Debit Card vs Credit Card Fees for Your Business: Ultimate guide

Most transactions—around 84%—happen with debit or credit cards. So, if you're into business or thinking about it, it's crucial to get the lowdown on both card types.‍
Most transactions—around 84%—happen with debit or credit cards. So, if you're into business or thinking about it, it's crucial to get the lowdown on both card types.‍
April 15, 2024
5 min read

Debit Card vs Credit Card Fees for Your Business: Ultimate guide 

In today's world, most transactions—around 84%—happen with debit or credit cards. So, if you're into business or thinking about it, it's crucial to get the lowdown on both card types.

Our guide breaks down all the fees associated with these cards, giving you the scoop on why businesses should be on board with both. It's not just about keeping customers happy; it's also about enhancing the whole shopping experience and potentially boosting sales (that we will talk about later). 

Difference Between Debit Card vs Credit Card Fees

It's good to know that taking payments with debit cards and credit cards has some differences. Let's check them out for business owners:

  1. Transaction Fees: 

When it comes to fees, debit card transactions often come with lower charges compared to credit card transactions. Debit card fees are typically a fixed amount per transaction, while credit card fees usually take a percentage of the transaction total.

  1. Risk of Fraud: 

Both debit and credit card transactions involve some fraud risk, but the responsibility for fraudulent charges can vary. Generally, credit card companies are more likely to take the hit for fraudulent charges, while with debit cards, either the merchant or the cardholder might need to foot the bill.

  1. Payment Processing Time: 

Debit card transactions usually get processed and settled faster than credit card transactions. Debit transactions are often sorted out within a day, whereas credit card transactions might stretch over several days.

  1. Chargebacks: 

Chargebacks happen when a customer disputes a transaction and asks for a refund. Credit card transactions are more prone to chargebacks, and dealing with them can be a bit of a hassle and expense for merchants.

Now that we understand the main differences between them, let's talk about the fees themselves.

Merchant fees for credit and debit cards

These fees are the charges your business incurs when a customer opts for card payment, and they can vary significantly based on various factors.

  1. Card Network:

 The type of card used, whether it's Visa, MasterCard, Amex, or another network, plays a role in determining the fees. Each network may have different fee structures.

  1. Transaction Volumes and Values: 

The frequency and amount of transactions impact fees. Higher volumes or larger transaction values may result in different fee structures.

  1. Payment Method: 

How the payment is made matters. Transactions made over the phone or by mail might incur different charges compared to in-person transactions.

  1. Merchant's Acquirer: 

The entity handling payment processing on behalf of your business, known as the acquirer, also influences the fees. Different acquirers may have varying fee structures and service levels.

  1. Additional Charges: 

Apart from per-transaction fees, businesses may encounter additional monthly service charges and processing fees. These charges contribute to the overall cost of accepting card payments.

How Much Do Credit and Debit Card Fees Cost?

Now that we've talked about the different charges businesses might face with credit cards, let's break down the costs. Keep in mind these are ballpark figures and can differ based on your card provider and the type of card. Here's a rough overview with the main fees:

  • Merchant Service Charge (MSC): About 0.2%–3%, depending on the card issuer and card type 

  • Card-Not-Present Transaction: The cost varies but usually ends up pricier than other transactions.

  • Interchange Fees: For debit cards, it's around 0.2%, and for credit cards, it's about 0.3%.

  • Online Payment Gateway Fees: Usually between £20–£70 per month for hosted checkout pages.

  • Minimum Monthly Service Charge (MMSC): Between £5 to even £30 per month if you don't meet a minimum spending requirement.

  • Chargeback Fee: Roughly £10–£20 for each customer chargeback.

  • Authorisation Fees: Roughly 1–3p per transaction.

  • PCI Compliance Fee: Around £30–£120 per year

  • Cancellation Fee: Typically £115 if you cancel early.

On average, you might end up paying around 2% to 4% of each transaction's value in total fees. Keep in mind these are general estimates, and the actual charges can vary based on factors like the type of card, the way you accept payments, the industry you're in, and how many transactions you handle. Understanding these costs helps you plan and make smart decisions for your business.

Can I Make Customers Pay Card Fees?

No. In the past, UK companies could make customers cover the cost of processing card payments, but things changed in January 2018 in favor of shoppers . It's against the rules for businesses to tack on extra charges at the checkout to make up for processing fees.

How to Avoid Credit and Debit Card Fees

If you want to get rid of those pricey card fees, there's a simple trick: guide your online customers toward using alternative payment methods that cost less like A2A Payments.

Consider instant bank transfers powered by open banking. With this option, the average fee is less than 1% of the transaction value, and that's the only charge you'll see.

Here's the bonus: with instant bank transfers, you wave goodbye to chargebacks and interchange fees. Plus, payments happen faster and smoother compared to card transactions with a one-click solution.

Discover how Volume can be your ticket to leaving credit and debit card fees behind.

Book a call with Volume’s team

Volume Payments Limited is a private limited company with company number 12431529

Volume Payments Limited, is a distributor of Modulr FS Limited, a company registered in England and Wales with company number 09897919, which is authorised and regulated by the Financial Conduct Authority as an Electronic Money Institution (Firm Reference Number: 900573) for the issuance of electronic money and payment services. Your account and related payment services are provided by Modulr FS Limited. Whilst Electronic Money products are not covered by the Financial Services Compensation Scheme (FSCS) your funds will be held in one or more segregated accounts and safeguarded in line with the Electronic Money Regulations 2011. for more information please see the Modulr safeguarding letter

© 2024 Volume