What payment processors actually charge, and why the headline rate is the small part

A fee has two parts, and they behave very differently

Nearly every processor charges a percentage of the transaction plus a fixed amount per transaction. The percentage is what gets advertised. The fixed part is what decides whether small orders are worth taking.

Work it through on a fixed fee of 30p and a rate of 2.9%. On a £100 order the total is £3.20, which is 3.2% — close enough to the headline. On a £5 order the same structure costs 45p, which is 9%. The rate did not change; the fixed fee simply became most of the bill.

This is why the effective rate on a business selling £4 accessories is nothing like the rate on its quote, and why processors that advertise a low percentage with a high fixed fee suit large baskets and punish small ones. Compare on your actual average order value, not on the percentage.

The charges that are not in the quote

Cross-border. When the customer's card was issued in a different country from your account, most processors add a further percentage — commonly around one to one and a half points. Nothing about the order looks different to you; the card's country of issue is what triggers it.

Currency conversion. If you are paid in a currency other than the one charged, a conversion spread is applied on top. This is the charge that most often goes unnoticed, because it is taken inside the exchange rate rather than shown as a line item. A processor using a rate two or three percent away from the mid-market rate has charged you two or three percent without ever calling it a fee.

Chargebacks. A disputed transaction usually costs a flat fee whether or not you win, and you lose the goods as well as the sale. One dispute on a £15 order can wipe out the margin on a dozen of them.

Payouts. Some processors charge to move money to your bank, particularly for accelerated payouts or overseas accounts.

Interchange is the part nobody can negotiate away

The fee you pay is not one charge but three stacked together. Interchange goes to the bank that issued the customer's card. Scheme fees go to Visa or Mastercard. The processor's margin is what is left, and it is the only part that is genuinely theirs.

Interchange varies by card type, and the variation is large. A consumer debit card is cheap; a corporate rewards card is several times dearer, because someone has to fund the rewards. This is why a blended rate feels unpredictable — your fee changes with your customer mix, not with anything you did.

Interchange-plus pricing exposes those layers separately and is usually cheaper for larger merchants, at the cost of an invoice that takes real effort to read. Blended pricing hides them behind one number that is easier to plan with and slightly more expensive on average. Neither is a trick; they are different trade-offs.

Buy-now-pay-later is priced differently on purpose

Klarna, Clearpay and similar services charge the merchant considerably more than a card would — often several times the percentage — because the merchant is buying something other than payment processing. The provider takes the credit risk, pays you up front, and pursues the customer if they default.

Whether that trades well depends entirely on whether it lifts average order value or conversion enough to cover the spread. That is measurable, and it is worth measuring rather than assuming, because the answer differs sharply by price point. On a £30 order the maths rarely works; on a £300 one it often does.

What to do with this

Take a month of real transactions and divide total fees by total revenue. That single number is your actual cost of accepting money, and it is almost always higher than the rate you believe you are on.

Then split it by order size. If the effective rate on your smallest band is above about 5%, the fixed fee is the problem, and the fix is order value — bundling, minimum spend, or shipping thresholds — rather than shopping for a different processor.