Cheapest Way to Process Credit Cards for Small Business

Finding the most affordable way to process credit card payments is crucial for small business survival.
With the rising necessity to accept credit cards, small businesses often struggle with high processing fees that eat into their profits.

The cheapest way for small businesses to process credit cards typically involves selecting a reliable payment service provider that offers competitive rates and transparent pricing structures.
This article, will help you find the most cost-effective solution for your business & show how Tuza you can find the right card providers in a few clicks.

Credit Card Processing Fees

Payment Structure

When choosing a credit card processing provider, understanding the different payment structures is crucial. Here are the three primary pricing models:

  • Flat Rate Pricing: You pay the same rate for every transaction, regardless of the card type or transaction amount. This model is straightforward and predictable, making it ideal for businesses with low transaction volumes. For example, if a flat rate is 2.5%, a $100 transaction will always incur a $2.50 fee.
  • Interchange Plus Pricing: This model charges a fixed fee per transaction (the processor's cut) plus a percentage that matches the interchange fee set by the credit card company. It's typically more transparent and can be cost-effective for businesses with high transaction volumes. For example, if Visa’s interchange fee is 1.5% and the processor adds a 0.5% fee, your total cost would be 2%.
  • Tiered Pricing: Fees are categorized into tiers (qualified, mid-qualified, and non-qualified), each with different rates. This model can be confusing and less transparent, often leading to higher costs. Qualified transactions, which are standard card swipes, might incur a 1.5% fee, while non-qualified transactions, such as keyed-in entries, could be 3% or higher.

On top of the pricing structure, credit card processing companies charge various rates depending on how customers pay. In-person payments typically incur lower fees compared to online or over-the-phone transactions due to the reduced risk of fraud.

Basic Fees

Understanding the primary fees associated with credit card processing is essential for managing costs effectively. Here are the main fees to consider:

  • Transaction Fees: Charged each time a customer makes a purchase. Examples include
    • American Express: 2.5% to 3.5%
    • Mastercard: 1.55% to 2.6%
    • Visa: 1.43% to 2.4%
  • Authorisation Fees: A small fee for each transaction authorization, typically ranging from 1 to 3 pence per transaction. This fee covers the cost of verifying the cardholder's details and available credit.
  • Merchant Service Charges: Ongoing fees for maintaining your merchant account, usually a percentage of each transaction. These charges cover the cost of services provided by the merchant account provider.
  • Equipment Setup: Costs associated with purchasing or leasing POS terminals and other necessary hardware. Depending on the provider, you might pay a one-time fee or a recurring rental fee for the equipment.
  • Incidental Fees: Additional fees for specific situations, such as chargebacks, insufficient funds, or special verification services. These fees can add up quickly and should be accounted for in your budgeting.

Hidden/Non obvious Charges

Be aware of potential hidden charges that can increase your processing costs:

  • Set-up Fee: An initial fee for setting up your account and terminal. This can range from a few pounds to several hundred, depending on the provider.
  • Monthly Fee: Charged if you fail to process the agreed amount of transactions. Some providers set a minimum monthly transaction requirement, and failing to meet it incurs this fee.
  • Minimum Monthly Transaction Fee: The lowest amount you’ll be charged on transaction fees each month, ensuring the provider earns a baseline amount regardless of your transaction volume.
  • Terminal Rental: Recurring fee for renting card terminals. While some providers offer terminals for free, others charge a monthly rental fee.
  • Early Termination Fee: Charged for ending a contract early, which can be substantial, especially if your contract term is long. This fee can be a fixed amount or based on the remaining contract period.
  • Chargeback Fee: A fixed fee for each reversed transaction. Chargebacks occur when a customer disputes a transaction, and the amount can vary significantly.
  • Refunds: Fees for processing refunds. These fees can range from 30p to £1 per refund and can add up if you process many returns.
  • Authorisation Charge: Fee for each transaction authorization. Similar to authorisation fees, but may be charged separately in certain pricing models.
  • Non-secure Transaction Charge: Higher fees for high-risk transactions, such as those without chip and PIN, non-pay-by-link online payments, and telephone orders.
  • PCI Non-compliance: Fines for not complying with PCI DSS standards. These can be substantial and are imposed monthly until compliance is achieved.

How to find the Cheapest Credit Card Processing Provider

There is no “one size fits all” solution when it comes to selecting a merchant service provider, as each business has unique needs and priorities. However, with Tuza, you can easily compare instant quotes from a variety of providers to find the best fit for your business.

Step 1: Enter Your Annual Card Turnover

Navigate to the Tuza Price Comparison tool, enter your annual card turnover, and answer a few basic questions about your business.

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Step 2: Let Us Do the Heavy Lifting

Lay back, relax, and let us sift through hundreds of offerings to find the cheapest option for your small business.

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Step 3: Filter Through the Offerings Easily

Use our filters to narrow down the options based on your specific needs and preferences.

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Step 4: Compare All Fitting Solutions

Review and compare the tailored quotes to find the best solution for your business.

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Step 5: Choose & Finish

Select the provider that fits your needs best and complete the process. If you ever need help, don't hesitate to call 0330 818 7510.

Ways To Cut Down Credit Card Processing Costs

  • Choose the Right Payment Processor for Your Business: Evaluate your business needs and select a processor that offers the best rates for the services you require. Consider factors like transaction volume, payment methods, and integration with your existing systems.
  • Offer Cash Discounts: Encourage customers to pay with cash to avoid processing fees. This can be done by offering a small discount for cash payments, which can incentivize customers to choose this payment method.
  • Set Minimums for Credit Card Purchases: Implement a minimum purchase amount for credit card payments to ensure that the transaction fees do not outweigh the profit on small sales.
  • Restrict the Cards You Accept: Limit acceptance to cards with lower interchange fees. For instance, you might choose not to accept American Express due to its higher fees.
  • Opt for Flat-Rate Pricing: Simplify fee management with predictable flat-rate pricing. This model can be particularly beneficial for businesses with lower transaction volumes.
  • Negotiate Discounts: Discuss lower fees with your processor based on your transaction volume. Processors may be willing to offer better rates to retain your business, especially if you have a high transaction volume.
  • Cut Services You Don’t Need: Avoid paying for unnecessary services or features. Review your contract and eliminate any add-ons that do not add value to your business.
  • Avoid Lengthy Contracts: Choose month-to-month plans to maintain flexibility. Long-term contracts can be restrictive and expensive to exit if your business needs change.
  • Use a Mobile Payment Processor: Mobile processors often have lower fees and minimal equipment costs. They are ideal for small or new businesses that do not require extensive hardware.
  • Use a Merchant Services Provider: Dedicated providers typically offer better rates than major banks. Providers like PayPal, Stripe, or Square can offer competitive pricing and robust features.

How to Accept Credit Cards as a Small Business

Step 1: Find the Cheapest Credit Card Processing Provider

Research and compare providers to find the one with the best rates and features for your business needs. Consider factors such as transaction fees, monthly fees, contract terms, and customer support.

Step 2: Open a Merchant Account

Set up an account with your chosen processor to begin accepting payments. This account will allow you to process transactions and manage your funds.

Step 3: Set Up Payment Terminals

Install the necessary hardware, such as card readers and POS systems, to process transactions smoothly. Ensure the terminals are compatible with your existing systems and can handle the volume and type of transactions you expect.

Frequently Asked Questions

What are credit card processing fees for small business?

Credit card processing fees for small businesses are composed of various charges applied each time a customer uses a credit card. These include transaction fees, interchange fees, and additional charges such as monthly fees or chargeback fees. The interchange fees, set by the credit card networks and paid to the card-issuing bank, generally form the largest portion of the costs. Payment processing fees, which include the processor's markup, also significantly contribute to the total cost.

What is the cheapest way of taking card payments?

The cheapest way for small businesses to take card payments typically involves selecting a reliable payment service provider that offers competitive rates and transparent pricing structures. It is also beneficial to consider different pricing models such as flat-rate, tiered, and interchange-plus pricing to determine which is most economical based on the business's sales volume and transaction types.

How do I accept a credit card payment as a small business?

To accept credit card payments as a small business, you need to set up a merchant account which acts as a bridge between your business's bank account and the payment networks. This involves providing detailed financial information and undergoing a credit check. Choosing the right merchant services provider is crucial, and you should consider factors such as supported payment methods, fees, contract terms, and customer support.

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