What is an authorisation fee?
A few pence on every card payment, charged whatever the sale is worth. It is the quietest cost on your statement and, for businesses with small average transactions, often the most expensive one.
What an authorisation actually is
Every time a customer taps or inserts a card, your terminal sends a short message out to the card issuer asking one question: is this card real, and is there money behind it? The answer comes back in under a second and the sale goes through.
That round trip is the authorisation. The authorisation fee is a fixed amount in pence charged for it — and it is charged per transaction, not per pound. A 2p auth fee costs the same on a £2 coffee as it does on a £900 sofa.
Why a few pence matters
Auth fees are the easiest cost to overlook because they never appear as a big number. They appear as a slightly smaller settlement every single day.
Take a business doing £4,000 a month with an average transaction of £10 — that is 400 card payments a month, 4,800 a year.
| Auth fee | Per month (400) | Per year (4,800) |
|---|---|---|
| 2p | £8 | £96 |
| 5p | £20 | £240 |
| 9p | £36 | £432 |
| 20p | £80 | £960 |
Why it hits small-ticket businesses hardest
The lower your average transaction, the more transactions you need to reach the same turnover — and the auth fee is charged on every one of them. A coffee shop taking £4,000 in £3 sales runs about 1,333 transactions a month. At 9p that is £120 a month, £1,440 a year, on top of the percentage rate.
This is why two businesses with identical turnover and identical card percentages can end up hundreds of pounds apart. It is never the headline rate that separates them.
What a fair authorisation fee looks like
Open Rates publishes authorisation at 2p. Anything at or under about 3p is competitive. Once you are into 5p and above, it is worth asking why — especially if your average transaction is small.
Watch for providers that quote a very low card percentage and then sit on a high auth fee. The percentage wins the conversation; the auth fee wins the year.
What to ask your current provider
- What is my authorisation fee per transaction, in pence?
- Is it charged on every transaction, including declines and refunds?
- Does it differ between debit, credit and business cards?
- Is there a separate PDQ, gateway or settlement fee on top of it?