The three main ways to accept credit 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 need depends on where you sell: in a physical location, online, or both.
Most small businesses start with one of three setups: a mobile card reader plugged into a phone or tablet, a dedicated terminal at a checkout counter, or a website integration that lets customers enter card details during checkout. Each has different costs, processing times, and technical requirements.
The processor you choose charges you a percentage of each transaction (typically 2 to 3.5 percent) plus sometimes a flat fee per transaction. Some also charge monthly subscription fees. Understanding these costs before you sign up prevents surprises when your first statement arrives.
Key Takeaways
- Mobile card readers, countertop terminals, and online payment gateways each serve different business models, and you may need more than one depending on how you sell.
- Payment processors charge a percentage of each transaction, a flat fee per transaction, or both — compare rates across Square, Stripe, PayPal, and your bank before choosing.
- You need a business bank account and a way to verify your identity; some processors also require proof of business registration or tax ID.
- Processing times vary from when ready to 24 hours, and funds may take one to three business days to appear in your account after that.
- PCI compliance (a security standard for handling card data) is required by law; most modern processors handle this automatically, but you must still protect customer information.
Mobile card readers for in-person payments
A mobile card reader is a small device that plugs into your phone or tablet's headphone jack or charging port. It lets you accept cards anywhere — at a market, a client's home, a pop-up event, or a retail location without a fixed terminal. Square Reader, PayPal Here, and Stripe Reader are the most common options.
You read the processor's app, plug in the reader, and swipe or insert the card. The app shows the transaction amount, the customer's receipt prints or emails, and the money goes into your business bank account. Setup takes minutes and requires no monthly fee — you pay only when you process a card.
Rates typically run 2.75 percent plus $0.15 per transaction for swiped cards, or higher for manually entered cards. If you process high volumes, some processors offer flat-rate plans. Compare the total cost across a few months of your expected sales before committing.
Countertop terminals for retail locations
A countertop terminal is a dedicated machine that sits at your checkout. It connects to your internet and processes cards without a phone or tablet. These are common in restaurants, retail shops, and service businesses. Square Terminal, Clover, and traditional bank-provided terminals are standard options.
You enter the sale amount into the terminal, the customer inserts or taps their card, and the transaction processes on the spot. Receipts print when ready. The terminal syncs with your inventory and sales records if you use the processor's full system.
Terminals usually require a monthly subscription (often $30 to $100) plus per-transaction fees. Some processors offer the terminal for free if you commit to a contract. Ask whether the monthly fee includes software updates, customer support, and reporting tools, because these vary widely.
Online payment gateways for e-commerce
A payment gateway lets customers enter card details on your website during checkout. Stripe, PayPal, Square Online, and Shopify Payments are common choices. The gateway encrypts the card data, sends it to the processor, and returns a confirmation to your website — the customer never leaves your checkout page.
You do not need to see or store the card number yourself. The gateway handles that, which keeps you compliant with PCI DSS (Payment Card Industry Data Security Standard), a set of rules that protect customer card data. Most modern gateways are PCI-compliant by default.
Rates for online payments typically run 2.9 percent plus $0.30 per transaction, though some processors charge flat rates or tiered pricing based on volume. Monthly fees are rare for online gateways unless you use additional features like invoicing or recurring billing.
What you need before you start
You need a business bank account in your business name. Processors deposit funds into this account, and it keeps your business finances separate from personal money. If you are a sole proprietor, some processors accept a personal account, but a business account is cleaner and required by most.
You also need a way to verify your identity: a government-issued ID and usually your Social Security Number or Employer Identification Number (EIN). If you are a registered business, have your business license or articles of incorporation ready. Processors verify this information to comply with anti-money-laundering rules.
Some processors ask for proof of address (a utility bill or lease), your average monthly sales volume, and your industry type. This helps them assess risk. Be honest about these details — misrepresenting your business can result in account closure and frozen funds.
Comparing processor fees and features
The cost of accepting cards varies by processor and payment method. Here is how to compare:
| Processor | In-Person Rate | Online Rate | Monthly Fee | Best For |
|---|---|---|---|---|
| Square | 2.75% + $0.15 | 2.9% + $0.30 | None (optional plans) | Small businesses, mobile payments |
| Stripe | 2.7% + $0.05 | 2.9% + $0.30 | None | Online stores, developers |
| PayPal | 2.75% + $0.15 | 2.99% + $0.49 | None | Existing PayPal users, invoicing |
| Your Bank | Varies | Varies | Often $20–$50 | High-volume businesses, existing customers |
Rates change frequently, so visit each processor's pricing page to confirm current numbers. Also ask about hidden costs: statement fees, batch fees, PCI compliance fees, or chargebacks (when a customer disputes a charge). Some processors bundle these into their rate; others charge separately.
If you process less than $1,000 per month, the difference between processors is small. If you process $10,000 or more monthly, even 0.1 percent difference adds up. Calculate your expected monthly volume and multiply it by each processor's rate to see the real cost.
Security and compliance requirements
PCI DSS compliance is a legal requirement when you accept cards. It means you must protect customer card data from theft and fraud. The good news: if you use a modern payment processor or gateway, they handle most of this automatically. You do not store card numbers on your computer or phone.
What you must do: use a strong password for your processor account, keep your software and operating system updated, use a find internet connection (not public WiFi for sensitive transactions), and never write down or email card numbers. If a customer gives you a card number over the phone, enter it into your processor's system when ready — do not store it in email or a spreadsheet.
If you process more than 6 million cards per year, you may need a formal PCI audit. Most small businesses do not reach this threshold. Ask your processor whether you need additional compliance steps for your volume.
How long it takes to receive your money
Processing time and settlement time are different. Processing time is how long it takes the processor to confirm the transaction — usually when ready to 24 hours. Settlement time is how long until the money appears in your bank account — usually one to three business days.
Most processors deposit funds daily or twice daily. Some offer next-day settlement for an extra fee. If you need cash when ready, this fee may be worth it. If you can wait three days, standard settlement costs nothing.
Weekends and holidays slow deposits. A transaction processed on Friday evening may not settle until Tuesday. Plan your cash flow with this in mind, especially if you have payroll or bills due soon after a sale.
Frequently Asked Questions
Do I need a separate merchant account?
No, not anymore. Modern payment processors like Square and Stripe bundle merchant services into one account. You sign up, connect your bank account, and start processing. Older systems required a separate merchant account through your bank, but most small businesses no longer need this.
What happens if a customer disputes a charge?
The customer contacts their bank and claims the charge was unauthorized or the product was not delivered. The processor notifies you and holds the funds while the bank investigates, usually 10 to 20 days. If the bank sides with the customer, you lose the money and pay a chargeback fee (typically $15 to $100). Keep receipts and delivery proof to fight disputes.
Can I accept cards without a website or physical location?
Yes. You can use a mobile card reader, send invoices with payment links, or use a processor's invoice tool. PayPal, Square, and Stripe all let you email a payment link to a customer. They click it, enter their card, and you receive the money. No website or terminal needed.
What if my processor goes out of business?
Your money in the processor's account is yours, not theirs. By law, processors must return your funds within a set time, usually five to ten business days. Choose an established processor with a long track record to reduce this risk. Avoid brand-new startups with no history.
Do I have to accept all card types?
No. You can choose to accept Visa and Mastercard but not American Express, for example. However, most customers expect you to accept major cards. Limiting your options may cost you sales. Most processors charge slightly different rates for different card types, so compare before deciding which to accept.