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 processes cards in person), or a payment gateway (software that connects your website to a processor). Which one you need depends on whether you sell in person, online, or both.

Every route involves fees. You pay a percentage of each transaction (typically 1.5% to 3.5%), a flat per-transaction fee (usually $0.20 to $0.30), or both. Some systems charge monthly subscription fees on top. The processor keeps part of this; your bank and the card networks (Visa, Mastercard, American Express, Discover) take the rest.

You do not need a special business bank account to accept cards, but you do need a way to deposit the money. Most processors deposit funds directly into your existing bank account within one to three business days.

Key Takeaways

  • Payment processors like Square and Stripe charge per-transaction fees (typically 2.6% plus $0.30 for online, 2.7% plus $0.30 for in-person) with no monthly fee, making them the lowest-cost option for most small businesses.
  • Point-of-sale systems like Toast and Square Register cost $50 to $300 per month but include inventory tracking, staff management, and reporting tools that processors alone do not offer.
  • Payment gateways like Authorize.Net connect your website to a processor and require you to choose a separate processor, so you pay both the gateway fee and the processor fee.
  • Interchange fees (the cut that goes to the card issuer) are set by Visa and Mastercard and do not change based on your processor, so shopping for the lowest rate means comparing the processor's markup, not the interchange itself.
  • You must display your fees clearly to customers before they pay, and you cannot charge different prices based on payment method in most states.

Payment processors for in-person and online sales

Square and Stripe are the two largest processors for small businesses. Both charge 2.7% plus $0.30 per in-person transaction and 2.6% plus $0.30 per online transaction. Neither charges a monthly fee. You can start accepting payments within hours of signing up.

Square requires a card reader (a small device that plugs into your phone or tablet); the reader costs $10 to $50 depending on the model. Stripe does not require hardware for online payments but does require a reader for in-person sales. Both deposit funds to your bank account within one to two business days.

PayPal charges 2.99% plus $0.30 per online transaction and 2.7% plus $0.30 per in-person transaction. Clover charges 2.7% plus $0.30 per transaction and also offers a point-of-sale system starting at $50 per month. Toast is designed for restaurants and hospitality and charges 2.89% plus $0.29 per transaction, plus a $99 monthly software fee.

All of these processors handle chargebacks (when a customer disputes a charge with their bank). You pay a chargeback fee (usually $15 to $25) if you lose the dispute, and the processor deducts the disputed amount from your account. Keeping clear records of what you sold and when protects you in most disputes.

Point-of-sale systems for retail and restaurants

A point-of-sale system is software (and usually hardware like a register or tablet) that does more than just process cards. It tracks inventory, records which staff member made each sale, generates sales reports, and integrates with accounting software. You use it if you run a retail store, restaurant, salon, or any business where you need to track what sold and who sold it.

Square Register costs $0 to $60 per month depending on features and includes card processing at 2.7% plus $0.30 per transaction. Toast starts at $99 per month plus 2.89% plus $0.29 per transaction. Clover starts at $50 per month plus 2.7% plus $0.30 per transaction. Lightspeed charges $99 to $299 per month plus 2.6% plus $0.10 per transaction.

The hardware varies. Square Register works on an iPad you already own or a Square-branded stand. Toast and Clover sell their own terminals. Lightspeed integrates with multiple hardware brands. If you already own a tablet or computer, Square is the cheapest entry point. If you want a complete system designed for your industry, Toast or Clover may save you money on setup and training.

Payment gateways for your website

A payment gateway is the software that sits on your website and encrypts card information before sending it to a processor. You choose a gateway and a processor separately, and you pay both.

Authorize.Net is the largest gateway. It charges $25 per month plus $0.10 per transaction, then you add a processor on top (typically another 2.5% to 3% plus $0.20 to $0.30). Stripe acts as both gateway and processor, so you pay only Stripe's rate (2.6% plus $0.30 for online). PayPal Checkout does the same at 2.99% plus $0.30.

If your website is built on Shopify, WooCommerce, or another platform, the platform usually has built-in integrations with Stripe, PayPal, and Authorize.Net. You do not need to install anything separately; you just enter your processor account details in your store settings.

Gateways that charge monthly fees (like Authorize.Net) make sense only if you process a very high volume and can negotiate a lower percentage rate to offset the monthly cost. For most small businesses, Stripe or PayPal Checkout is cheaper.

Understanding interchange fees and why you cannot avoid them

Interchange is the fee that the card issuer (the customer's bank) takes from every transaction. Visa and Mastercard set these rates, and they vary by card type and transaction type. A rewards credit card typically has higher interchange than a basic card. A card-not-present transaction (online or phone) typically has higher interchange than a card-present transaction (in person).

You cannot negotiate interchange rates or choose to avoid them. Every processor pays the same interchange to the card networks. What you can shop for is the processor's markup — the percentage or flat fee the processor adds on top of interchange.

When a processor advertises "low rates," they are usually advertising their markup, not the total cost. A processor charging 2.6% plus $0.30 is cheaper than one charging 2.9% plus $0.30, but both are paying the same interchange to Visa and Mastercard. The difference is what the processor keeps.

Fees you must disclose and rules about surcharges

You must tell customers your fees before they pay. If you charge a surcharge (an extra fee for paying by card), you must display it clearly at checkout and on your receipt. The surcharge cannot exceed the actual cost you pay to process the card, and in some states it is not allowed at all.

You cannot charge different prices for different payment methods in most states. You can offer a discount for cash or check, but you cannot charge extra for credit cards unless you disclose it as a surcharge and comply with state law. Check your state's attorney general website or your processor's terms for the rules in your area.

You must also keep records of every transaction for at least three years. Your processor provides transaction reports, but you should download and save them yourself. If a customer disputes a charge, you will need proof of what you sold, when, and for how much.

How to choose between processors and systems

Start by answering three questions: Do you sell in person, online, or both? Do you need inventory tracking and staff management, or just payment processing? How much do you expect to process per month?

If you sell only online and do not need inventory tracking, use Stripe or PayPal Checkout. If you sell only in person and do not need inventory tracking, use Square or Stripe with a card reader. If you sell both in person and online, use Square or Stripe for both channels. If you need inventory tracking or staff management, choose a point-of-sale system (Square Register, Clover, or Toast) based on your industry and budget.

Calculate your monthly cost by multiplying your expected monthly sales by the processor's percentage rate, adding the per-transaction fee (multiply your expected number of transactions by the per-transaction fee), and adding any monthly subscription fee. Compare this total across three processors before you sign up. The difference between 2.6% and 2.9% on $10,000 in monthly sales is $30 per month, or $360 per year.

Frequently Asked Questions

Do I need a business license to accept credit cards?

No. You need a business license to operate legally in your city or county, but that is separate from accepting cards. Your processor does not check for a license. However, your city or county may require one, so check your local government website.

What happens if a customer disputes a charge?

The customer's bank contacts your processor, and your processor gives you a chance to respond with proof (a receipt, invoice, or email confirmation). If you provide proof that the transaction was legitimate, you keep the money. If you do not respond or the bank sides with the customer, the processor deducts the amount plus a chargeback fee (usually $15 to $25) from your account.

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

All major processors accept Visa, Mastercard, American Express, and Discover. American Express and Discover typically charge higher interchange rates than Visa and Mastercard, so your total cost per transaction may be slightly higher for those cards, but you cannot refuse them without refusing all cards.

How long does it take to get paid after a customer swipes their card?

Most processors deposit funds within one to two business days. Some offer next-day deposits for an extra fee. Weekend and holiday transactions may take longer. Your processor's dashboard shows you the expected deposit date for each transaction.

What if I process a very high volume — can I negotiate a lower rate?

Yes, but only if you process at least $10,000 to $20,000 per month. Contact the processor's sales team directly and ask about volume pricing. They may lower the percentage rate or per-transaction fee, but they cannot lower interchange because that is set by the card networks.