It’s official – debit and credit cards are now the preferred method of payment in the UK. Last year consumers used debit cards 13.2bn times, while the number of cash payments fell 15% and that trend continues through 2018. Businesses are expected to provide for card payments and face the prospect of losing customers if they don’t.
For convenience, many businesses looking to set up with card readers will go with their high street bank. Banks do offer card readers as part of their business accounts but simply partner with a card processor to provide them with card readers. This usually means higher rates for processing transactions. It’s worth shopping around to find the best provider, but even before you do that, it’s important to understand the fees involved with card payments. It also helps to have an understanding of the different parties involved in the card payment process…
The parties involved in card processing
Merchant
The merchant is the business that accepts credit or debit cards as payment from customers (or cardholders in this instance) for goods or services they provide.
Cardholder
The cardholder is someone who pays for goods or services with a credit or debit card. The card is provided to them by their bank (the issuing bank).
Issuing Bank
As well as providing debit or credit cards to their account holders the issuing bank is also a member of the card associations (Visa and MasterCard). Issuing banks pay acquiring banks for purchases that their cardholders make.
Acquiring Bank
An acquiring bank (sometimes called the merchant bank), acts as the banking partner for the merchant, allowing them to accept credit and debit cards. Acquiring banks provide the merchant with the card readers and software and also handle things like customer service. The acquiring bank will also deposit funds from credit card sales into the merchant’s account. This is mostly done behind the scenes, so the merchant has virtually no dealings with the acquiring bank. It’s not to be confused with a business bank account…
Business Bank Account
Much like a personal or current account, a business bank account is a legal requirement for businesses. They can be opened with a high street or commercial bank and are opened in the name of the company, enabling the owner to keep their business transactions separate from their own personal money.
Card Association
You’ll always see either a Visa or a MasterCard logo on all credit and debit cards. But what exactly are they? Well, they’re not banks so they can’t issue credit cards or bank accounts. Instead, they are card associations which are a network of issuing banks and acquiring banks that process card payments. They maintain and improve the card network, acting as an arbiter between the issuing and acquiring banks and manage their own brands.
Credit Card Reader Costs & Fees Breakdown
Set up fees
Card reader providers will impose a one-off joining and set up fee to provide and set up the card readers. This will of course vary depending on which company you choose.
Merchant service charge
Once the card readers are up and running, the business owner has to pay a proportion to their acquiring bank whenever a customer uses a credit or debit card. One of these charges is called the merchant service charge (MSC). The merchant service charge is the fees assessed by the acquiring bank for processing the merchant’s daily credit and debit card transactions. The acquiring bank then passes this on to the card issuer (the customer’s bank).
Minimum monthly service charge
A minimum monthly service charge (MMSC) is a minimum fee which will be applied by an acquiring bank where their merchant service charges (MSC) is less than the MMSC. For example, with an MSC of £17.50 for that month and a MMSC of £20, an acquirer would make a charge of £20 for the month. As merchants’ businesses grow, they are less likely to have to pay a MMSC.
Interchange fee
The interchange fee is paid by the business’s acquiring bank to the cardholder’s bank every time a card payment is processed. Interchange fees cover the cost of processing payments quickly and securely, and ensure that the retailer receives the payment promptly. Other parts are a charge levied by the “acquiring bank” to cover the cost of processing the transaction, and card scheme fees which are a cost to your acquiring bank paid to Visa and Mastercard. These are worked out according to several factors, such as card type, location and volume of transactions.
PCI DSS compliance fee
The PCI DSS compliance (Payment Card Industry Data Security Standards) is a requirement for all business owners who accept card payment. It’s an industry standard to prevent card fraud and is a small fee paid every month. PCI DSS is an organisation created and controlled by the major U.S. card networks (American Express, Discover Financial Services, JCB International, MasterCard Worldwide, and Visa). PCI DSS is not affiliated with the US government, as some believe.
So why choose Paymentsense?
With over 70,000 UK business owners already with us, we are able to negotiate excellent rates with the banks that we pass on to you. Our card processing costs are worked out according to several factors, including the nature of your business, your annual turnover, the type of card reader you’ll need to process payments (either countertop, portable, or mobile) and the number of terminals you choose. Card processing fees are charged per transaction and vary based on card types (credit/debit), card turnover and the nature of your business.
We also have Connect, our revolutionary cloud-based technology that seamlessly links merchants’ EPoS and card processing systems. This helps boost profits, increase efficiency and improve the customer experience. However, don’t just take our word for it – have a look at what some of our customers are saying about us.
If you have an existing merchant services provider and you’re dissatisfied with the service or costs, we’ll cover the cancellation costs from your existing provider up to the value of £3,000. We’ll be able to set you up with a credit card reader in as little as 3 days. If you’re just getting started and are interested in a fast and smart way to take payment, fill out our form online to receive a quote.