What makes up a payment fee
A payment fee usually has two core parts: a percentage charge and a fixed charge. The percentage scales with the order value; the fixed charge applies once per payment transaction. For an illustrative rate of 1.5% plus £0.20, an £80 order would incur £1.40: £1.20 percentage charge plus £0.20 fixed charge. Confirm the provider’s terms before applying any rate, including which order value the percentage uses.
Some providers document processing, payout or currency-related costs separately rather than combining them with the transaction fee. Record each line using the provider’s statement and keep currency costs for the later comparison of refunds, chargebacks and currency effects. Do not assume a payout deduction is part of the fee charged when the customer places the order.
The order-level payment fee is a variable selling cost: it is attached to taking that payment and should be deducted when assessing the order’s contribution. It is different from operating costs such as subscriptions, rent, fulfilment, packaging, wages or advertising. A profit margin calculator can help show the fee alongside those separate cost categories, rather than treating every bank or platform deduction as a payment fee.
| Component | How it behaves | What to check |
|---|---|---|
| Percentage charge | Rises as the payment value rises | The rate and the value it is applied to |
| Fixed charge | Usually applies once per payment transaction | Whether it varies by payment method or transaction type |
| Separately documented costs | May be deducted at processing or payout | Whether processing, payout or currency costs are included or listed separately |
Why low-value orders feel the pressure first
Low-value fragrance orders feel payment fees more sharply because the fixed charge is spread across less revenue. The percentage element changes with order value: if the order value doubles, that part of the fee doubles. The fixed element does not. It is charged once whether the customer buys one small item or a larger basket.
That makes the fee percentage higher on the smaller order, even when the provider’s underlying rates are identical. For example, applying the percentage rate and fixed charge from the worked example, the comparison is:
| Order | Percentage charge | Fixed charge | Total fee as a share of the order |
|---|---|---|---|
| Lower-value order | Percentage rate × lower order value | Same fixed charge | (Percentage charge + fixed charge) ÷ lower order value |
| Higher-value order | Percentage rate × higher order value | Same fixed charge | (Percentage charge + fixed charge) ÷ higher order value |
Worked example with sample numbers
This example is illustrative. It uses sample numbers for a fragrance store selling in the UK. They are made up to show the method, they are not a benchmark, and your own figures will differ.
Formula: Payment fee = order value x percentage + fixed amount.
| Order value | Fee | Fee as share of order |
|---|---|---|
| £8.50 | £0.49 | 5.8% |
| £17.00 | £0.74 | 4.3% |
| £33.99 | £1.24 | 3.6% |
| £101.97 | £3.23 | 3.2% |
Run the same sum with your own numbers in the free calculator, or browse guides for sellers in the UK and more fragrance guides.
General information only: tax, duty and import rules change and depend on your situation, so check with an accountant or the official source before acting.
Eligible Shopify stores can see these numbers for their own store through the Founding 10,000 offer.
How to read the worked example
Read each order value across the example rather than comparing the headline rate alone. Assume a fee of 1.5% plus £0.20, product cost of 40% of sales, and no other costs. On a £20 order, the percentage charge is £0.30 and the fixed charge is £0.20, making the total fee £0.50. Gross profit before the payment fee is £12.00, so £11.50 remains after the fee.
The same calculation at £50 produces a £0.75 percentage charge, a £0.20 fixed charge and a £0.95 total fee. At £100, those figures are £1.50, £0.20 and £1.70. The fixed amount stays unchanged; the percentage amount and total fee rise with the order value.
The fee rate is the total fee divided by the order value: 2.5% on £20, 1.9% on £50 and 1.7% on £100. That rate helps compare fee pressure between order sizes, but it is not the cash amount deducted. Use the total fee for cash planning and the remaining margin for deciding whether the order economics work. A profit margin calculator can help check the arithmetic with your own prices and costs.
- Fixed amount: assess the effect of minimum-value orders.
- Percentage amount: see how the fee scales with sales value.
- Total fee: measure the actual cash deduction per order.
- Remaining margin: judge profitability after the payment fee.
| Order value | Percentage charge | Fixed charge | Total fee | Fee rate | Remaining after fee |
|---|---|---|---|---|---|
| £20 | £0.30 | £0.20 | £0.50 | 2.5% | £11.50 |
| £50 | £0.75 | £0.20 | £0.95 | 1.9% | £29.05 |
| £100 | £1.50 | £0.20 | £1.70 | 1.7% | £58.30 |
Refunds, chargebacks and currency costs
Refund terms can change the cost of a cancelled fragrance order. Check whether the provider returns the percentage fee, the fixed fee, both, or neither when you issue a refund. Some terms may return the original transaction fee but retain a fixed processing amount; others may charge a separate refund fee. A £50 order with a £1.00 payment charge therefore does not necessarily recover the full £50 fee when the customer is refunded. Record refunded payment fees separately from the product refund so your margin analysis reflects the cash retained.
Chargebacks need a different check. Review the dispute fee, whether the original payment fee is retained, and what happens if you successfully challenge the claim. A reversed chargeback may return the disputed amount without returning the original processing fee, or may also reverse the chargeback fee. Check the deadline and evidence requirements as well, because the operational cost of a dispute is not limited to the fee.
Currency conversion creates another layer. For UK sales, confirm the rate used, the conversion spread or percentage charge, and whether those costs are recalculated when a payment is refunded. A refund in a different exchange-rate environment can return less in your trading currency even when the customer receives the expected foreign-currency amount. Keep the provider’s settlement currency, conversion charge and refund amount visible in your records. ORVX reports refund value against realised revenue and keeps each merchant’s trading currency separate, helping you see whether returns and payment costs are reducing product or collection profitability.
- Check provider terms for: refunded percentage fees; retained fixed fees; separate refund charges; chargeback fees and reversals; conversion rates; FX spreads; and whether currency charges are recalculated on refunds.
- Use refund value against revenue to assess returns, and payment-fee records to assess provider costs. They answer different questions and should not be combined into one rate.
Compare providers using the same order profile
Compare payment providers with one fixed order profile, not with headline rates copied from different pricing pages. Set the same basket value, UK customer location, card or wallet method, trading currency, refund rate and settlement schedule. Record whether the quoted fee includes VAT, any platform or payout charge, and whether the provider returns fees when an order is refunded. Use the provider’s publicly documented terms for the date of the comparison.
Then calculate four measures for each provider: the fee in pounds per successful order, the fee as a percentage of the order value, the total cost after assumed refunds and currency conversion, and the cash received by the settlement date. The first two help assess unit economics; the refund-adjusted figure suits stores with frequent returns; and cash received helps manage working capital. Keep the assumptions visible so a change in average order value, payment mix or international sales can be tested without changing the comparison rules.
- Use identical assumptions: order value, payment method, currency, refund treatment, chargeback treatment and settlement terms.
- Compare the resulting pound cost and net settlement, not percentage rates alone.
Sources
- VAT registration: when to register (GOV.UK (HM Revenue & Customs), checked 26 October 2026).
How this page was made: drafted with AI from a brief, then checked by automated rules for arithmetic, sources and duplication. The sample numbers were calculated, not reported.