Card machine charges for businesses explained

Berry Mathew

Updated on:

Card machine charges for businesses explained

With more than half of all payments now made using a credit card, debit card or mobile wallet, card machines are a great investment for your business. 

But while the ultimate aim of a card machine is to help you take more transactions and earn more profit, there are some payments involved with card machines that you need to know about, especially when it comes to how these payments work and which ones are necessary.

Understanding how card machine charges for businesses work can actually help you avoid many unnecessary charges.

Here’s what you need to know.

11 card machine charges you should know about

  • Card transaction fees

There’s no escaping card transaction fees.

Every time you accept a payment via a card machine, your business must cover the cost of processing the transaction. These are known as transaction fees or processing fees.

Card transaction fees are often a point of differentiation for card machine providers, so it’s worth shopping around to find the lowest deals you can.

You should also pay attention to the transaction fees of cheap card machine providers.

One of the reasons these providers are able to give you a card machine for £20 is because they make up the difference with higher transaction fees with some getting close to 2% per transaction.

These fees may not be too bad when you start out, but they can quickly get out of control once you start taking more payments and growing your business.

Authorisation fees

Authorisation fees occur with every card payment you accept, much like transaction fees.

Whenever a customer uses their card with you, their bank account details need to be verified and authorised by account vendors. Authorisation fees are the charges you pay for this service, though they’re relatively inexpensive.

Premium credit card charges

You may occasionally do business with a customer using what’s known as a premium credit card.

These cards differ from standard debit or credit cards in that they’re associated with corporate accounts, or are offered by card providers who charge customers for access to the card in return for inviting rewards and incentives. American Express is a good example.

These providers can add an additional fee on top of the usual transaction fee when customers shop with you, meaning you’ll be paying more to accept the payment.

Whether or not you want to accept payments from premium cards like these is something you’ll need to consider before accepting card payments.

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Interchange fees

Interchange fees are paid to the card issuer during every payment.

Along with covering the general cost of managing the payment, they also cover the costs of any potential fraud or debts a customer may have.

Minimum monthly service charge

This is an amount you’ll pay to your card machine provider, regardless of the volume of transactions on a given month.

So if you’re minimum service charge is £40 a month and you only take £20 of transactions, you’ll still pay the higher amount.

Card terminal fees

These are the monthly fees you’ll pay your card provider for using their equipment, if you pay for your terminals monthly.

Much like a mobile phone contract, these card machine costs will differ from provider to provider, as well as being dependent on the type of device you’re renting.

For example, if you choose a card machine with all the bells and whistles, like 4G connectivity and a large colour screen, your monthly card machine cost will be significantly higher than if you chose a standard card machine designed for simple chip-and-pin payments. The more impressive the tech, the higher the monthly payment will be.

If, on the other hand, you choose to buy your card machines outright, you won’t be lumbered with these costs. However, you can expect to pay higher transaction fees and other potential hidden fees, so be sure to put plenty of time and research into your decision.

Card not present fees

Transactions made where the customer’s card is not present, like online payments, are known as card not present (CNP) payments. 

Because the physical card is not present at the time of the transaction, these transactions are deemed to be at a significantly higher risk of card fraud or customer chargebacks.

This is why some vendors choose to implement card not present fees for these transactions, making them more expensive for businesses than other in-person card payments.

Scheme fees

Scheme fees are charges paid by banks so they can join certain payment schemes. Think of them as membership fees for banks wanting to benefit from credit and debit card providers, or similar payment networks.

Banks pay to join the schemes and, as a result, charge merchant accounts as a benefit. These charges usually occur per transaction and are one of the more obscure regular charges many businesses are either unaware of or not knowledgeable on.

PCI DDS fees

All businesses that accept debit or credit card payments must comply with PCI DDS (Payment Card Security Data Security Standard). 

This is the standard by which merchants and vendors must handle their customers’ debit and credit card data, ensuring it’s done safely and securely that meets all current protocols. 

Depending on your card machine provider, you may be charged fees your provider will collect for them carrying out necessary security measures on behalf of your business when you collect card payments, so your business remains PCI DDS compliant.

Businesses that do not comply with these standards can receive severe fines or other legal action.

Statement charges

If your card machine provider would like access to your monthly statements or information on the usage of your card machines, they may charge you statement fees for the rights to this information.

This information is used by the card machine providers to build on the knowledge of their customer base and to gain other analytical information about their in-use machines.

Chargeback fees

Customers request returns all the time. Their item could be faulty, damaged, or incorrect in another sense.

Either way, when a customer needs to be refunded, the bank may charge you chargeback fees to cover the cost of the transaction.

Essential vs non-essential charges

When researching card machine providers, it’s important to delve into any hidden charges the provider may try to sneak into your deal.

What may sound like a good deal at face value may turn out to cost you more than expected in the long run.

Always be sure to look into which card machine charges with your chosen provider are essential and which ones are non-essential, so you can avoid any unwanted losses as your business continues to take payments.

Choose a reputable card machine provider for your business

Not every card machine vendor will try to hamstring you, though.

A reliable, reputable card machine provider will offer you reasonable, impartial advice about your card machine charges, which ones you could avoid, and the best way forward using card machines in your business.

Choosing the right card machine provider the first time around will save you the hassle of having to switch providers for a better deal later down the line and will help your business reach even greater success.