The three ways to take credit card payments

You can accept credit cards through a payment processor (a company that handles the transaction), a point-of-sale system (hardware and software that rings up sales), or a payment gateway (software that connects your website to a processor). Which one you need depends on where you sell: in person, online, or both.

Each route has different costs, setup time, and equipment needs. A food truck might use a mobile card reader. An online store uses a gateway like Stripe or Square Online. A retail shop might use a full POS system. The choice affects how much you pay per transaction and how quickly you get your money.

You'll also need a merchant account — a bank account specifically for business card payments — though some processors bundle this into their service so you don't set it up separately.

Key Takeaways

  • Payment processors charge a percentage of each sale (typically 2–3%) plus a small flat fee, and this is the main cost of accepting cards.
  • Mobile readers like Square or PayPal Here let you accept cards anywhere with just a phone, while POS systems are better for high-volume retail with inventory tracking.
  • Online stores need a payment gateway (Stripe, Square Online, Shopify Payments) that encrypts card data and sends it to a processor securely.
  • You must comply with PCI DSS (Payment Card Industry Data Security Standard) rules, which means not storing full card numbers and using encrypted connections.
  • Funds typically arrive in your bank account within 1–3 business days, though some processors hold money longer if they see high refund rates.

In-person payments: mobile readers and point-of-sale systems

If you take payments face-to-face, you have two main paths. A mobile card reader is a small device that plugs into your phone or tablet and reads the card's chip or magnetic stripe. Square, PayPal Here, and Clover all make these. Setup takes minutes: download the app, plug in the reader, and you're ready to swipe. Costs are usually 2.6% + 10¢ per transaction for in-person cards, or higher for keyed-in cards (when you type the number manually).

A point-of-sale system is a full setup: a terminal, a cash drawer, a receipt printer, and software that tracks inventory and sales. Clover, Toast, and Square all offer POS systems. These cost more upfront (hardware can run $500–$2,000) but give you sales reports, employee management, and inventory tracking. They're worth it if you run a restaurant, retail store, or salon where you need to track what sold and who worked the shift.

Both routes require you to physically present the card or insert it into the reader. Cards that are swiped or inserted are treated as "card-present" transactions and have lower fraud risk, so processors charge less for them.

Online payments: payment gateways and hosted checkout pages

If you sell on a website, you need a payment gateway — software that encrypts the card number and sends it securely to a processor. Stripe, Square Online, Shopify Payments, and PayPal are common gateways. You don't build the gateway yourself; you integrate it into your website using code or a plugin.

The gateway never sees the full card number. Instead, it tokenizes the card (converts it into a code) so your website doesn't store sensitive data. This keeps you compliant with PCI DSS rules and protects customers from theft if your site is hacked.

Some gateways offer a hosted checkout page — a page the customer is sent to instead of entering their card on your site. This is simpler to set up because you don't handle the card data at all; the gateway's page does. Costs are usually 2.9% + 30¢ per transaction for online cards, sometimes higher.

What payment processors actually charge

The main cost is the interchange fee — a percentage of the sale that goes to the card issuer (your customer's bank). This is set by Visa, Mastercard, and American Express, not by the processor, and varies by card type. A rewards credit card might have a 2.2% interchange fee, while a basic debit card might be 0.5%. The processor adds its own markup on top.

You'll also see these charges:

  • Percentage fee: Usually 2–3% of the transaction, depending on whether the card is present and the processor's pricing model.
  • Flat fee per transaction: Often 10¢ to 30¢ per sale.
  • Monthly fees: Some processors charge $10–$50 per month for access to reporting or advanced features. Others charge nothing.
  • Batch fees: A small charge (usually $0.10) each time you settle (close out) your sales for the day.
  • PCI compliance fee: Some processors charge $10–$20 per month to handle PCI compliance for you.
  • Chargeback fees: If a customer disputes a charge, the processor charges you $15–$100 to investigate.

Processors compete on these rates, so shop around. A high-volume business might negotiate lower rates; a startup might pay standard rates. Some processors offer flat-rate pricing (a single percentage for all cards) to make budgeting easier, though this usually costs more than interchange-plus pricing (interchange + a fixed markup).

PCI compliance: what you must do to stay legal

PCI DSS (Payment Card Industry Data Security Standard) is a set of rules created by Visa, Mastercard, and American Express to prevent card fraud. If you take card payments, you must follow these rules or face fines.

The core rules are: never store a full card number on your own servers, always use encrypted connections (HTTPS) on your website, keep your software updated with security patches, and use strong passwords. If you use a payment processor or gateway, they handle most of this for you. You're mainly responsible for not storing card data yourself and keeping your business's network secure.

If you take fewer than 20,000 transactions per year and use a processor that handles the card data, you're usually in the lowest compliance tier and don't need to pay for a formal audit. But you still must follow the rules. If you store card data yourself or process millions of transactions, you'll need a formal PCI assessment, which costs money and takes time.

How long it takes to get your money

When a customer pays, the processor doesn't send you the money immediately. Instead, they settle the transaction — they batch up all your sales from the day, subtract their fees, and send the rest to your bank account. This usually takes 1–3 business days, though some processors are faster.

A few things can slow this down. If you have a high refund rate (customers asking for their money back), the processor might hold funds longer to cover potential chargebacks. If you're a new business or in a high-risk industry (like gambling or travel), they might hold funds for 7–30 days. If you process a very large transaction, they might hold it separately while they verify it's not fraud.

You can see your settlement schedule in the processor's dashboard. Most let you check when money will arrive before it does.

Choosing between processors: what to compare

Start by matching the processor to how you sell. If you're in person only, a mobile reader is simpler and cheaper than a full POS. If you're online only, a gateway like Stripe is better than a POS. If you do both, look for processors that offer both (Square, Clover, and PayPal all do).

Then compare costs. Get the pricing page for each processor you're considering and calculate what you'd pay on a typical sale. If you sell $1,000 per day at an average transaction of $50, you'll process 20 transactions. At 2.7% + 10¢, that's $27 per day or roughly $810 per month. At 2.2% + 30¢, it's $22 per day or $660 per month. Over a year, that's a $1,800 difference.

Also check: Does the processor charge a monthly fee? Can you cancel anytime, or is there a contract? Do they offer the features you need (inventory tracking, employee management, reporting)? What's their customer support like? Read reviews from other small businesses in your industry.

Frequently Asked Questions

Do I need a separate business bank account to accept credit cards?

You need a merchant account, which is a bank account designed for card payments. Many processors set this up for you as part of onboarding, and it's often the same as your regular business checking account. Some processors deposit funds into any bank account you own, so you don't need a separate one. Check with your processor.

What happens if a customer disputes a charge?

The processor investigates the dispute (called a chargeback). If the customer wins, the money goes back to them and you're charged a chargeback fee (usually $15–$100). To protect yourself, keep receipts, send order confirmations, and respond quickly if the processor asks for proof the sale was legitimate. Refunding the customer before they dispute is often cheaper than fighting a chargeback.

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

Most processors accept all four major card brands. American Express and Discover charge higher interchange fees (sometimes 3.5%+), so your total cost per transaction is higher when someone pays with them. You can't refuse these cards without losing sales, so budget for the higher cost.

What's the difference between a payment processor and a payment gateway?

A processor is the company that moves the money from the customer's bank to yours. A gateway is the software that encrypts the card and sends it to the processor. Many companies (like Stripe and Square) do both. You always need a processor; you only need a separate gateway if you're building your own checkout instead of using the processor's built-in one.

Is it safe to accept credit cards online?

Yes, if you use a processor or gateway that handles the card data. They encrypt the card number so it's never stored on your server, and they're required by law to follow PCI DSS rules. The risk is low as long as you don't try to store card numbers yourself or use an unencrypted connection.