Finding the best deal for merchant card services
Merchant service fees
The terminology surrounding opening a merchant account can be mind boggling so it’s important to understand what you are paying and why those costs exist (or don’t in some cases) on your monthly statement. This will enable you to make a like-for-like comparison when shopping around.
Merchant service charge (MSC)
This is the charge taken on every credit and debit card transaction the business accepts. Account providers will quote a percentage fee which will not be the same for each type of card. Equally, business cards and international cards will be charged separately, and smaller costs could be available for contactless payments. Make sure you are quoted all of these before signing on the dotted line.
Example. One of our subscribers obtained two quotes. The first was a 0.85% fee for Visa and Mastercard personal credit cards, 0.469% for debit cards and 2% for business credit cards. The second was 0.6% for Visa and Mastercard credit cards, 0.425% for debit cards and 2.1% for business cards. So, it’s important to analyse what cards most of your customers will use when reviewing quotes.
Tip. Make sure the provider has correctly classified how you take card payments as some charge a lot more for card not present (CNP) transactions. A CNP transaction is when neither the cardholder nor the credit card is physically present at the time of the transaction. It’s most common for orders that happen remotely - over the phone or by fax, online or mail. Tip. The MSC is set by your bank, but you are free to negotiate a better deal with them. The MSC is purely between your bank and your company and card companies are not involved in the rate your bank sets for you. The bigger your business, the better the deal you should be able to get.
Authorisation fee
Most providers charge an authorisation fee on top of the MSC and this is usually a flat amount per card transaction. Tip. Add this fee onto the MSC to get the true fee for each card transaction. For example, our subscriber was quoted an authorisation fee of 3p on the first quote and 4p on the second quote. So, if they took a debit card transaction of £20, the first quote would cost 0.85% x £20 + £0.03 = £0.20 and the second would cost 0.6% x £20 + £0.04 = £0.16.
PCI compliance fee
The payment card industry data security standard is a security standard all businesses that accept card payments must comply with to safely and securely accept, store, process, and transmit cardholder data during debit and credit card transactions. Some, but not all, providers charge a monthly fee for certification. Our subscriber was quoted £15 per month for this by one provider and nothing by another provider.
Today’s credit cards also have additional security features called EVM chips, which create a unique transaction code that cannot be used again.
Other fees
As well as the common fees above, you are likely to be charged a minimum monthly service charge and a set-up fee (not all providers charge this). There will probably also be fees for chargebacks and terminal hire fees (if you need a physical card machine).
For a merchant card services comparison tool, visit https://www.tips-and-advice.co.uk , Download Zone, year 14, issue 11.
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