True charges to retailers of accepting credit/debit cards

NFH

In light of the forthcoming super-complaint to be made by the Consumers Assocation regarding surcharges for credit and debit card payments, I was wondering exactly how much retailers pay to accept card payments. The media have reported that debit card payments incur a fixed charge (e.g. 20p) whereas credit card payments incur a percentage charge (e.g. 1% to 2%). I understand that for a particular merchant, the fee will vary depending on whether the card is:

• Visa credit
• Visa debit
• Visa Electron
• MasterCard credit
• MasterCard debit
• Maestro
• American Express
• Diners Club
• JCB
• Non-UK cards of the above card networks

I recently used my credit card to pay in a restaurant and was told that because the bill was under £30, there would be a 50p surcharge. Given that acceptance of credit cards is widely reported to incur a percentage charge rather than a fixed fee, such a fixed charge didn't make sense for small credit card payments but might have made sense for small debit card payments. I'm therefore wondering whether merchants are charged a fixed fee in addition to a percentage for accepting credit card payments or whether there's a minimum fixed amount when the percentage amount is calculated, for example.

Can any retail business owners give some examples of the true exact charges, as opposed to the vague figures reported by the media?

dzug1

Depending on the retailer's arrangements with the merchant, there can be a daily or monthly rental-type fee for the machine as well as a charge for each transaction. For a small retailer that maybe only takes half a dozen card payments a day it could be significant.

No idea on amounts, sorry.

NFH

dzug1 wrote: »

Depending on the retailer's arrangements with the merchant

Just to point out regarding terminology, the retailer and the merchant are the same thing. "Merchant" is a term used by the payment processing industry to refer to a retail business that accepts payments by card. There are also other terms such as "acquirer" which refers to the bank that processes the card payments for the merchant.

kev.s

don't know the amounts, but makro charge you £1 if you use credit card for purchases under £100.. maybe that gives some sort of reflection

NFH

kev.s wrote: »

don't know the amounts, but makro charge you £1 if you use credit card for purchases under £100.. maybe that gives some sort of reflection

Good point - I'd forgotten that one. It's another example that goes to show that the media may have misreported the simple percentage charge on accepting credit card payments.

billymadbiker

The charges to the retailer depend on what type of deal they are on, and who with.

Say Streamline provide your card processing services and you run a small candle making firm selling £500 p/m on cards.

They will charge you a set fee p/m to rent the chip&pin terminal, then a set fee for having the merchant account. You will then also pay a % of each tranasaction, depending on the amount of the sale and the card used.

The 5 charges are near impossible to work out, most times the retailer/merchant has a fixed % which covers all the cards but may not be able to take certain cards (diners club etc) as these cards charge streamline more than the % you pay them.

Streamline also get benifits from moving money around, they get to hold it for the few days it takes to clear, and they also, take the payment from the card on the day the sale is made but may not pay it back into the shopkeepers account for 28 days.

So, the more you sell the less you pay for card charges.
That's why your local garage may say min spends of £5 in shop or £10 on fuel where Tescos will let you buy a packet of crisps on a card.

I have a merchant account and they were trying to 'upgrade' me to a terminal to accept contactless payments.
At the time the maximium payment that could be made by Barclaycard on contactless was £3.50 (before needing the pin).
I would have needed to take 5 payments p/m for £3.50 each before I broke even on the extra rental and charges to take contactless!!

NFH

billymadbiker wrote: »

So, the more you sell the less you pay for card charges.
That's why your local garage may say min spends of £5 in shop or £10 on fuel where Tescos will let you buy a packet of crisps on a card.

I'm not following the logic there. If it's in your interests to increase the volume of payments by card, why would you want to refuse payment by card for some transactions (i.e. low value ones)?

Is there any chance you could post the exact charges for accepting each type of card (i.e. the marginal cost per payment)?

billymadbiker

Because it is mostly in my intrest to accept payment in other forms.
I get charged 40p to bank a cheque.
I also get charged 70p to pay in cash. Obviously if I don't need the money in the account I will pay the cash in as lest often as possible to only get one charge.
(charged to/on my business bank account)

No, I can't give the exact charges.
Mostly because I can't work them out myself!

I paid £250 to set up a merchant account.
This enables me to have the card terminal. I am not allowed to take payments over the phone or on-line.
Both these options would cost me extra set-up fees and monthly rental/charges.

I pay a fixed fee of £25 p/m to hold a merchant account.
I pay £32 p/m to rent the card reader.
I also get charged on my phone bill for every time it calls up to process a card but this is not a lot.

On the first transaction of the month I pay 50p plus 2.5% of the transaction after the first 50p.
So, If I 'took' £100 they would deduct:
£100 - 50p = £99.50
£99.50 x 2.5% = £2.4875
+ 50p = £2.9875.

Now, if that is the only card payment I take that mth it's cost me about £60.

It gets complicated because after taking so many payments the fee drops to 25p per transaction.
After taking so many more than that the % rate also drops.
Another confusing thing is sometimes the 'month' they use is 28days from the last bill, sometimes it's an actuall calander mth and other times it's from the last transaction (if I go more than 28 days between a payment.
I think they work this in my favour though.

The % rate does also vary from card to card but so does the set payment.
Ie, a debit card may only cost 1% but there would be a £1.25 minimum fee.
These vary around as they see fit (I presume it depends on what one bank is charging to 'sell' at and the other is using to 'buy')
You also get 'offers' every now and again, for example Mastercard may say 'no minimum fee, just fixed rate of 3% for March'

billymadbiker

Also, to reply to your first post,
Charging a 'fixed' fee to process the card will make sense.
In a restaurant for example,
If the bill is under £30 the 50p will go toward the cost of the charge.
There is no point charging a % because the machine will not work this out for you so staff would have to stand there and work it out for every sale. Not worth doing on sub 30 quid.
(I do belive you can set the terminal up to accept 'tips' though. I suppose you could set your 'tip' rate at 2.5% but not sure if the customer would be too happy?)
If you spent £500 on a flash dinner you wouldn't!

Over £30 and you will be making enough profit on the meal to cover the costs of taking the payment.

Thats why you always see the £5 shop / £10 fuel in garages.

They can make enough profit on shop sales to absorb the cc costs on £5 worth of sales.
As they are only making ?pence per litre on fule they have to sell a larger amount to cover costs of processing cards.

NFH

billymadbiker wrote: »

I also get charged on my phone bill for every time it calls up to process a card but this is not a lot.

Don't they work over IP now rather than needing a phone line? And does it dial up for all card types or just some (e.g. American Express)?

billymadbiker

We run a mobile one,
logs onto gprs/3g etc when available but mostly seems to be over standard mobile line.
Not 100% sure on the actuall cost-per-call.

It says 'connecting' every time I put a payment through and I have to wait so I think it's for all card types.
Sometimes I put cards in for 'pre-authorising' and it won't connect, just say '£70 available' etc. If I then request a larger amount it will call in.
Again, this is probbaly somthing I could change in set-up.
If I took £10k a day I may not be so worried about a £25 payment not going through so could set it all to run overnight. As it is, I like to see every one clear at time of payment.

The land line ones run over data rather than dial-up now.
If you had a shop you would still have to pay £40 per quarter for a BT landline though even if the processor provided you with free broadband.
Again, larger retailers would get around this on a lower cost per-card payment.
Tesco most likley have a server in each store or something