What Are Payment Gateway Fees?
Every card payment a UK business takes involves several parties — the customer’s bank, the card scheme (Visa or Mastercard), an acquirer, and a payment gateway — each of whom takes a cut. The fee that appears on your statement is the sum of these costs, presented either as a single blended rate or broken out line by line. Understanding what each fee covers helps you compare providers on equal terms and identify where you are paying more than you need to.
The Three-Layer Fee Structure
Interchange Fees
Interchange is the fee paid by the acquirer to the card issuer (the customer’s bank) every time a card is used. Visa and Mastercard set interchange rates, and they vary by card type, transaction type, and geography. UK domestic consumer debit card interchange is capped at 0.2% by regulation. UK domestic consumer credit card interchange is capped at 0.3%. Commercial cards (business credit cards, corporate cards) are not subject to caps and can reach 1.5–2% or higher.
The interchange cap applies to cards issued in the UK used at UK merchants. EU-issued cards used at UK merchants are now treated as international (post-Brexit), with higher interchange rates — typically 0.2–1.15% depending on card type and scheme.
Scheme Fees
On top of interchange, Visa and Mastercard charge scheme fees — also called assessment or network fees — for their role in processing and guaranteeing transactions. These are typically a small percentage (around 0.1–0.2%) plus a per-transaction charge. Scheme fees are passed through by acquirers either as a bundled cost or as a visible line item on IC+ statements.
Acquirer / Processor Mark-Up
The acquirer’s mark-up is what the payment processor charges above interchange and scheme fees for their service — fraud management, settlement, reporting, dispute handling, and profit margin. This is the only part of the total fee that is directly negotiable between merchant and provider. Blended rates (like SumUp’s 1.69% or Square’s 1.75%) bundle all three layers into a single percentage, making comparison simple but hiding whether your mix of card types is being charged fairly.
Blended vs Interchange-Plus Pricing
Blended (Flat-Rate) Pricing
A single percentage applied to every transaction regardless of card type. Example: 1.75% on every card-present payment, whether the customer pays by basic Visa debit or by a premium Mastercard World Elite credit card.
Advantages: Predictable costs, easy to budget, simple to reconcile. No surprises when a customer pays by a high-interchange commercial card.
Disadvantages: If most of your customers pay by basic debit cards (low interchange), you are effectively subsidising the small proportion who pay by premium cards. At high volume, the overpayment on debit transactions becomes significant.
Blended pricing is offered by: SumUp (1.69%), Square (1.75%), Zettle (1.75%), myPOS (1.10% + £0.07). These are generally the best options for businesses processing under £15,000 per month.
Interchange-Plus (IC+) Pricing
Interchange-plus separates the interchange cost (which varies by card) from the acquirer’s fixed mark-up. You pay: interchange rate (set by card scheme) + scheme fee + acquirer margin (fixed pence and/or percentage).
Example: IC+ pricing of interchange + 0.3% + 10p. A basic Visa debit card (interchange 0.2%) costs you 0.5% + 10p. A premium Visa credit card (interchange 0.8%) costs you 1.1% + 10p. You pay more for expensive cards — but you know exactly why.
Advantages: Transparent; you benefit directly when customers use cheaper cards; negotiable margin.
Disadvantages: Unpredictable monthly bill, harder to reconcile, requires more accounting sophistication.
IC+ pricing is typically available from acquirers such as Dojo, Worldpay, Elavon, and TakePayments, usually at volumes above £5,000–£10,000 per month.
Other Fees to Watch in Payment Gateway Contracts
Monthly or Annual Fees
Some providers charge a fixed monthly platform, software, or service fee on top of transaction fees. This may be described as a “gateway fee”, “monthly minimum”, or “service charge”. SumUp, Square, and Zettle have no monthly fee on standard plans. Dojo charges around £20–£25 per month for terminal rental. Worldpay and Elavon have monthly fees that vary by contract.
PCI DSS Compliance Fees
PCI DSS (Payment Card Industry Data Security Standard) compliance is required for all businesses that accept card payments. Some providers charge a monthly PCI compliance fee (typically £2–£10) for administering your compliance status. Others include it in the standard monthly fee. A non-compliance fee may apply if you fail to complete the annual self-assessment questionnaire.
Chargeback Fees
If a customer disputes a transaction and their bank raises a chargeback, most providers charge a fee regardless of outcome — typically £10–£25 per chargeback. This covers the administrative cost of handling the dispute. Enterprise providers like Dojo and TakePayments include chargeback management in their service.
Refund Fees
Provider policies differ on refunds. Square returns the transaction fee when a refund is processed. SumUp does not — the original transaction fee is retained even if the sale is refunded. For businesses with high refund rates, this difference is worth modelling at your expected refund volume.
Early Termination Fees
No-contract providers (SumUp, Square, Zettle, myPOS) have no termination fees — cancel at any time. Acquirers like Worldpay, Dojo, and TakePayments typically have 12–36 month minimum terms with early termination fees if you cancel before the end of the contract. These can be several hundred pounds and are worth reading carefully before signing.
Setup and Integration Fees
Most payment gateway providers do not charge setup fees for standard integrations. However, some legacy acquirers charge a setup or activation fee. Custom integration work — connecting a gateway to a bespoke e-commerce platform — may be charged separately by your development team, not the provider.
How to Compare Payment Gateway Fees Fairly
The only reliable way to compare providers is to model the total annual cost based on your actual transaction mix, not headline rates. The key variables:
- Monthly volume. A £25 monthly fee is irrelevant at £50,000/month; it is significant at £1,000/month.
- Card mix. If most customers pay by consumer debit cards, blended rate providers may not be the cheapest even if their headline rate looks competitive. Ask an acquirer for IC+ pricing and model your debit card proportion.
- Average transaction value. Per-transaction charges (the fixed pence component) matter more on low-value transactions. A 10p per-transaction charge on a £5 sale is 2% alone.
- Refund and chargeback rate. If your business has a high dispute or return rate, provider-specific policies on these fees can significantly affect total cost.
Worked Example: Comparing Total Annual Cost
Scenario: a retail business taking £10,000 per month, mostly consumer debit, average £35 per transaction, low refund rate.
| 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.
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 not very useful — the right comparison is between 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 transactions — 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 this risk. Providers pass this through as a higher rate for online payments. Strong Customer Authentication (SCA/3DS2) reduces fraud risk but does not eliminate the interchange difference.
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 based on your monthly volume, card mix, business type, and contract length. Businesses processing over £10,000 per month should always get quotes from multiple acquirers before signing, and re-negotiate at contract renewal.
Some acquirer contracts include a minimum monthly service charge (MMSC) — a minimum fee the merchant pays regardless of transaction volume. If your transaction fees in a given month fall below the MMSC, you pay the MMSC instead. This is a cost floor, not a cost cap. Businesses with seasonal trading patterns or variable volumes should check for MMSC clauses and model whether their low-volume months will trigger them.
Yes. Payment processing fees are an allowable business expense for UK tax purposes — they are deductible against your trading income. Most payment providers do not add VAT to their transaction fees (financial services are generally VAT-exempt). Hardware purchases are subject to VAT at 20% and can be claimed as capital expenditure. Confirm treatment with your accountant for your specific circumstances.
BusinessExpert is reader-supported. Some links on this page are affiliate links — if you click through and make a purchase, we may earn an affiliate commission at no extra cost to you. This does not affect our editorial independence or the providers we recommend.