When a customer makes a card payment, a variety of players – banks, card networks, and payment processors – charge fees for their part in the payment process. Since card payments are so popular in the United Kingdom, which saw 2.3 billion debit card transactions in July 2024 alone, understanding these fees can help businesses maximise their revenue. Choosing the right payment processor and fine-tuning their payment setups can help them avoid unnecessary losses with each card payment.

Below, we’ll explain the different types of card processing fees and the factors that affect them.

What’s in this article?

• Types of card processing fees
  
• Factors that affect card processing fees in the UK
  
• Stripe’s UK card processing fees
  
• How Brexit has affected card processing fees
  

Types of card processing fees

There are a few different types of card processing fees. These fees differ based on agreements with payment processors, the business type, and the transaction volume. Here are some of the different types of card processing fees:

• Interchange fees: Companies pay interchange fees to the cardholder’s issuing bank. The UK caps interchange fees at 0.2% for domestic consumer debit card transactions and 0.3% for domestic consumer credit card transactions.

• Assessment fees: Businesses pay assessment fees to the card networks (e.g. Visa, Mastercard). The structure and rates are consistent with global standards but can include specific rates for UK businesses.

• Payment processor fees: Payment processors charge payment processor fees. These fees vary in amount depending on the provider, business size, and agreement between parties. They are built for the UK market and account for factors such as local payment methods.

• Payment gateway fees: Payment gateways charge these fees for card payments and other electronic payment methods. However, some payment processors such as Stripe also act as payment gateways and don’t charge additional fees for these services.

• Cross-border fees: Card networks charge cross-border fees for international transactions. After Brexit, these can apply to payments between the UK and the European Union.

• Chargeback fees: Card networks and payment processors generally set chargeback rules and fees. Fees differ based on the processor and the nature of the business.

Factors that affect card processing fees in the UK

Card processing fees for UK businesses can vary depending on several factors. Here are the key elements that influence these fees:

• Type of card used: Fees differ according to whether the card is a debit or credit card and whether it is a standard, premium, or corporate card. Premium and corporate cards generally have higher fees due to their additional benefits and rewards programs.

• Transaction method: Fees can vary based on whether the transaction is made in person (e.g. chip and PIN, contactless) or online. Card-not-present (CNP) transactions such as online payments usually have higher fees due to increased fraud risk.

• Business type: Different industries have different risk levels. Hospitality or travel businesses, which are more prone to disputes and chargebacks, might face higher fees than low-risk industries such as retail.

• Transaction volume and value: Higher transaction volumes can lead to lower fees, since many payment processors offer tiered pricing or volume-based discounts. The average transaction value can also affect pricing models.

• Payment processor agreement: Fees change depending on the specific agreement with the payment processor. Some processors might offer flat-rate fees, while others might use an interchange-plus model in which the fee is a combination of the interchange rate and a markup.

• Domestic vs. international payments: Transactions that involve foreign cards (e.g. cross-border transactions) usually have higher fees. If a customer pays in a currency that is different from the business’s settlement currency, currency conversion fees might apply too.

• Regulatory changes: The UK caps domestic interchange fees but no longer caps fees for cross-border transactions between the UK and the EU due to Brexit. In 2023, the UK’s Payments Systems Regulator (PSR) proposed reinstituting caps on interchange fees for transactions between the UK and the European Economic Area (EEA), but this is an ongoing debate.

• Security features and fraud prevention: Some processors offer lower fees for businesses that use advanced fraud protection measures such as 3D Secure. However, other processors might charge extra for these services.

• Financial history: Payment processors might adjust fees based on a business’s credit history, financial stability, and risk of chargebacks.

Stripe’s UK card processing fees

For UK businesses, Stripe charges a flat fee for all card types and a percentage fee that varies depending on the card and transaction type. There are no additional gateway fees with Stripe.

Here are the payment processing fees that Stripe charges in the UK:

• Standard UK cards (e.g. consumer cards): 1.5% + 20p per transaction

• Premium UK cards (e.g. corporate cards): 1.9% + 20p per transaction

• EEA cards: 2.5% + 20p per transaction

• International cards: 3.25% + 20p per transaction

• Currency conversion: 2% per transaction involving currency conversion

With Stripe, businesses that have large payment volumes or unique business models can create custom pricing.

How Brexit has affected card processing fees

Brexit has resulted in higher card processing costs for UK businesses that engage in cross-border trade with the EU. UK businesses have had to adapt to changing fee structures and adjust their payment tactics to mitigate these increased fees, whether through negotiation, finding alternative payment methods, or exploring new markets.

Here’s how Brexit has affected these fees:

• Cross-border fees: Before Brexit, transactions between the UK and EU countries were considered “intraregional”. These incurred lower interchange fees under the EU’s Interchange Fee Regulation (IFR), which capped fees at 0.2% for debit cards and 0.3% for credit cards. After Brexit, these transactions are now considered “interregional” or “cross-border” and have higher interchange fees. For instance, Visa and Mastercard raised interchange fees for consumer UK-EEA CNP transactions to 1.15% for debit cards and 1.50% for credit cards.

• Payment processor fees: Some payment processors now have custom pricing for UK companies that do a significant amount of business with EU customers, to mitigate the impact of increased fees.