Your card machine does not cost what you think it costs

Almost every business we review is paying more than the number they were sold. Not because anyone lied, but because the headline rate only ever covered part of the bill.

The fix takes one statement and about five minutes.

Work out your effective rate

Take your most recent monthly statement and do this:

1. 1.Find your total card turnover for the month — the gross amount your customers paid you.
2. 2.Add up every charge on the statement. Not just the percentage. Everything.
3. 3.Divide the total charges by the total turnover.
4. 4.Multiply by 100.

That number is your effective rate. It is the only figure worth comparing between providers, and it is almost always higher than the rate on the front of your contract.

What people forget to add in

The percentage is the part everyone remembers. These are the lines that quietly move the number:

• •PCI compliance fee — often £3 to £6 a month, sometimes billed annually
• •Non-compliance fee — charged if you have not completed a self-assessment questionnaire you may not know exists
• •Minimum monthly service charge — you pay it whether you trade or not
• •Terminal rental — frequently on a separate agreement with a separate company
• •Authorisation fees — a few pence per transaction, which matters enormously if your average sale is small
• •Statement or admin fees

A coffee shop with a £4 average sale and a 3p authorisation fee is paying an extra 0.75% before the headline rate is applied at all.

The bands nobody mentions

Your headline rate usually applies to UK consumer debit cards only. Everything else sits in a different band:

• •Consumer credit cards
• •Commercial and business cards
• •Non-UK cards
• •Keyed or card-not-present transactions

If you are in a city centre, near an airport, or serving business customers, the proportion of your takings in those higher bands can be much larger than you would guess. Your statement will break it down.

Then check the exit

Once you know your real rate, find two more things before you do anything:

• •The notice period. Usually 30 to 90 days before renewal, in writing. Miss it and most agreements roll for a full term.
• •The hardware agreement. Terminal leases are often a second contract with a different end date. Ending the payments side does not automatically end it.

What good looks like

There is no universal right answer, but a setup worth having usually has: no long-term contract, hardware you own rather than lease, no monthly minimum, no PCI charge, and a rate quoted against your actual card mix rather than read off a list.

If your current provider cannot put all of that in writing on one page, that is worth a moment's thought.