Understanding Merchant Fees in the UK

Merchant fees are a necessary part of accepting card payments, but without a clear understanding of how they work, they can quietly reduce your margins.

This guide explains what merchant fees are, how they’re calculated, and the practical steps UK businesses can take to reduce them without compromising the customer experience.

What are merchant fees?

Merchant fees are the charges a business pays to process card payments. When someone uses a card to make a contactless payment, for example, the card machine reads the chip information and sends the details through a payment network, like Visa or Mastercard, which passes the request to their bank for approval before the transaction is completed.

 This means that each card payment involves several parties, and each takes a small fee to process, route, and authorise the transaction.

These fees are typically charged as a percentage of the transaction value, but the exact amount can vary depending on the card type, payment method, and pricing model used by your provider.

What makes up a merchant fee?

A typical merchant fee is made up of three main components:

Interchange fees. Paid to the customer’s card-issuing bank. These vary depending on factors such as card type (debit, credit, or premium), transaction method (in person or online), and whether the card is domestic or international.

Card scheme fees. Charged by card networks such as Visa, Mastercard, and American Express. These cover the cost of maintaining payment infrastructure and network security.

Merchant service fees. Charged by your payment provider for processing transactions and providing hardware, software, reporting, and support.

Understanding how these components fit together makes it easier to compare providers and identify hidden costs.

How are merchant fees calculated?

The way your fees are calculated depends on the pricing model used by your payment provider. Common models include:

Transaction rate pricing

You pay a percentage fee for each transaction amount. While rates can vary by card type, transparent costs make it easier to forecast expenses.

Interchange‑plus pricing

You pay the true interchange fee for each transaction, plus a fixed margin charged by your provider. With this model, fees can vary widely month to month, making it very hard to predict and budget accordingly. 

Tiered pricing

Transactions are grouped into tiers (e.g. qualified, mid‑qualified, non‑qualified), each with different rates. This model is often less transparent and harder to predict.

Merchant fees can also vary depending on how a payment is made. In-person transactions are typically lower-risk and therefore cheaper to process, while online or manually entered payments often incur higher fees. International cards can also cost more due to additional processing and currency considerations.

Compare merchant fees in the UK

Compare merchant fees for Square, Zeller, SumUp and Airwallex.

*Price comparison based on publicly available information on provider websites on 28th of April 2026 for Visa and Mastercard domestic transactions.

*Airwallex pricing is not POS-specific and may vary by product and use case

Debit vs credit card fees: what’s the difference?

Debit card transactions typically have lower fees than credit cards, as funds are taken directly from a customer’s bank account. Credit cards, particularly premium or rewards cards, tend to cost more to process due to higher interchange rates.

Understanding this difference can help you make informed decisions about how you accept payments and manage costs.

Should your business accept American Express?

American Express is often associated with higher‑spending customers, making it an attractive payment option for many businesses. 

Accepting American Express can:

• Increase average transaction values.

• Improve customer convenience and satisfaction.

• Help capture spend from domestic and international customers who prefer Amex.

How to reduce your merchant fees

While some costs are unavoidable, there are a few straightforward ways to keep the cost of accepting card payments under control.

Understand what you’re actually paying

Most businesses don’t look past the headline rate. Take a closer look at your statements and calculate your true cost across all transactions. If it’s not clear, that’s usually a sign to dig deeper.

Keep your provider’s pricing simple

If you don’t fully understand how you’re being charged, it’s hard to stay in control of costs. Simple, transparent pricing makes it easier to track what you’re paying and avoid surprises.

Avoid getting locked in

Long contracts can make it difficult to leave, even if pricing changes or your needs evolve. Flexibility matters, especially if your business is growing.

Reduce disputes where you can

Chargebacks don’t just cost you money, they take time to deal with. Clear receipts, simple refund policies, and good communication go a long way in avoiding them. Learn how to reduce chargebacks.

Choose a provider that fits how you work

The right setup should make running your business easier, not harder. Look for something that gives you visibility over your payments and keeps things simple.

How to negotiate merchant fees

Most providers won’t tell you this, but fees aren’t always fixed, especially once your business is up and running.

• Start with your own numbers. If you don’t know your monthly volume or average transaction size, it’s hard to push back on pricing.

• Don’t just focus on the rate. Extra fees, add-ons, and pricing tiers can make a “low rate” more expensive overall.

• Use your growth. If you’re processing more than you were six months ago, that’s a reason to ask for better terms.

• Ask direct questions. What can be reduced? What’s fixed? Where’s the margin? You’ll get a clearer picture quickly.

• Be willing to move. You don’t need to threaten it, but knowing you can switch puts you in a stronger position.

Pay low transparent fees with Zeller.

• Simple, transparent pricing 

• No hidden contracts or lengthy paperwork

- No subscriptions or hardware rental costs

• Reliable, modern hardware

• 24/7 customer support via phone, email, and SMS

• Real-time reporting from desktop or mobile app

•  No chargeback fees

Learn more