The charges a payment provider takes on each transaction — a percentage plus a fixed fee — that quietly reduce the revenue you actually keep.
Processing fee per transaction = (transaction amount × percentage rate) + fixed fee; e.g. (amount × 1.5%) + £0.20
You process 1,000 payments of £50 each in a month through Stripe at 1.5% + 20p.
Per charge: (£50 × 0.015) + £0.20 = £0.75 + £0.20 = £0.95; across 1,000 charges = £950 in fees (an effective 1.9% of £50,000)
Payment processing fees are what a provider like Stripe charges to move money from your customer to you. The standard structure is a percentage of the transaction plus a small fixed fee — for Stripe in the UK, around 1.5% + 20p per successful card charge at the time of writing, with higher rates for international cards, currency conversion, and certain payment methods. These fees come straight off the top of every payment, so they sit inside your cost of goods sold and reduce gross margin.
The fixed-fee component makes processing disproportionately expensive on small transactions. On a £100 charge, 1.5% + 20p is £1.70, an effective 1.7%. On a £5 charge the same structure costs 27.5p — an effective 5.5%, more than triple the rate — which is why low-priced, high-volume products feel processing fees far more acutely and why bundling into larger annual payments can meaningfully cut the blended rate.
Beyond the headline rate, the details add up: cross-border and currency-conversion surcharges, chargeback fees, failed-payment retries, and the choice between a bare processor and a merchant of record all move the true cost. Because the fees scale directly with revenue, even a fraction of a percent matters at volume — shaving the blended rate or shifting customers to annual billing flows straight to the bottom line.
Payment processing fees are a direct, unavoidable haircut on every pound of revenue, and because they scale with volume they quietly cap gross margin no matter how well the rest of the business runs. The fixed-fee component punishes small transactions hardest, so understanding your blended effective rate — and reducing it through annual billing, fewer failed retries, or the right provider — is real margin most teams leave on the table.
Stripe's standard UK rate is 1.5% + 20p for standard UK consumer cards and 1.9% + 20p for premium cards (not the 2.9% US flat rate), rising to 2.5% + 20p for EEA cards, 3.25% + 20p for international cards, plus 2% on currency conversion and £20 per dispute (stripe.com/gb/pricing, 2026). Across processors most small businesses see an effective 2% to 3.5% blended rate; a merchant of record runs higher (around 5%) in exchange for handling tax and compliance.
The fixed fee is a larger share of a small charge. At 1.5% + 20p, a £100 payment costs an effective 1.7%, but a £5 payment costs 5.5% — over triple — which is why bundling into larger annual payments lowers the blended rate.
Yes. Processing fees are part of cost of goods sold for SaaS, so they reduce gross margin directly. Lowering the blended effective rate flows straight to the bottom line.
In the UK, no — surcharging consumer debit and credit cards (and card-based wallets like Apple Pay) has been banned since 13 January 2018 under the Consumer Rights (Payment Surcharges) Regulations as amended by the Payment Services Regulations 2017. You can only surcharge commercial or corporate cards, and even then no more than your actual cost to process that payment. In practice the fees come out of your margin, so most SaaS businesses price them in rather than bolt them on.
A card fee splits three ways: the interchange fee paid to the customer's issuing bank (usually the biggest slice), the assessment or scheme fee charged by the card network such as Visa or Mastercard, and your processor's markup on top. Flat-rate providers like Stripe bundle all three into one headline rate such as 1.5% + 20p, which is simple but hides where the cost actually goes.
Flat-rate (a single blended percentage plus a fixed fee) is simplest and fine at low volume. Interchange-plus, where you pay the real network cost plus a fixed markup, is often cheaper once monthly card volume passes roughly £10,000, because flat-rate overcharges on low-interchange cards like debit. Above that point the transparency and lower blended rate usually win.
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