Roqqett Blog

September 6, 2023
Author: Patrick McDill

Understand and reduce card fees

A buyer's guide for merchants and understanding the merchant service charge.

Quick Summary

  1. What is the MSC?
  2. Why it's important
  3. Tips on how to optimally calculate your MSC

The Merchant Service Charge (MSC) is both the largest and most commonly overcharged card processing fee.

This means it’s important for merchants who take card payments in person to know exactly what the MSC consists of, how it is set and which elements are negotiable. Smaller merchants are particularly vulnerable to being overcharged. In this post, we explain what the MSC is, providing a breakdown of the three fees it consists of, as well as some valuable tips on how to avoid being overcharged.

What is the Merchant Service Charge?

The Merchant Service Charge (MSC) is an unavoidable transaction cost that applies to every credit or debit card payment a merchant takes. It consists of three different fees - interchange fees, card scheme fees and markup fees. Merchants pay the MSC to the party who facilitates the processing of their card transactions - often referred to as a ‘Provider’. The Provider can either be an acquirer, such as Barclays, First Data or WorldPay, or a Payment Facilitator (PayFac), such as Square, iZettle or SumUp.

The Provider does not keep the whole MSC - they take a percentage for themselves (the markup fee) before passing the rest on to the other relevant parties involved in processing the transaction.

Screenshot 2020-11-05 at 14.14.01

Why is understanding the Merchant Service Charge important?

If merchants aren’t careful, their MSC could be as high as 2.75% per transaction! Such high fees are usually a result of Providers adding a steep markup fee. Smaller merchants are particularly affected by this, as Providers tend to only offer them a ‘blended rate’. With a blended rate, the merchant has no clear way of discerning the markup fee (which is usually negotiable) from the interchange and card scheme fees (which are non-negotiable), allowing Providers to add as high a markup fee as they can get away with.

This makes it important for merchants to have an understanding of what their MSC should look like, to either increase their bargaining power when agreeing to a ‘blended rate’, or to aid decision making when choosing a Provider. We have summarised some of our best tips for understanding this below, but for a more extensive MSC breakdown (as well as some other great insights for keeping card fees down).

Tips for working out what your MSC should be:

Interchange fees:

  • Interchange fees are set based on the type of card used (aka debit or credit card and which country the card is from), so if you work out the types of cards your customers are likely to use (e.g. are the majority of your customers from the UK or do you receive a lot of non-European tourists?) you can check out the interchange fees associated with them online.
  • Both Visa and Mastercard publish their interchange fees on their websites
  • American Express are less transparent about their interchange fees (although Merchant Maverick have attempted to break them down in an informative article).

Markup fees:

  • These should only be between 0.5-1%, so make sure you aren’t being overcharged for these!

Card scheme fees:

  • Card schemes also vary, but the basis upon which they do is less clear and transparent than interchange fees.
  • Unfortunately, they are also non-negotiable (and on the rise). Hopefully legislation will soon be put in place to cap this fee.
  • In the meantime, the only way to avoid high card scheme fees is to use alternative payment methods, such as Roqqett, which use open banking technology to facilitate secure, contactless payments.

The MSC is only one of many fees associated with taking card payments. Be sure to keep yourself well informed about the types of costs you should be incurring and whether you are being overcharged. For an extensive card fee breakdown (and other great insights for keeping card fees down), check out our Card Processing Fees White Paper!

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