How to reduce card processing fees as a UK small business

Card payments are now the dominant way UK customers pay. For most small businesses, that means card processing fees have become one of the most significant and unavoidable costs of running a business.

The problem isn't paying fees — it's paying more than you need to. Many UK SMEs are overpaying simply because they're on a fee structure that doesn't match their transaction volume, card mix, or business type.

This guide explains how card processing fees work, how to spot whether you're overpaying, and practical steps to reduce what you pay.

How card processing fees work in the UK

To understand how to reduce fees, you first need to understand where they come from.

Every card transaction involves three parties: you (the merchant), the bank that issued the card to your customer (the issuing bank), and the payment network (Visa or Mastercard). Each one takes a cut.

The components of a card processing fee

Interchange fee: Paid to the customer's bank. This is set by the card scheme (Visa/Mastercard) and varies depending on the type of card used — consumer debit, consumer credit, corporate, or international cards each carry different rates. Interchange is the biggest component of most processing fees.

Scheme fees: Paid to Visa or Mastercard for use of their network. These are small but non-negotiable.

Acquirer margin: The amount your payment processor adds on top. This is where providers make their margin — and where there's the most room for negotiation.

The two main pricing models

Flat rate (blended) pricing: A single percentage is charged on every transaction, regardless of card type. Simple and predictable, but often more expensive — especially for businesses processing a high proportion of debit card transactions (which carry lower interchange rates). This is how providers like SumUp and Square typically price.

Interchange plus (IC++) pricing: You pay the actual interchange rate (which varies by card type) plus a fixed markup from the processor. More complex to understand, but almost always cheaper for businesses with significant card volume. This is how Stored prices its in-person transactions.

Why many small businesses overpay on card fees

Flat rate pricing on high-volume transactions

Flat rate pricing works reasonably well for low-volume businesses. But as your card volume grows, the difference between what you're paying on a flat rate and what interchange plus would cost becomes significant.

A business processing £500,000 a year in card payments could save thousands annually by switching from a flat rate to an IC++ model — often without any change to their day-to-day operations.

Corporate and international cards

If you use a blended pricing model, you're paying the same rate regardless of whether the customer pays with a UK debit card (low interchange) or a corporate credit card (higher interchange). That can look like a good deal in some transactions, but you're subsidising the expensive cards with the cheap ones — and vice versa.

With IC++ pricing, you see exactly what each transaction actually costs.

Ancillary fees adding up

Beyond the headline rate, many providers charge additional fees that accumulate over time:

• Monthly rental or service fees
• Refund fees (yes, some providers charge you to process a refund)
• Chargeback fees
• PCI compliance fees
• Statement or reporting fees
• Early termination fees if you try to leave

Add these up over a year and the true cost of your payment processing can be significantly higher than the headline rate suggests.

Long contracts locking you in

Some providers lock small businesses into 12, 24, or 36-month contracts with early exit penalties. This removes your ability to shop around or switch to a better deal when one becomes available.

Practical steps to reduce your card processing costs

Step 1: Audit your current fees

Pull together three months of merchant statements and add up every fee — transaction fees, monthly fees, minimum monthly charges, PCI compliance fees, refund fees, everything. Calculate what you paid as a percentage of your total card turnover. This is your effective rate.

Step 2: Understand your card mix

Look at the breakdown of card types in your statements — UK debit, UK credit, corporate, international. If the majority of your transactions are on UK debit cards (which have low interchange), a flat rate provider is likely charging you more than necessary.

Step 3: Get quotes on IC++ pricing

If you're on a flat rate and processing more than £100,000 a year in card payments, get a quote from an IC++ provider. The comparison will often be illuminating.

With Stored, in-person payments are processed at 0.8% — and the pricing is transparent, with no hidden fees layered on top.

Step 4: Negotiate

If you're happy with your current provider and have been with them for a while, use your transaction history as leverage. Ask for a review of your rates, particularly if your volume has grown since you first signed up. Many providers have flexibility that they don't proactively offer.

Step 5: Cut ancillary fees

Review every line item on your merchant statement. Cancel services you don't use. Check whether PCI compliance fees are being charged separately when they shouldn't be (a compliant provider should help you maintain compliance as part of the service, not charge extra for it).

Step 6: Don't sign long contracts

When choosing a payment provider, look for contract flexibility. Month-to-month arrangements protect you — if a better option becomes available or your provider's service deteriorates, you can act on it without a penalty.

Step 7: Consolidate your payment tools

If you're using separate providers for in-person payments, online payments, and invoicing, you're likely paying multiple sets of fees with no visibility across all of them. Consolidating everything onto one platform often reduces costs and definitely reduces admin.

What about surcharging — passing fees on to customers?

Since 2018, surcharging (adding a fee to card payments to recover processing costs) has been banned for consumer transactions in the UK under the Payment Services Regulations. You cannot add a surcharge to a customer's bill because they're paying by card.

This means fee reduction has to come from your provider and pricing model — you can't pass it on.

The difference good cash flow makes

Lower processing fees directly improve your margin — but so does the speed at which your funds arrive.

Some providers settle weekly or even less frequently. With next-day settlement (Monday to Friday), you have access to yesterday's takings today. For businesses managing tight cash flow, this can be the difference between being able to pay a supplier and having to wait.

Fast settlement reduces the need for overdrafts and working capital borrowing — which is, indirectly, another way to reduce the cost of running your business.

What to look for when switching payment provider

If your audit reveals you're overpaying, switching provider is often the most impactful move you can make. Here's what to prioritise:

• Transparent IC++ pricing — know exactly what you're paying and why
• No hidden fees — get a full breakdown in writing before signing anything
• Fair contract terms — know what you're committing to upfront
• Fast settlement — next-day as standard
• Support — a real team you can call when something goes wrong
• Coverage of all payment types — in-person, online, invoicing, pay by link in one place

How Stored approaches pricing for UK SMEs

Stored uses IC++ pricing rather than blended flat rates. In-person transactions are processed at 0.8%, online at 1.0% — transparent, consistent, and without the hidden extras that inflate effective rates on other platforms.

There are no monthly minimum fees for standard plans and no charges for refunds or PCI compliance. Settlement is next-day (Monday to Friday). Hardware starts from just £1 per month, and bespoke rates are available for businesses processing over £200k.

Stored is built for UK SMEs that are ready to move beyond the entry-level providers they outgrew and want competitive, transparent pricing alongside a proper business payments platform.

Ready to see what you'd actually pay?

If you want to understand what you're really paying now — and what you could be paying — talk to the Stored team. Or sign up free and see the platform for yourself.

Start by calculating your current card processing costs with our free tool.