Processing customer credit card payments, either on your website, by phone or in person, is fast and convenient and, for many customers who no longer use cash, the only way they pay. Your business will benefit from processing credit cards and contactless payments but it will also pay transaction fees which can easily cost you 1-3% per sale, and merchant service charges typically range from 0.25-0.35%.
With this level of fees, it’s well worth shopping around to check fees and find a cheap card processor before you sign up. To name just one example, Square keeps things transparent at 1.75% for contactless, inserted, or swiped transactions. Other providers might include setup fees and monthly charges that aren’t immediately obvious. Compare processors alongside hardware in our best card readers guide.
Setting up credit card processing
Setting up card processing is straightforward. Once you have chosen your card processor, you can start accepting payments quickly and affordably; here’s how to break down the process into easy steps.
Decide how you want to accept payments (in-person, online, mobile)
Your customers’ payment preferences matter. Here are three main options:
- In-person payments: Using point-of-sale (POS) systems or card readers at your physical location
- Online payments: Letting customers pay through your website or via email invoices
- Mobile payments: Taking payments anywhere using card readers that connect to smartphones or tablets (read our guide to mobile payments)
Our top five card processors
Choose a merchant service provider
The right merchant service provider is a vital part of affordable processing. Look for these features:
- Support services that run 24/7 through phone, email and live chat
- Systems have high up-time so you won’t get stuck without service
- Reliable security programmes and PCI compliance help
- Support for your industry and businesses your size
- Clear fees without hidden costs
UK businesses can pick from many different providers including well-known brands such as Worldpay, SumUp, Square, and Stripe, as well as newer entrants who each have a different offer, normally with pricing tiered by volume of sales.
Open a merchant account or use a payment facilitator
You have two main ways to process payments:
Traditional merchant account: A special account just for card payments. This needs more paperwork but can save money if you have high sales volume.
Payment facilitator (PayFac): Services like Square and SumUp let you process payments without your own merchant account. These are quick to set up and perfect for new businesses or those making under £25,000 yearly in card sales.
Set up your POS or online checkout system
Now it’s time to get your system running:
Physical stores need to connect their card reader or terminal to the network and add required software. Today’s POS systems are easy to set up.
Online stores must add a payment gateway to their website. Most providers have plugins for popular e-commerce platforms or widgets for custom websites.
The final steps include creating staff profiles with the right permissions to keep things secure. Make sure to test everything before going live.
Comparing the cheapest merchant services
Small businesses can save money by comparing credit card processing options. The UK market has several competitive providers that offer different fee structures and features.
Worldpay vs SumUp vs Square vs Stripe
The right provider choice needs careful analysis. Worldpay handles over 40% of UK card transactions and charges credit card fees at 1% and debit card fees at 2%, plus a 4p authorisation fee. SumUp keeps things simple with a 1.69% fee for in-person transactions without monthly charges. Square sets rates at 1.75% for in-person payments and 2.5% for keyed-in transactions. Stripe runs on a flat-rate structure of 1.4% + 20p for UK cards and 2.9% + 20p for international transactions.
Stripe stands out for online businesses with its developer-friendly tools and support for 135+ currencies. Worldpay proves ideal for businesses with annual turnover above £250,000 and offers custom pricing plans.
Cheapest merchant services UK: what to look for
Here are the key factors to think about:
- Transaction fees: Most fall between 1.5% and 3.5% per transaction
- Pricing structure: Interchange-plus tends to give the lowest fees for most businesses
- Monthly minimums: Some providers ask for minimum monthly fees
- Contract length: Long commitments make sense only with big discounts
- Hardware costs: Buying equipment often beats renting
Pay-as-you-go models work best for startups and seasonal businesses. High-volume merchants usually benefit more from subscription models.
How pricing varies by transaction volume and business type
Processing costs depend heavily on your business’s nature. Face-to-face transactions usually cost less than online payments because they have lower fraud risk. Premium cards like rewards and business cards come with higher interchange fees than standard ones.
Volume makes a big difference – businesses with high transaction volumes can get rates as low as 0.3% with providers like takepayments. Risk profiles also matter – hospitality businesses often pay more due to higher chargeback risks.
Brexit has changed things for UK businesses. They now face higher cross-border fees for EU transactions, with Visa and Mastercard raising interchange fees to 1.15% for debit cards and 1.50% for credit cards.
Smart ways to cut processing costs
Smart businesses can save money on card processing costs beyond just comparing providers. Here are some proven ways to keep more of your hard-earned money.
1. Use flat-rate pricing for simplicity
Flat-rate pricing keeps things simple by charging the same fee whatever the card type or issuer. This makes your payment processing costs predictable and easy to understand. This pricing model works best especially when you have low transaction volumes or sell low-value items. The rates might not be the lowest, but you can forecast expenses better and include processing costs in your pricing.
2. Avoid unnecessary hardware rentals
You can save a lot by buying payment hardware instead of leasing it. A VeriFone VX520 terminal costs about £95.30 to buy but could set you back nearly £397.08 with a four-year lease. Payment hardware is more affordable now, so avoid expensive leasing agreements that you can’t cancel early.
3. Choose providers with no monthly minimums
Companies like SumUp or Square are great options as they don’t charge monthly fees, minimum transaction requirements, or early termination penalties. This setup works best especially when you have seasonal businesses or sales that go up and down.
4. Reduce chargebacks with better customer service
Chargebacks cost you money even if you win the dispute. Quick customer service often stops problems before they grow – only 4% of unhappy customers actually reach out to businesses. Your business needs clear returns policies, detailed transaction records, and fast responses to customer questions.
5. Use ACH or Direct Debit for recurring payments
ACH (Automated Clearing House) transactions cost less than credit card payments for recurring charges. Companies using GoCardless see 51% fewer late or incorrect payments, and 97% of collections happen right on schedule. ACH payments help keep customers around longer since they connect to bank accounts instead of cards that expire.
6. Monitor and review your statements regularly
Your processing statements need regular checks to spot weird charges, higher fees, or chances to negotiate better rates. Watch for monthly fee changes and too many downgrades. Payment processors usually update their rates twice a year, so staying alert helps catch small changes quickly.
When and how to switch providers
Your small business can save money by knowing when to change payment processors. Many businesses stick with providers that don’t suit their needs just because they’re used to them.
Signs your current provider is too expensive
The headline transaction rates don’t tell the whole story. You’ll get a clearer picture of costs by dividing total fees by total sales volume. Here are some warning signs that suggest it’s time to make a switch:
- Tiered pricing models that label too many transactions as “non-qualified” with higher fees
- Monthly statements with surprise or unexplained charges
- Reserve requirements that go beyond 20% of your transaction volume
- Long-term contracts that come with big termination fees (typically between £79-£397)
How to compare new offers effectively
You should get into each provider’s fee structure in detail. Look past transaction rates and identify all monthly fees, equipment costs, and extra charges. Ask for a free estimate based on your actual processing data.
The right pricing model should line up with your business volume. Interchange-plus works better for 2+ year old businesses, while pay-as-you-go suits smaller operations. You should also assess the quality and availability of customer support.
Steps to switch without disrupting your business
Start by checking your current contract’s termination conditions. Most contracts need notice periods or include penalties if you cancel. The best time to plan your switch is during slower business periods.
Running both old and new systems side by side helps minimise disruption. Many businesses keep both systems running for 180 days. This gives you time to test everything properly and provides backup if technical issues come up.
The core team needs a full picture of the new system before you completely shut down your old processor.
Cheap credit card processing
You can reduce your card processing costs by picking a payment processor that works well with your transaction volume and business types. Pay-as-you-go models suit startups and seasonal operations best. Ten-year old businesses with higher volumes get better deals with interchange-plus pricing structures.
Smart cost-cutting moves can boost your bottom line. You’ll save money by buying hardware instead of leasing it. Pick providers without monthly minimums and keep chargebacks low through great customer service. Direct Debit options for recurring payments can also trim your costs over time.
You need to check your statements regularly to spot hidden charges or fee hikes. Many businesses skip this step and end up paying too much for years. The best approach is to review your processing costs every three months.
The cheapest option isn’t always the best deal. Your ideal provider should give you solid support, tight security, and stable systems along with good rates. A slightly higher fee from a provider with great service might save you money compared to a cheaper one with tech problems or poor support.
FAQs
Q1. What is the most cost-effective credit card processing option for small businesses? The cheapest option varies depending on your business needs. For new and small businesses, Square offers competitive rates. Stripe is excellent for online businesses, while Helcim provides low overall costs for many small businesses.
Q2. How much do credit card processing fees typically cost small businesses? Credit card processing fees generally range from 1.5% to 3.5% of each transaction’s total. However, the exact cost can vary based on factors such as transaction volume, business type, and the specific payment processor used.
Q3. Is it possible to reduce credit card processing costs for my small business? Yes, there are several ways to cut processing costs. These include using flat-rate pricing for simplicity, avoiding unnecessary hardware rentals, choosing providers with no monthly minimums, reducing chargebacks through better customer service, and using ACH or Direct Debit for recurring payments.
Q4. How can I set up credit card processing for my small business? To set up credit card processing, first decide how you want to accept payments (in-person, online, or mobile). Then, choose a merchant service provider, open a merchant account or use a payment facilitator, and set up your point-of-sale (POS) or online checkout system.
Q5. When should I consider switching credit card processing providers? Consider switching providers if you notice unexplained charges on your monthly statements, your effective rate (total fees divided by total sales volume) seems high, or you’re locked into a long-term contract with substantial early termination fees. It’s also worth exploring other options if your current provider doesn’t offer the features or support your business needs.
