The three main ways to accept card payments
You can accept credit card payments through a payment processor (a company that handles the transaction), a point-of-sale system (hardware and software that processes cards in person), or a payment gateway (software that connects your website to a processor). Which one you use depends on whether you sell in person, online, or both.
Each route has different costs, setup time, and technical requirements. A small business selling at a farmers market needs something different from an online store. A restaurant needs something different from either. The choice affects how much you pay per transaction and how quickly money reaches your bank account.
Key Takeaways
- Payment processors charge a percentage of each transaction (typically 2.2% to 3.5%) plus a per-transaction fee, and this cost varies by processor and card type.
- Point-of-sale systems require upfront hardware costs but work offline and are built for in-person sales; payment gateways require no hardware but need a website and internet connection.
- Your bank account, business type, and monthly sales volume all affect which processors will work with you and what rates they offer.
- Settlement time — how long before money hits your account — ranges from same-day to three business days depending on the processor and your bank.
Payment processors for small businesses and online sellers
A payment processor is the simplest entry point if you are just starting out. Companies like Stripe, Square, PayPal, and Toast handle the entire transaction: they collect the card information, verify the funds, and deposit money into your bank account. You do not need to build anything or buy hardware — you sign up, get a link or code, and start accepting payments.
Processors charge you a percentage of each sale plus a flat fee per transaction. Stripe and Square typically charge 2.9% plus $0.30 per online transaction; PayPal charges 3.49% plus $0.49 for standard transfers. These rates apply to credit and debit cards. Some processors charge more for certain card types (like American Express or international cards) or for transfers that settle faster than the standard three to five business days.
You will need a U.S. bank account and a business tax ID (EIN) or Social Security number to open an account. Most processors verify your identity and business within minutes to a few hours, though some may request additional documentation if your business type is considered higher-risk (like subscription services or nonprofits).
Point-of-sale systems for in-person sales
A point-of-sale system (POS) is hardware and software that processes cards at a physical location. It includes a card reader (which connects to a tablet or computer), software to ring up sales, and a receipt printer. Square, Toast, Clover, and Shopify POS all offer this setup. You swipe, insert, or tap the card, and the system processes the payment and prints a receipt.
POS systems cost money upfront: a basic Square reader is $49, a Clover system ranges from $300 to $2,500 depending on the model, and a full Toast setup can cost $1,000 or more. Monthly software fees range from $0 to $300. You also pay per-transaction fees similar to online processors (2.6% to 3.5% plus $0.10 to $0.50 per transaction, depending on the system and card type).
The advantage is that POS systems work offline — if your internet goes down, you can still process cards and the transactions sync when you reconnect. They also track inventory, employee hours, and sales reports automatically. This makes them worth the upfront cost if you run a restaurant, retail store, or service business with regular in-person transactions.
Payment gateways for websites and online stores
A payment gateway is software that sits on your website and connects customers' card information to a processor. It handles the encryption and sends the data securely to your processor, which then charges the card. Gateways like Authorize.Net, Braintree, and 2Checkout let you build custom checkout experiences or integrate with shopping cart software.
Payment gateways do not process the payment themselves — they route it to a processor you choose separately. This means you pay the gateway a monthly fee (typically $10 to $50) plus the processor's per-transaction fees. The advantage is flexibility: you can switch processors without changing your website code, and you can customize exactly how the checkout looks and works.
Gateways require more technical setup than a simple processor link. You need to choose a processor, set up the gateway, test the connection, and integrate it with your website or shopping cart. If you use Shopify, WooCommerce, or another platform, the gateway is usually built in and you just connect your processor account.
What affects your costs and which processors will accept you
Your monthly sales volume, business type, and industry all affect which processors will work with you and what they charge. A coffee shop with $5,000 in monthly card sales will get different rates than an online retailer with $50,000 in sales. Processors also avoid certain industries: subscription services, nonprofits, adult content, gambling, and high-refund businesses (like fitness memberships) are considered higher-risk and may be declined or charged higher fees.
Your bank account history matters too. Processors check your bank statements to verify you are a real business and that your account is in good standing. If you have multiple chargebacks or a history of disputes, some processors will decline you. If you have been declined by one processor, you can still apply to others — each has different underwriting standards.
Card type also affects your costs. Debit cards and basic credit cards (Visa, Mastercard) have lower fees. American Express and Discover typically cost 0.5% to 1% more. International cards cost even more. Some processors bundle these into one rate; others charge separately. Check the processor's pricing page or ask their sales team for a breakdown before you sign up.
How long it takes for money to reach your account
Most processors deposit money into your bank account within one to three business days. This is called the settlement period. Square and Stripe typically settle within one business day for most accounts. PayPal and some others take two to three business days. A few processors offer same-day settlement for an extra fee (usually 0.5% to 1% of the transaction).
The settlement period starts when the customer's card is charged, not when you ship the product or complete the service. So if a customer buys something on Monday, the processor may deposit the money on Tuesday or Wednesday, even if you have not shipped yet. This matters if you need cash flow quickly or if you offer refunds — refunds come out of your next settlement, which can take another few days.
Your bank also affects settlement time. Some banks process ACH transfers (the method processors use to deposit money) faster than others. If your bank is slow, ask the processor if they offer faster settlement options or if you can use a different bank account.
Comparing processors side by side
The table below shows how the most common processors compare on cost, setup, and settlement. Rates and fees change frequently, so check each processor's current pricing page before you decide. Also ask about volume discounts — if you process more than $10,000 per month, some processors will negotiate lower rates.
| Processor | Best for | Online rate | In-person rate | Monthly fee | Settlement |
|---|---|---|---|---|---|
| Square | Small businesses, startups | 2.9% + $0.30 | 2.6% + $0.10 | $0 | 1 business day |
| Stripe | Online stores, SaaS | 2.9% + $0.30 | 2.7% + $0.05 | $0 | 1–2 business days |
| PayPal | Existing PayPal users | 3.49% + $0.49 | 2.7% + $0.30 | $0 | 1–3 business days |
| Toast | Restaurants, bars | N/A | 2.59% + $0.10 | $99–$299 | 1 business day |
| Clover | Retail, services | 2.9% + $0.30 | 2.6% + $0.10 | $0–$50 | 1–2 business days |
When you compare processors, look at the total cost per transaction, not just the percentage. A processor charging 2.6% plus $0.10 costs less on a $100 sale than one charging 2.9% plus $0.30. Also factor in monthly fees and hardware costs if you need them. The cheapest processor is not always the best — consider settlement speed, customer support, and whether they work with your business type.
Frequently Asked Questions
Do I need a separate merchant account?
No. Modern processors like Square and Stripe handle merchant accounts for you — you do not need to set one up separately. Older processors and some banks still require a separate merchant account, but most small businesses can skip this step now.
What happens if a customer disputes a charge?
The customer contacts their card issuer and reports the charge as fraudulent or unauthorized. The processor then investigates and either refunds the customer or sides with you. You can dispute the chargeback by providing evidence (like a receipt, shipping confirmation, or email correspondence). Chargebacks cost you $15 to $100 in fees even if you win.
Can I accept payments without a website or physical store?
Yes. You can use a processor's payment link (Square, Stripe, PayPal all offer this) to send a unique URL to each customer. They click the link, enter their card details, and pay. You can also use invoicing software like Wave or FreshBooks to send invoices with a payment button built in.
What if I want to accept payments in person and online?
Most processors let you do both with one account. Square, Stripe, and Clover all support online payments through their website tools and in-person payments through a card reader. You pay the same per-transaction fees for both, though in-person rates are sometimes slightly lower.
How do I know if a processor is secure?
Look for PCI DSS compliance certification on their website. PCI DSS is a security standard that all payment processors must follow. Also check that the processor encrypts card data (look for "SSL" or "TLS" in their security documentation) and that they are registered with the card networks (Visa, Mastercard, American Express). You can verify this on the card networks' websites.