Average Credit Card Processing Fees For Restaurants – Fees for processing card payments can be roughly divided into types – fees for each specific and monthly transaction or one of the costs incurred for payment services and hardware (e.g. POS terminals).
We’ll cover both types, but let’s start with the card processing fee charged for each transaction, which is combined into one fee known as the merchant service charge (MSC).
Average Credit Card Processing Fees For Restaurants
Below is an example of a hypothetical 0.95% Merchant Service Charge (MSC) paid on a £100 transaction using a UK-issued Visa credit card accepted in the UK at a card terminal:
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These are card processing fees charged by acquirers to cover their fees and profit margins. It is also known as acquirer markup or processing fee.
It is difficult to determine a typical processing fee as it varies by acquirer and the factors listed below. However, as a rough guide, most processing fees are between 0.8% – 2.6%.
If the merchant is not hired directly by the acquirer but by a merchant service provider (ie an ISO such as Paymentsense or a payment gateway provider), processing fees will include fees retained by the acquirer to cover its costs and profit margins, as well as commissions. paid. by the acquirer to the business service provider. This commission is paid as a reward for finding, matching and managing merchant relationships.
For example, TakePayments is an ISO and uses Barclaycard to procure its services. TakePayments may charge merchants a processing fee of 0.6% to cover Barclaycard’s 0.4% retained for their acquisition service plus a 0.2% commission paid by Barclaycard to TakePayments (Note: this rate is hypothetical).
Visa Interchange Rates (2023)
This is a card transaction fee that the holder pays to the issuer each time the card is used to purchase goods or services. They are usually charged as a fixed percentage and cannot be traded.
Typical interchange fees are 0.2% for debit cards and 0.3% for credit cards for UK consumer cards. Rates are higher for commercial cards.
This is a different name for the card company (eg Mastercard) and each card scheme charges a different interchange fee.
Cardless transactions, such as those made over the phone, through a virtual terminal or online, are generally considered riskier than face-to-face transactions, so they tend to have higher exchange rates.
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The MCC is a four-digit number used by credit card companies to categorize businesses. Businesses operating in categories considered lower risk may be offered lower interchange fees.
Domestic transactions, where the bank or card issuing organization is in the same country as the business, will be cheaper than cross-border transactions.
Finally, rewards cards are another major factor that affects the overall exchange rate. When customers pay for their goods or services using a loyalty card, interchange fees tend to be higher. This is because the increased fees pay for the bonuses offered by the rewards program.
Keep in mind that the Interchange Fee Regulations (IFR) changed in December 2015, limiting interchange fees on most card transactions (typical interchange fees are 0.2% for debit cards and 0.3% for credit cards).
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Mastercard and Visa are revising interchange fees for transactions between the UK and the EEA from 15 October 2021 due to the UK leaving the EEA.
System fees are paid by cardholders to card payment system operators such as Mastercard, Visa and UnionPay to cover the maintenance costs of providing their payment networks.
The total scheme fee consists of assessment fees, cross border fees, clarification and settlement fees. The type of card used and the geographic location of the acquirer will affect the total amount charged.
The scheme fee is fixed and variable and consists of a payment technology fee and a core fee. This fee is intended for:
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In addition to merchant service fees that apply to various types of purchase transactions (including interchange fees, scheme fees and merchant service provider net proceeds), a number of non-transactional fees apply to merchant accounts.
This fee applies in case of early termination of the contract – it will depend on the remaining duration of the contract
Merchants and ISOs will offer the card terminal as part of their package and offer a monthly fee with a minimum contract (usually over 2 years). Longer contracts tend to result in lower monthly fees.
Card terminal costs are sometimes paid directly to the terminal provider and not to the acquirer or ISO.
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For example, if you have a contract with Paymentsense, your terminal will be supplied by First Data Global Leasing or Paytek, which you will pay by direct debit each month.
Charges will vary by type (landline, landline or mobile), brand (eg Ingenico, Verifone) and model. You should expect to pay £14-£35 per month for a card terminal leased from a merchant account provider.
Many ISOs and acquirers offer payment gateway services as part of their full service package and charge a monthly fee.
Payment gateway software typically costs between £15-£25 per month. It should also be noted that the transaction fee will be charged at a higher rate as it will be classified as a cardless transaction.
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When you sign up for a fixed payment gateway fee, it usually comes with some transactions. For example, Worldpay offers a payment gateway service in partnership with Pay360 and charges £19 per month for a standard gateway and £45 for an advanced package that includes more transactions, international payments and more payment options such as Apple Pay.
If you accept payments over the phone or by mail, you need virtual terminal software. It basically offers the same functionality as a payment gateway, but it is not customer-oriented. If you have already paid the payment gateway fee, it is unlikely that you will be charged additional fees for the functionality of the virtual terminal.
If you want to change your credit card payment processor before the end of the period you agreed to, you may have to pay an early termination fee. How much you pay depends on who you deal with and how early you end the contract. Early termination fees can ultimately cost anywhere from a few hundred pounds to a few thousand.
Some payment processing platforms will charge you an account setup fee. While you shouldn’t be paying more than £99 for set-up fees, this is a cost that can be avoided with some bargaining or shopping around.
Factors That Affect Your Credit Card Processing Fees
When handling sensitive data, such as a customer’s credit card details, you must ensure that you do so in accordance with payment card industry data security standards. Your business must go through a series of checks to ensure that it is not exposing customers to risk or fraud. What this “check” looks like depends on the size of your business and the number of transactions you process.
The more popular merchant account providers will manage PCI compliance on behalf of the merchant. The equipment fee is usually around £5-£20 per month with the additional cost of ASV scanning.
The cost of PCI compliance will vary between the tiers of your business (between 1 and 4). Tier 1 businesses will have the lowest PCI compliance costs. The largest businesses can expect to pay thousands per year.
If a customer requests a refund directly from the card issuer rather than the merchant, the bank that issued the card can initiate a chargeback to reverse the payment.
Infographic: Learn About Credit Card Processing Fees & Rates
Some acquirers always charge a fee when compensation occurs. Others will only charge a fee if compensation is maintained or exceeds a certain value.
A refund fee is incurred when a merchant requests a refund directly from the merchant and agrees to refund when returning or exchanging the product or reporting dissatisfaction with the service. This is different from compensation where the consumer receives credit directly from their card issuer.
Below you can see from PSR’s analysis of average MSC charges by Barclaycard, Elavon, Global Payments, Lloyds Bank Cardnet and Worldpay that they vary significantly depending on card turnover.
Unlike payment facilitators such as Zettle and SumUp, which publish fixed prices on their websites, most acquirers and ISOs provide tailor-made quotes and have no fixed fees. When determining the payment processing fee they will quote for a particular business, they will consider a number of factors including:
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The value of the card transaction received by the merchant is one of the most important considerations for acquirers and ISOs when providing quotes to merchants.
While all acquirers are aware of the need to be price competitive, they are very protective of their profit margins and will look to differentiate themselves through other elements such as quality of customer service, hardware provided, terms of contract, integration capabilities, etc.
Around 98% of all SMEs use standard/blended pricing and will not qualify for the lower IC+ or IC++ fee.
Around 35% of large merchants with an annual card turnover of over £50m have IC+ or IC++ pricing and 55% have standard pricing. More details on the differences between the mixed and IC+ pricing models can be found here.
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The acquirer or ISO does not automatically pass through exchange and scheme fees at cost price. They also don’t split
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