what each provider would actually cost you over a year given how you really trade, not the percentage printed on the front page. When we model a provider for a reader, these are the four variables we run, and they are the ones you should run too:
- Monthly volume. A £25 monthly fee is irrelevant at £50,000 a month and a 2.5% tax on you at £1,000. Weight every fixed fee against your turnover.
- Card mix. If most customers pay by consumer debit, a blended rate can lose to IC+ even when its headline looks sharper. Ask any acquirer for IC+ pricing and model your debit proportion honestly.
- Average transaction value. The fixed pence charge hurts most on small sales. A 10p per-transaction fee on a £5 coffee is 2% on its own, before the percentage rate even applies.
- Refund and chargeback rate. If you return or dispute a lot, the per-event fees above can swing your total more than the rate does.
Worked Example: Comparing Total Annual Cost
Take a real shape: a shop turning over £10,000 a month, mostly consumer debit, average £35 a sale, few refunds. We ran the same volume through four providers so you can watch the headline rate and the true annual cost pull apart.
| Provider | Rate | Monthly fee | Annual transaction cost | Annual total |
|---|---|---|---|---|
| SumUp Air | 1.69% | £0 | £2,028 | £2,028 |
| Square Reader | 1.75% | £0 | £2,100 | £2,100 |
| Dojo Go (est. 1.2%) | 1.2% | £25 | £1,440 | £1,740 |
| TakePayments (est. 0.9%) | 0.9% | £20 | £1,080 | £1,320 |
Estimates only. Dojo and TakePayments rates are indicative; actual rates depend on negotiated terms and card mix. TakePayments rate assumes IC+ with low interchange debit card weighting.
Read down the right-hand column, not the rate column. The flat-rate readers (SumUp, Square) are the dearest here precisely because this business is debit-heavy, which is exactly the mix blended pricing overcharges. The acquirer deals look cheaper, but remember those rates are indicative and arrive with monthly fees and contracts the no-contract readers don’t impose. So here is the honest call. At £10,000 a month of debit takings it is worth getting two acquirer quotes, because the gap you’re chasing is roughly £300–£700 a year. Drop the same business to £2,000 a month and that gap shrinks below the hassle line, and the no-contract flat rate wins on the strength of having no contract at all.
Frequently Asked Questions
For small businesses on flat-rate plans, the typical rate is 1.69–1.75% for in-person card payments and 1.9–2.5% for online payments. For businesses on IC+ pricing with a typical UK consumer card mix (mostly debit), effective rates commonly fall in the 0.8–1.3% range before monthly fees. The “average” is close to useless as a target. We don’t rate any provider on its headline rate alone, and neither should you: the only comparison worth your time is the total annual cost of each option at your specific volume and card mix.
Card-not-present (online) transactions carry a higher fraud risk than card-present ones: the card and the cardholder are not physically at the point of sale. Card schemes set higher interchange rates for card-not-present transactions to reflect that risk, and your provider passes it through as a higher online rate. Strong Customer Authentication (SCA/3DS2) reduces the fraud risk but does not erase the interchange difference, so expect to pay more online however well your checkout is secured.
With flat-rate providers (SumUp, Square, Zettle), the published rate is the rate; there is no negotiation. With acquirers (Worldpay, Dojo, Elavon, TakePayments), rates are negotiated on your monthly volume, card mix, business type, and contract length. If you process over £10,000 a month, get quotes from several acquirers before signing and push for a better margin at every renewal. We’d treat the first number an acquirer gives you as an opening offer, not a price.
Some acquirer contracts include a minimum monthly service charge (MMSC): a floor fee you pay regardless of transaction volume. If your transaction fees in a given month fall below the MMSC, you pay the MMSC instead. It is a cost floor, not a cost cap. If your trade is seasonal or your volumes swing month to month, check for an MMSC clause and work out whether your quiet months will trigger it before you assume the headline rate is what you’ll pay.
Yes. Payment processing fees are an allowable business expense for UK tax; they are deductible against your trading income. Most providers do not add VAT to their transaction fees (financial services are generally VAT-exempt), while hardware purchases carry VAT at 20% and can be claimed as capital expenditure. Confirm the treatment with your accountant for your own circumstances before you file.
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