Merchant Accounts for UK Small Businesses
Cards now account for almost two thirds of UK payments. For a small business, the real challenge is choosing a payment setup that stays competitive as your card turnover grows.
Tell us how your business takes payments
Answer a few questions about your card turnover and requirements to compare merchant-service options suited to your business.
What is a merchant account?
It is part of the payment infrastructure that lets your business accept card payments and receive the money into your bank account.
Dedicated merchant account
Often a good fit for established businesses with predictable card turnover and more complex payment requirements.
- Rates can be tailored to your payment mix
- Card machines and online gateways available
- More detailed underwriting
- Contract terms need careful comparison
Payment service provider
Square, SumUp and similar providers make it easier for smaller merchants to start accepting cards quickly.
- Simple published pricing
- Often no long contract
- Easy hardware setup
- Less room to negotiate standard rates
Integrated payments
Useful when your card terminals, EPOS, online checkout and reporting need to work as one system.
- Less manual reconciliation
- Fewer keying mistakes
- One view across payment channels
- Integration quality matters
Merchant service providers compared
Use these as reference points rather than a universal ranking. Your cheapest option depends on turnover, average transaction value, card mix and how customers pay.
| Provider | Current pricing snapshot | Commitment | Likely fit |
|---|---|---|---|
| Square | 1.75% on UK card-present transactions; standard Square POS has no monthly software fee | Flexible standard processing | Small businesses wanting straightforward pricing and POS tools |
| SumUp | 1.69% pay as you go; Payments Plus £19/month with 0.99% on eligible domestic consumer cards | Pay-as-you-go available | Lower or variable turnover and bought-outright readers |
| Dojo | 1.2% blended rate advertised for businesses below £100k annual card turnover; hardware varies | Package dependent | Hospitality and established SMEs wanting fast terminals and integrations |
| Worldpay | Simplicity pricing currently advertises 1.50% on Mastercard and Visa, with terminal pricing varying by plan | Fixed-term terminal plans available | Businesses wanting a traditional acquirer with broad payment options |
| Barclaycard Payments | Published small-business options include 1.6% and turnover-based pricing; bespoke acquiring is also available | Varies by package | Established SMEs wanting major-acquirer support and tailored options |
| PayPal POS | 1.75% for in-person card and contactless payments | Simple POS model | Businesses already using PayPal or wanting straightforward face-to-face payments |
Merchant account vs payment provider: which is better?
For a new café taking a few thousand pounds a month on cards, simplicity may matter more than shaving a fraction of a percentage point off the processing rate. A Square or SumUp-style setup can get the business trading without a complicated merchant-services agreement.
For a busy restaurant, retailer or multi-site business processing substantially more, individually quoted acquiring can become more attractive. That is particularly true if you need several terminals, EPOS integration, online payments, faster settlement or stronger service guarantees.
| Traditional merchant account | Payment service provider | |
|---|---|---|
| Pricing | Often tailored to turnover and card mix | Usually simple published rates |
| Application | More underwriting may be required | Usually faster and simpler |
| Contract | May include fixed terms and terminal rental | Often more flexible |
| Negotiation | Often possible | Usually limited on standard plans |
| Best fit | Higher volumes and more complex requirements | Start-ups, sole traders and smaller merchants |
What does a merchant account actually cost?
There is no single merchant-account fee. The number worth comparing is your expected total monthly cost.
Transaction or merchant service charge
This is the percentage charged on each transaction. Rates can vary by provider, card type, transaction channel and whether a card was issued in the UK or overseas.
Card-machine rental or purchase
Some terminals are bought outright, while traditional acquiring packages often rent the hardware monthly. If you need several devices, ask whether additional terminals receive discounted pricing.
Authorisation fees
Some acquiring agreements add a small fixed amount each time a card payment is authorised. This can be easy to overlook when comparing headline percentages.
Gateway fees
If you take online payments, check whether your gateway is included in the quoted transaction price or charged separately.
PCI, chargeback and administration fees
Traditional merchant-service contracts can contain charges for PCI-related services, disputes, refunds and other account administration. Ask for a complete schedule of charges before comparing providers.
Minimum charges and exit fees
These matter particularly for seasonal businesses. A low percentage rate is less attractive if you are committed to a minimum monthly bill or expensive early termination.
A small percentage difference can be smaller than it sounds
At £10,000 of monthly card sales, 1.69% costs £169 and 1.75% costs £175. That is a £6 difference. Service quality, settlement speed and contract terms can easily have a bigger commercial impact.
Compare providers using your real card turnover
Give providers the same transaction profile so you can compare the complete cost rather than competing headline percentages.
How does a card payment reach your bank account?
- The customer pays through a card terminal, online checkout or another payment channel.
- The transaction request is sent through your processor or acquirer and the relevant card network.
- The customer’s card issuer approves or declines the payment.
- An approved payment is captured and prepared for settlement.
- Your payment provider sends the funds to your nominated business bank account according to its settlement timetable.
The customer-facing approval normally happens within seconds. Settlement into your bank account happens later.
Your merchant account is not your business bank account
Your business bank account is where you manage the company’s money. Your merchant acquiring or payment-processing arrangement is the infrastructure that handles card transactions before those funds are settled into that account.
Modern payment providers can make the distinction almost invisible because several parts of the payment process are bundled together.
Which setup suits your business?
Sole trader or microbusiness
If turnover is low or unpredictable, a no-monthly-fee reader with simple flat-rate processing can be a sensible place to start.
Growing retailer
Compare negotiated rates once transaction volume becomes meaningful. EPOS integration and additional-terminal costs also become more important.
Restaurant, pub or café
Prioritise reliable portable terminals, gratuities, pay-at-table features, EPOS integration and fast replacement if hardware fails.
Online and in-person business
Compare the card-present and online rates separately and look for reporting that brings both channels together.
Merchant accounts for hospitality
For hospitality, terminal speed and reliability can be as important as the transaction fee. A few seconds added to every card payment is noticeable when a restaurant or bar is busy.
Look for portable terminals, gratuity support, split-bill workflows and proper integration with your EPOS system. Our card machines for hospitality guide goes into this in more detail.
Merchant accounts for retailers
Retailers should pay particular attention to EPOS integration. When the till sends the amount directly to the card terminal, staff do not have to enter it twice, which can reduce errors and make reconciliation easier.
What do you need to apply?
Requirements vary, but a traditional acquirer may ask for:
- company or sole-trader details
- identity and address information for owners or directors
- business bank details
- expected monthly and annual card turnover
- average and maximum transaction values
- details of what you sell and how customers buy
- previous processing statements if you already accept cards
- information about delivery, refunds and chargebacks where relevant
What is a high-risk merchant account?
“High risk” is an acquiring classification rather than a judgement on the quality of the business. Industries with higher chargeback, fraud or fulfilment exposure can face more detailed underwriting, higher fees or reserves.
Risk can be affected by what you sell, average transaction values, international customers, subscription billing, how far in advance customers pay and your previous chargeback history.
Online merchant accounts
If you sell online, your payment gateway or hosted checkout becomes the customer-facing equivalent of the card terminal. Online transactions can have different fees from face-to-face payments, so compare them separately.
Square, for example, currently publishes different pricing for UK online transactions and UK card-present payments. That is a useful reminder not to judge an omnichannel provider by one rate.
PCI DSS and payment security
Businesses taking card payments have responsibilities under PCI DSS. A good provider can reduce the amount of sensitive card information you handle directly, but security and compliance should still be part of the buying decision.
See our PCI DSS guide for more detail.
Looking for the card machine itself?
See our card machine provider comparison, our guide to the best card machines for small businesses or our guide to accepting card payments.
10 questions to ask before signing
- What will our total processing cost be using our actual card mix?
- Which fees sit on top of the headline transaction rate?
- How much do commercial and international cards cost?
- How quickly will funds settle?
- What does each terminal cost?
- How long is the agreement?
- What happens if we cancel early?
- What are the chargeback and refund fees?
- What happens if our terminal fails?
- Can the service integrate with our EPOS, website and accounting software?
Frequently asked questions
Does every UK business need a merchant account to accept cards?
Card payments need an acquiring or payment-processing arrangement, but you do not always need to open a standalone traditional merchant account yourself. Providers such as Square and SumUp package this into their service.
How much does a merchant account cost?
It depends on turnover, card mix and how you take payments. Simple face-to-face providers currently advertise rates around 1.69% to 1.75%, while traditional acquirers can offer different or individually quoted rates alongside other charges.
What is a good card-processing rate?
There is no universal “good” rate. A lower percentage can be offset by terminal rental, authorisation charges, subscriptions, PCI fees or a long contract. Compare the effective total cost.
Can a sole trader get a merchant account?
Yes. Sole traders can use both payment service providers and traditional merchant-service arrangements, subject to the provider’s eligibility checks.
How quickly do merchant-account payments reach my bank?
Settlement varies by provider and package. Next-business-day settlement is available from a number of UK providers, but cut-off times, weekends and eligibility can affect when funds arrive.
Can merchant account fees be negotiated?
Often yes with traditional acquiring, particularly if you have meaningful card turnover and processing history. Standard flat-rate PSP plans tend to offer less negotiation.
Compare before renewing your current deal
Once a business processes meaningful card volumes, even modest improvements in fees or contract terms can add up over a year.
Bottom line
The best merchant account is not necessarily the provider with the lowest advertised percentage. It is the payment setup that fits your turnover, payment channels and need for flexibility at the lowest sensible total cost.
For lower or variable turnover, simple pay-as-you-go pricing can be attractive. As card sales grow, compare traditional acquiring and individually quoted rates. In both cases, look at transaction fees, hardware, settlement, support and contract terms together.
