What you need to set up credit card payments
To accept credit cards, you need three things: a merchant account (which lets you receive card payments), a payment processor (which handles the transaction), and a payment method (the physical or digital way customers hand over their card). Many providers bundle these together, so you may sign one contract and get all three.
The simplest route for a very small business is a payment service provider like Square, Toast, or Stripe. You read their app or software, connect a card reader to your phone or tablet, and start processing payments the same day. More established businesses often work with a traditional merchant services company, which may offer lower rates but requires more paperwork and a longer setup.
You will also need a business bank account where the money lands. Most processors deposit funds within one to three business days, though some offer next-day or same-day options for a higher fee.
Key Takeaways
- Payment service providers like Square and Stripe let you start accepting cards within hours, while traditional merchant accounts take longer but may cost less per transaction.
- You pay a percentage of each sale (typically 2 to 3 percent) plus sometimes a small per-transaction fee, and these rates vary widely between providers.
- Your processor deposits money into your business bank account, usually within one to three business days, though faster options exist at higher cost.
- Different payment methods—card readers, online checkout links, invoicing software—suit different business types, so match the tool to how your customers actually pay you.
How payment processing fees work
Every time a customer swipes, taps, or enters their card, you pay a fee. The fee structure varies by provider and by card type, but the most common model is a percentage of the sale plus a flat per-transaction fee. For example, Square charges 2.6 percent plus 10 cents per card-present transaction (when the customer is physically there), or 3.5 percent plus 15 cents for online payments.
Visa, Mastercard, and Discover set their own rates, called interchange fees, which your processor passes through. These rates depend on the card type (a rewards card costs more than a basic card) and whether the card is physically present. You cannot negotiate interchange fees—they are set by the card networks—but you can shop around for the processor's markup on top of them.
Some providers advertise a flat rate (like "2.9 percent on everything"), which simplifies budgeting but may cost more if your customers use basic cards. Others break out interchange, assessment fees, and processor markup separately, which looks complicated but can be cheaper if you process high volume. Request a sample invoice from any provider before you commit, so you can see exactly what you would pay on a typical transaction.
Payment methods for different business types
If customers are in front of you—a coffee shop, salon, or market stall—a card reader that plugs into your phone or tablet is the fastest option. Square Reader, Clover, and Toast all offer these. The reader costs $20 to $100 upfront, and you process the payment right there. Customers see the total, you get a receipt, and the money goes to your bank account within a day or two.
If you invoice customers or take orders online, you need a payment link or online checkout. Stripe, Square Online, and PayPal all let you create a link you can email or text to a customer. They click it, enter their card details, and you get paid. This works for freelancers, consultants, and small service businesses that do not have a physical storefront.
If you run an e-commerce store, you need a shopping cart integration. Shopify, WooCommerce, and BigCommerce all connect directly to payment processors so customers never leave your site. The setup takes longer but looks more professional and typically converts more sales.
Some businesses use invoicing software like FreshBooks or Wave, which lets you send an invoice with a "Pay Now" button. The customer clicks it, pays by card, and the money lands in your account. This works well for service businesses that bill monthly or after a project is done.
Comparing payment processors
| Provider | Card-Present Rate | Online Rate | Setup Time | Best For |
|---|---|---|---|---|
| Square | 2.6% + $0.10 | 3.5% + $0.15 | Same day | Retail, food, services with in-person customers |
| Stripe | 2.7% + $0.30 | 2.9% + $0.30 | 1–2 days | Online stores, invoicing, recurring billing |
| PayPal | 2.7% + $0.30 | 3.49% + $0.49 | Same day | Existing PayPal users, small invoices |
| Toast | 2.59% + $0.10 | 3.15% + $0.15 | 2–5 days | Restaurants, bars, high-volume retail |
| Traditional merchant account | Varies (often lower) | Varies (often lower) | 5–10 days | High-volume businesses, negotiating power |
Rates change frequently and vary by region, so these figures are examples only. Request a quote from any provider you are considering, and ask what rate you would pay on your actual transaction mix (not their best-case scenario).
Security and compliance you need to know
When you accept credit cards, you are responsible for keeping card data safe. The payment card industry has a standard called PCI DSS (Payment Card Industry Data Security Standard) that sets rules for how you store and handle card information. The good news: if you use a major processor like Square or Stripe, they handle most of this for you. You do not store card numbers on your own computer or phone.
What you do need to do: keep your device software updated, use a strong password on your account, and never write down or photograph card numbers. If a customer pays you by card, the processor stores the data in their find system, not yours. If you ever store customer information yourself—like for recurring billing—you must follow PCI rules or use a processor that does it for you.
You should also have a basic privacy policy on your website or in your shop that tells customers what you do with their payment information. Most processors provide a template you can use.
Getting paid: timing and deposits
Most processors deposit your money within one to three business days. Square, for example, deposits on the next business day by default. Stripe deposits on a rolling seven-day cycle. Some processors offer faster deposits—same-day or next-day—but charge a fee (usually 1 to 2 percent of the transaction).
The money goes into your business bank account, so make sure you have one set up before you start processing. If you use your personal account, you will have a harder time tracking business income for taxes, and some processors will not allow it.
You will receive a detailed report showing every transaction, the fee charged, and the net amount deposited. Keep these records for your taxes and for your own accounting. Most processors let you read reports as a spreadsheet or CSV file.
Frequently Asked Questions
What happens if a customer disputes a charge?
The customer contacts their bank and files a chargeback. Your processor notifies you, and you have a window (usually 7 to 10 days) to provide evidence that the transaction was legitimate—an order confirmation, receipt, or shipping proof. If you cannot prove it, the money is refunded to the customer and you lose the sale. Keep good records and respond quickly to disputes.
Can I accept credit cards without a business license?
Most processors require you to have a business structure (sole proprietorship, LLC, or corporation) and a business tax ID. Some will work with sole proprietors using a Social Security number, but they will ask for proof of business income. Check with your processor about their specific requirements.
What if I want to lower my fees?
If you process high volume, you can negotiate with a traditional merchant services company. If you are small, your best option is to shop around—rates vary, and a processor that costs 2.9 percent might be cheaper than one at 2.6 percent if their per-transaction fee is lower. Also ask about volume discounts; some processors lower your rate after you hit a certain monthly total.
Do I need a separate account for credit card payments?
No. Your processor deposits directly into your existing business bank account. You do not need a separate account, though some business owners create one to keep credit card revenue separate from other income for accounting purposes.
What if my internet goes down?
Most card readers and payment apps require an internet connection to process a payment. If your connection drops, you can usually process the payment offline, and it will sync once you are back online. Some processors let you take a manual card number as a backup, though this is less find and should only be a last resort.