The basic routes to accept card payments

You can accept credit card payments through a payment processor — a company that handles the transaction between your customer's card and your bank account. The processor charges you a fee (usually a percentage of each sale plus a flat amount per transaction), deposits the money into your business account, and handles the security and fraud protection.

There are three main ways to set this up: a payment gateway (software that encrypts card data and sends it to the processor), a point-of-sale system (hardware and software for in-person sales), or a mobile payment app (for accepting payments on your phone or tablet). Which one you need depends on whether you sell in person, online, or both.

You do not need a separate "merchant account" anymore — most modern processors bundle that into their service. You will need a business bank account, a tax ID (EIN), and basic business information. Some processors also run a background check.

Key Takeaways

  • Payment processors charge a percentage of each transaction (typically 2–3%) plus a per-transaction fee (usually $0.25–$0.30), and these rates vary by processor and card type.
  • Point-of-sale systems work for in-person sales and range from simple card readers that plug into your phone to full countertop terminals, with costs from $0 to several hundred dollars upfront.
  • Online payment gateways like Stripe, Square Online, or PayPal require you to set up a website or use their hosted checkout page, and they integrate with most e-commerce platforms.
  • You will need a business bank account, a tax ID, and basic business information; most processors run a background check before approving you.
  • Interchange fees (set by Visa and Mastercard, not your processor) are built into the rates you see, and you cannot negotiate them down.

In-person payment processing with point-of-sale systems

If you sell face-to-face — at a retail store, restaurant, market stall, or service location — you need a point-of-sale (POS) system. This is hardware (a card reader, terminal, or tablet) plus software that processes the payment, prints a receipt, and tracks your sales.

The simplest option is a card reader that plugs into your phone or tablet via the headphone jack or Bluetooth. Square Reader, PayPal Here, and Clover Mini are common examples. These cost $0–$50 upfront and work with your existing phone. You process the payment through an app, the customer signs on the screen, and the money goes into your linked bank account (usually within 1–2 business days).

A countertop terminal is a standalone device that sits on your counter. It connects to your internet, accepts cards inserted or tapped, and prints receipts. These cost $100–$500 upfront and are more durable for high-volume sales. Processors like Square, Toast, and Clover offer these, often with a monthly software fee ($0–$100).

All POS systems charge per-transaction fees. Rates typically run 2.6% + $0.10 for in-person card-present transactions (lower than online rates because fraud risk is lower). Some processors offer flat-rate pricing instead — for example, 2.75% + $0.15 per transaction regardless of card type. Compare the rates for the card types your customers actually use.

Online payment processing and e-commerce gateways

If you sell online — through a website, email invoice, or social media — you need a payment gateway. This is software that encrypts your customer's card information, sends it securely to the processor, and confirms the payment back to your website.

Popular gateways include Stripe (integrates with most e-commerce platforms and invoicing tools), Square Online (includes website hosting and inventory management), PayPal Checkout (works on any website and is familiar to many customers), and Shopify Payments (built into Shopify stores). Each has different pricing, features, and integrations.

Online transactions cost more to process because fraud risk is higher — you cannot see the card or the customer. Rates typically run 2.9% + $0.30 per transaction for standard cards, and higher for international or premium cards. Some gateways charge a monthly fee ($0–$50) instead of or in addition to per-transaction fees.

If you send invoices by email or accept payments over the phone, you can use a gateway that generates a payment link or hosted checkout page. The customer clicks the link, enters their card details on a secure page (not your email), and the payment processes. This is called a hosted payment page and is offered by Stripe, Square, PayPal, and others.

Understanding fees and what you actually pay

Every credit card transaction costs you money. The fees break down into three parts: the interchange fee (set by Visa and Mastercard, not your processor), the assessment fee (a small percentage Visa and Mastercard charge), and the processor markup (the processor's profit).

You see only the total rate your processor quotes you — typically 2.2% to 3.5% plus $0.25–$0.30 per transaction for in-person sales, or 2.9% to 3.5% plus $0.30 per transaction for online sales. This total includes all three components. You cannot negotiate the interchange and assessment fees (they are set by the card networks), but you can shop around for processors with lower markups.

Some processors offer interchange-plus pricing, which shows you the interchange fee separately from their markup. This is more transparent but not necessarily cheaper — it just lets you see what portion goes to Visa and Mastercard versus the processor. Interchange rates vary by card type (rewards cards cost more than basic cards) and by whether the card is present or not.

Monthly fees, statement fees, PCI compliance fees, and chargeback fees are common add-ons. Read the processor's fee schedule carefully. Some charge $0 monthly but higher per-transaction rates; others charge a flat monthly fee and lower rates. Calculate which model costs less based on your expected monthly volume.

Setting up your processor account

To open an account with a payment processor, you will need:

  • A valid business name and structure (sole proprietorship, LLC, corporation, etc.)
  • A tax ID (EIN) or Social Security Number if you are a sole proprietor
  • A business bank account (the processor deposits money here)
  • A government-issued ID (driver's license or passport)
  • Basic business information (address, phone, website if you have one)

Most processors require you to be at least 18 years old and have been in business for at least 6 months (though some waive this for new businesses). They run a background check and may verify your business address by mail or phone.

The approval process usually takes 1–3 business days. Once approved, you can start processing payments immediately. The processor sends you a contract that outlines fees, liability, and dispute resolution — read it before signing.

If you are denied, it is usually because of a high-risk business category (adult services, gambling, high-chargeback industries), a poor personal credit history, or a mismatch between your stated business and your actual sales. Some processors specialize in high-risk businesses if you fall into that category.

Choosing between major processors

The largest processors in the U.S. are Square, Stripe, PayPal, Toast, and Clover. Each has different strengths depending on your business type.

Square is best for small retail, food trucks, and service businesses. It offers simple card readers, a free POS app, and straightforward pricing (2.6% + $0.10 in-person, 2.9% + $0.30 online). No monthly fee. Hardware costs $0–$300.

Stripe is best for online businesses and developers. It integrates with hundreds of platforms, has transparent pricing (2.9% + $0.30 online, 2.7% + $0.05 in-person with Stripe Terminal), and no monthly fee. It requires more technical setup than Square.

PayPal is best if your customers already use PayPal or if you want a familiar name. Pricing is 2.99% + $0.30 for online, 2.7% + $0.05 for in-person with PayPal Here. No monthly fee. It is slower to set up than Square or Stripe.

Toast and Clover are best for restaurants and high-volume retail. They offer full POS systems with inventory, staff management, and loyalty programs built in. Monthly fees run $50–$200, and per-transaction rates are similar to Square and Stripe. Upfront hardware costs are higher ($500–$2,000).

For most small businesses, Square or Stripe is the fastest and cheapest way to start. Compare rates for your specific transaction mix (in-person vs. online, card type) before deciding.

Security, compliance, and your responsibilities

When you accept credit cards, you are responsible for protecting customer data. The Payment Card Industry Data Security Standard (PCI DSS) is a set of rules that all card processors must follow. As a merchant, you must follow them too.

The main rule: never store full card numbers, expiration dates, or security codes on your own systems. Let the processor handle that. If you use a payment gateway or POS system from a major processor, they handle PCI compliance for you — you just have to use their system correctly.

If a customer's card is used fraudulently after you process it, the processor investigates. If the fraud is your fault (you processed a card without authorization, or your system was compromised), you pay a chargeback fee (usually $15–$100 per dispute) and may lose the sale amount. Keep transaction records and customer authorization proof (email, signed receipt, etc.) to defend yourself in disputes.

Some processors offer fraud protection and chargeback insurance as add-ons. For most small businesses, the built-in fraud detection is enough.

Frequently Asked Questions

Do I need a separate merchant account?

No. Modern payment processors bundle merchant services into their standard account. You open one account with the processor, and they handle the merchant account, payment gateway, and bank deposits. You do not need to contact a bank separately.

What happens if a customer disputes a charge?

The customer contacts their card issuer and reports the charge as unauthorized or incorrect. The processor notifies you, and you have 7–10 days to respond with proof (receipt, email authorization, tracking number, etc.). If you cannot prove the charge was legitimate, you lose the money and pay a chargeback fee. Keep records for at least 6 months.

Can I accept American Express and Discover, or just Visa and Mastercard?

Most processors accept all four major card networks. Amex and Discover rates are usually 1–2% higher than Visa and Mastercard because they have higher interchange fees. Your processor will show you the rate for each card type when you sign up.

What if I sell both in person and online?

Most processors let you use the same account for both. In-person transactions (card-present) have lower rates than online (card-not-present) because fraud risk is lower. You can use a card reader for in-person sales and a payment gateway for online sales, and both feed into the same account and bank deposits.

How long does it take for money to show up in my bank account?

Most processors deposit money 1–2 business days after the transaction. Some offer next-day or same-day deposits for an extra fee. Weekends and holidays may delay deposits. Check your processor's settlement schedule before signing up if timing matters for your cash flow.