Card machine statements are hard to read, and that is not just your impression. When the Payment Systems Regulator (PSR) reviewed the market, it found that the structure of acquirers' standard pricing "varies widely" and that most acquirers using it do not publish their prices (PSR card-acquiring market review, final report, paras 3.66 and 3.71). This guide goes through the lines you are most likely to see, and ends with the one number that makes statements comparable: your effective rate.

Key points

  • Most statements split costs into transaction charges (the merchant service charge) and a set of fixed or event-based fees.
  • The PSR found that around 98% of small and medium-sized merchants are on "standard" pricing, often called blended pricing.
  • Extra lines can include authorisation fees, PCI DSS fees, terminal rental, a minimum monthly service charge and chargeback fees.
  • Your effective rate is your total card-related charges divided by your total card turnover. It is the fairest way to compare providers.

What the merchant service charge is made of

The merchant service charge (MSC) is the total you pay your provider for accepting cards, including any additional fees (PSR, para 3.65). Behind it sit three parts: interchange fees (paid to the customer's card issuer), scheme fees (paid to the card schemes such as Visa and Mastercard) and the acquirer's own costs and margin (PSR, para 3.18).

Interchange and some scheme fees change depending on the card type (debit or credit), the scheme, where the parties are located, the channel (online or face to face) and how the cardholder was authenticated (PSR, para 3.19). That is why statements often list separate lines such as "Visa debit", "Mastercard credit", "commercial" or "non-UK" cards.

For UK consumer cards, interchange is capped by law at 0.2% of the transaction value for debit cards and 0.3% for credit cards (UK Interchange Fee Regulation, Article 3 and Article 4). Your transaction charge will be higher than this, because it also covers scheme fees and the provider's costs and margin.

Blended, interchange++ and fixed pricing

How those transaction charges appear depends on your pricing model. The PSR describes four (PSR, para 3.63):

  • Standard (blended) pricing. You pay one or more "headline rates" that do not automatically pass through the interchange fee at cost. A headline rate can be a percentage, a pence-per-transaction charge, or both (para 3.64).
  • Interchange plus (IC+). The interchange fee on each transaction is passed through at cost, plus the provider's fee.
  • Interchange plus plus (IC++). Both the interchange fee and the scheme fees are passed through at cost, plus the provider's fee.
  • Fixed pricing. A set periodic fee for card acceptance that does not depend on the volume or value of your transactions, within specified limits.

The PSR found that around 98% of small and medium-sized merchants are on standard pricing (para 4.55). If your statement shows a small number of percentage rates by card type, you are probably on blended pricing. If it shows interchange and scheme fees listed separately, you are probably on IC+ or IC++. Our guide to interchange++ vs blended pricing explains the trade-offs.

Authorisation fees

The PSR noted that most acquirers charge additional fees for authorisation requests, and that some charge different fees depending on the type of request (para 3.68). These usually appear as a pence-per-request line, separate from your percentage rate. On a business with many small transactions, a few pence per authorisation can add noticeably to the total, so it is worth checking how many you are being charged for.

PCI compliance and non-compliance fees

PCI DSS is the card industry's security standard. The PSR found that services to help merchants certify their compliance usually carry a fixed monthly or yearly fee (para 3.69), and that PCI DSS non-compliance is one of the events that can trigger an additional fee (para 3.64). If you see a line described as "PCI non-compliance", it usually means your provider does not have a current compliance confirmation from you. Our PCI compliance fees guide covers how to deal with it.

Terminal rental

Acquirers typically charge a fixed monthly fee to hire a card machine (para 3.69). At the time of its 2021 report, the PSR found acquirers typically charged between £10 and £40 a month per terminal, depending on factors such as the length of the hire and the number of devices (para 4.20). Terminal rental is sometimes billed by a different company from the one processing your payments, on a separate contract. Our guide to leaving a card machine contract explains why that matters.

Minimum monthly service charge

Some acquirers apply a minimum monthly service charge, which kicks in if the amount you pay for card acceptance in a month falls below a set threshold (para 4.20). If your card takings are seasonal or low, check whether you are paying a top-up in quieter months.

Chargebacks

A chargeback is started by the customer's card issuer when it considers the cardholder has the right to dispute a payment, for example if goods were not delivered or a payment looks fraudulent. It is different from a refund, which you start yourself (PSR, para 3.22 and footnote 29). Chargebacks are among the events that can trigger an additional fee on standard pricing (para 3.64), on top of the disputed amount itself.

Other lines you may see

Refunds and certain transaction types, such as e-commerce transactions, can also carry additional fees (para 3.64). If you take payments online, payment gateway charges may appear as a fixed monthly fee, a per-transaction fee or both (para 3.69).

If your provider is one of those directed by the PSR and your annual card turnover is up to £50 million, you should also be able to find a "summary box" in your online account setting out the key price and service information for your contract (PSR PS22/2). It is a useful cross-check against the statement.

How to work out your effective rate

Your effective rate turns every line above into a single percentage:

Effective rate (%) = total card-related charges for the period ÷ total card turnover for the same period × 100

"Total card-related charges" means everything: transaction charges, authorisation fees, PCI fees, terminal rental, minimum charge top-ups, chargeback fees and any other fees. "Total card turnover" is the value of card payments you took in that period.

Illustrative example (round numbers, not a real business): a café takes £20,000 in card payments in a month. Its statement shows £260 of transaction charges, £15 of authorisation fees, £20 of terminal rental and £5 for PCI. Total charges are £300.

£300 ÷ £20,000 × 100 = 1.5%

Two tips. First, use the same period for both figures, and ideally look at two or three months, because a quiet month can make fixed fees look larger. Second, include charges billed separately, such as terminal rental from a different company, or your effective rate will look lower than it really is.

Get a second opinion on your statement

Once you know your effective rate, you can compare it fairly with other providers. If you would rather not work through the lines yourself, you can upload a recent statement for a free comparison. A UK advisor at The Rate Dropper will read it, work out your effective rate and show what the same card volume would cost with Worldpay, Dojo, SumUp, Zettle, takepayments, Barclaycard, Elavon and Square. The service is free for businesses; we are paid a commission by the provider you choose, if you choose to switch.