The Parts of a Payment Fee
A payment fee can contain several charges, labelled or bundled differently by provider. The percentage charge is calculated against order value, while a fixed transaction fee is added per payment regardless of basket size. On a £30 haircare order, a 2% charge is 60p; adding a 30p fixed fee makes the payment cost 90p before other charges. Other costs may include payment processing, a gateway fee for routing or authorising the transaction, and charges for cross-border payments or currency conversion. They may be separate line items, included in a blended rate, or apply only to certain payment methods or orders. Check whether the quoted rate includes every applicable component and whether VAT is added to the provider’s fee. Treat the invoice and terms as the source of truth, not headline percentages alone.
| Component | How it is usually calculated | What it helps you assess |
|---|---|---|
| Percentage charge | A percentage of the transaction value | The cost of larger baskets |
| Fixed transaction fee | A set amount per payment | The cost of processing each order |
| Processing or gateway fee | Per transaction, monthly, or bundled | Whether the quoted rate covers the payment infrastructure |
| Cross-border or currency cost | Applied to eligible transactions or conversions | The cost of selling across currencies or markets |
Why Low-Value Orders Suffer Most
A fixed charge takes a larger share of a small basket. Assume a payment fee of 1.5% plus 20p: on a £10 order, the fee is 35p, or 3.5% of revenue; on a £50 order, it is 95p, or 1.9%. The percentage element grows with order value; the 20p element does not. A £5 order therefore carries a 23p fee, or 4.6%, before product, fulfilment or advertising costs.
Order value is a margin variable, not just a conversion metric. A low-priced shampoo or accessory may look profitable at product level but leave little contribution after payment cost when bought alone. Use this comparison to assess bundles, minimum basket thresholds or delivery charges for low-value promotions. Compare realised revenue with product and payment costs, then check advertising. A profit margin calculator can model the arithmetic. ORVX shows profitability by product and collection, helping identify where small baskets need a different commercial rule.
Worked example with sample numbers
This example is illustrative. It uses sample numbers for a haircare 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 |
|---|---|---|
| £10.50 | £0.57 | 5.4% |
| £21.00 | £0.90 | 4.3% |
| £41.99 | £1.56 | 3.7% |
| £125.97 | £4.19 | 3.3% |
Run the same sum with your own numbers in the free calculator, or browse guides for sellers in the UK and more haircare 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 the worked example from left to right. Start with the order value: the customer-facing basket amount, not profit. Keep it separate from deductions to see how much of the sale is absorbed by costs.
Follow each payment-fee line. Check the percentage, fixed charge and other displayed components, then confirm they total the payment fee deducted. Assess the fee against the order value using the stated formula; do not treat the fee total as a percentage unless the example explicitly calculates that rate.
Read the contribution-margin line: what remains after the included costs are deducted from the order value. Use the fee breakdown to diagnose payment cost and contribution margin to judge overall order economics. A fee can look modest alone while reducing what is available for product, fulfilment, advertising and operating costs.
| Measure | What it tells you | When to use it |
|---|---|---|
| Order value | The starting value of the customer’s basket | To anchor every percentage and deduction |
| Payment-fee components | How the provider’s charge is constructed | To identify which part of the fee is driving the deduction |
| Contribution margin | What remains after the example’s included costs | To assess the order’s usable profitability |
Refunds, Chargebacks and Currency Costs
Refunds require checking whether the provider returns the percentage fee, fixed fee, both or neither: a £50 refund may remove £50 of sales while leaving the original charge. Record the refund separately from the retained fee and check partial-refund treatment; ORVX reports refund value against revenue and return rate by units. Unlike refunds, chargebacks require checking the disputed amount, separate dispute fee, reversal after a successful challenge and evidence deadline; recovering order value may not recover every charge. For non-GBP payments, compare customer-charge, settlement and refund rates: GBP amounts can differ, and conversion fees may be retained or added. ORVX keeps each merchant’s trading currency separate and never mixes currencies in one figure.
| Event | Measure to verify | Why it matters |
|---|---|---|
| Refund | Refunded value and fees returned or retained | Shows the true cost of reversing the sale |
| Chargeback | Disputed amount and any dispute fee | Separates payment disputes from ordinary returns |
| Foreign-currency payment | Charge, settlement, conversion and refund rates | Explains differences between customer value and received funds |
How to Compare Providers Fairly
Compare providers using the same transaction assumptions: identical basket values, payment method, currency, settlement timing and monthly order volume. Record the fee shown on the invoice or statement, including any tax treatment, rather than relying on a headline rate. Separate unavoidable transaction costs from optional tools, hardware or subscription charges.
Model at least three basket sizes, such as £10, £30 and £75, then calculate total payment cost and cost as a percentage of the basket for each. This shows whether a provider’s pricing changes your economics mainly on low-value orders, larger replenishment baskets or across all orders. Keep refund, dispute and currency-related charges in separate lines so they do not distort the standard successful-order comparison.
| Fee type | Trigger | Treatment in the model | Most relevant to |
|---|---|---|---|
| Percentage fee | Successful transaction | Apply the stated rate to each basket | Every basket; material on larger orders |
| Fixed fee | Successful transaction | Add once per order | Small baskets |
| Subscription or account fee | Monthly or annual billing | Allocate across expected orders | All baskets; depends on volume |
| Refund or dispute fee | Refund or payment dispute | Model separately by event rate | Stores with returns or disputes |
| Currency or payout fee | Conversion or settlement | Add only to affected orders | International or multi-currency sales |
Turning Fee Analysis into Margin Decisions
Use payment-fee analysis to isolate checkout cost. Review pricing when fees leave a product or basket’s contribution too thin after product cost and fulfilment, comparing a price change with payment-method availability: a cheaper method may reduce cost, while removing a familiar option may affect checkout behaviour. Review availability when method-level costs justify testing or a provider does not suit target customers; free shipping when delivery cost plus fees erodes incremental-order contribution; and bundles when they spread fixed charges without excess discounting or fulfilment cost. Fees are not complete profitability: include realised revenue, product cost, advertising, returns, inventory and customer results. Use the profit margin calculator, then compare product and collection profitability in wider reporting. Act only when savings improve actual affected orders.
Payment fees should be assessed by order value, payment event and post-purchase outcome rather than by a single headline rate. Separating each charge and applying the same assumptions across providers gives a clearer basis for margin and checkout decisions.
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.