If you’re starting a new business, accepting card payments may seem straightforward: get a card machine, connect it to your bank, and start selling. However, “merchant services” often come with hidden fees, long contracts, slow payouts, and hardware that may not fit your trading style. This guide will clarify what merchant services really involve, how pricing works, and how to compare suppliers effectively so you can establish the right setup from the start without getting stuck with it for years.
What are “merchant services” and what do you need? Merchant services refer to the tools that allow your business to accept payments. These typically include: – Card terminal for in-person payments – Payment gateway for online payments (checkout, payment links, invoices) – Merchant account/acquiring (the background system that moves funds) – Apple Pay/Google Pay and contactless support – Reporting and settlements (payout speed, statements, chargeback management) – Optional extras: EPOS, tips, split payments, subscriptions, multi-site, multi-user access Most startups won’t require everything. The best supplier is one that matches your sales channels and keeps total costs predictable.
Step 1: Understand how you take payments (your “payment mix”) Before you compare quotes, consider the following: – Do you sell in-store, on-site, online, or all three? – What is your average transaction value (e.g., £8 coffees vs £800 installations)? – What is your expected monthly card turnover (even a rough estimate helps)? – Do you need tipping, multiple staff, or multiple locations? – Are you taking deposits or recurring payments? – Do you need payments to integrate with Shopify, WooCommerce, Xero, or QuickBooks? This information matters because pricing and risk checks can differ significantly between a café, a trades business, an e-commerce brand, and a subscription service.
Step 2: Know the three common pricing models (so you can compare properly) Suppliers may quote differently. If you don’t standardize this, you’ll end up comparing unrelated options. 1) Blended rate You receive one rate for most card types. This is simple, but not always the cheapest option. – Good for: low volume or those who want simplicity. – Watch out: this can get expensive as you grow. 2) Interchange++ Your cost consists of interchange (set by card schemes) plus a fixed provider margin. – Good for: growing businesses, higher card turnover, larger average transactions. – Watch out: statements may appear more complex. 3) Fixed-fee or per-transaction pricing Often marketed as “no monthly fees” with a clear per-transaction cost. – Good for: very small startups, pop-ups, or predictable needs. – Watch out: this can become pricier as you scale; check the fees for refunds and chargebacks.
Step 3: Be aware of the fees that can surprise startups When people say “rates are good,” they usually refer to the headline rate, not the full cost. Ask every supplier to confirm these in writing: – Monthly minimums (some contracts may charge you if you don’t meet a threshold) – Terminal rental vs. purchase (and replacement costs) – PCI compliance fees (and what happens if you don’t complete it) – Authorization fees (small extra charge for each transaction in some cases) – Gateway fees (especially for online checkouts) – Chargeback fees (and how disputes are managed) – Refund fees (some retain part of the fee even for refunds) – Payout speed/settlement time (next day vs. 2 to 3 working days) – Rolling reserve/held funds (common for higher-risk industries or new accounts) – Early termination fees and contract length If a quote doesn’t clearly outline these items, it isn’t a real quote yet. Step 4: Ask these questions to find the best supplier – What’s the contract length and what will I owe if I leave early? – Is the pricing blended or interchange++ and what’s your margin? – What’s the total monthly cost for X transactions and £Y in turnover? – How quickly do you pay out, and can you offer faster settlements? – Are there any PCI, gateway, reporting, or administrative fees? – Do you support Apple Pay, Google Pay, or contactless by default? – Does the terminal operate on Wi-Fi and 4G/5G, and what if the signal drops? – What’s the process for chargebacks and fraud prevention? – Can I take payments online (pay-by-link, invoices, or checkout) with the same provider? – What level of support do you provide (hours, phone vs. ticket, turnaround time)? A supplier who answers these questions quickly and clearly is usually a safer choice than one who avoids details. Step 5: Match the setup to your type of startup If you’re a mobile or trades business, look for a reliable 4G/5G terminal, quick payouts, pay-by-link for deposits, easy refunds, and strong support. If you’re e-commerce-focused, seek gateway reliability, fraud tools, a smooth checkout process, easy integration, and simple pricing for card-not-present transactions. If you’re in hospitality or retail, consider EPOS compatibility, tipping options, multiple users, end-of-day reports, stock management options, and fast terminal replacement. If you handle subscriptions or service contracts, look for recurring payment options, payment links, invoicing tools, and a straightforward method to reconcile payments in your accounting. Red flags that usually cost startups money: – “It’s only X%” without mentioning PCI, gateway, or contract length – Long contracts where you don’t own the hardware and can’t exit cheaply – Quotes lacking a worked example using your actual turnover – Support that relies solely on email when you’ll need daily payment assistance – “Instant payouts” promised without clear explanations of eligibility or limits – No defined process for chargebacks, fraud, or held funds A simple way to compare suppliers (the 10-minute method) Create a quick reference using the same assumptions for every quote: – Monthly card turnover (e.g., £5,000, £20,000, £50,000) – Average transaction value (e.g., £25) – Split of in-person vs. online sales – Number of terminals/users – Required features (pay-by-link, tips, EPOS integration) Then ask each supplier to confirm: – Total estimated cost per month at those volumes – Contract length and exit cost – Payout times – What’s included versus extra The “best” supplier is usually the one with the lowest total cost over 12 to 24 months and dependable support. Where Volcron fits in If you’d prefer not to spend hours deciphering quotes, Volcron can assist startups and small businesses in comparing merchant service options. They can help set you up with the right terminals and online payment tools while ensuring your pricing, support, and contract terms align with your trading needs. Call 0333 049 4233.
FAQ: Merchant services for startups What’s the difference between a payment gateway and a merchant account? A gateway manages the online checkout process. The merchant account or acquirer processes the transaction and moves the funds.
Can a startup obtain a card machine without a trading history? Yes, but you might need to undergo extra checks and may face limits initially, depending on your industry and risk profile.
How long should payouts take in the UK? This varies by provider and account type. Always inquire about the usual settlement time and whether quicker payouts are available.
Is interchange++ always cheaper than a blended rate? Not always, but it often offers better value for higher turnover. The right option depends on your card mix and average transaction size.
What is PCI compliance and is it necessary? PCI DSS is the security standard for card payments. Most providers require you to complete a straightforward compliance process, usually an online questionnaire.
Can I take deposits and send payment links? Many providers support pay-by-link or invoicing. Confirm fees and how refunds or partial payments work.
What contract length should a startup consider? Shorter and flexible contracts are safer initially. If you agree to a longer one, ensure the exit costs are clear and reasonable.
Why do some accounts have held funds or rolling reserves? This is typically to manage risk in new or higher-risk businesses. Ask what triggers holds and how to avoid them.
Do I need separate suppliers for in-person and online payments? Not necessarily. One supplier can cover both types but always compare overall costs and reporting simplicity.
What should I do if I’m offered a “special rate” today only? Treat this as a warning sign. A reliable supplier will provide a full quote in writing and allow you to review the terms properly.
If you need help give us a call and we can guide you through set up and pricing, plus help in other areas too for start-ups – mobile, sims, connectivity and utilities.