What you need to set up credit card acceptance
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 actual device or software your customers use to pay). Many providers bundle these together, so you may sign one contract and get all three.
The simplest route for a small business is a payment service provider like Square, Toast, or Stripe. You read their app or plug in their card reader, and they handle the merchant account and processing behind the scenes. You pay a percentage of each transaction (usually 2.6% to 3.5% plus a small per-transaction fee) and sometimes a monthly fee. No separate bank process required.
If you already have a business bank account, your bank may offer its own payment processing. Call and ask whether they provide merchant services. Banks often charge higher percentages but may waive fees if you maintain a minimum balance.
Key Takeaways
- Payment service providers like Square and Stripe are the fastest way to start accepting cards, with setup taking less than an hour and no separate merchant account process.
- You will pay a percentage of each transaction (typically 2.6% to 3.5%) plus a small per-transaction fee, and these costs vary significantly between providers.
- In-person card readers, online payment forms, and invoicing links all work through the same provider, so you can choose which methods fit your business.
- Your business type and annual card volume affect which providers will work with you and what rates you will pay.
In-person card readers for retail and service businesses
If you take payments face-to-face, you need a card reader that plugs into your phone or tablet. Square Reader, Clover, and Toast all make small devices that connect via Bluetooth or the headphone jack. The customer inserts, taps, or swipes their card, and the payment goes through when ready. You get a receipt printed or emailed to the customer.
Most readers cost between $0 and $50 upfront, though some providers include them free with a contract. The real cost is the per-transaction fee. Square charges 2.6% plus 10 cents per card-present transaction. Clover charges 2.7% plus 8 cents. These small differences add up if you process hundreds of payments a month.
If you run a high-volume business (restaurants, salons, retail stores), look at dedicated point-of-sale systems like Toast or Square for Restaurants. These cost more upfront but include inventory tracking, staff management, and detailed sales reports. They also often negotiate lower per-transaction rates because you are locked into a longer contract.
Online payment forms and shopping carts
If you sell online or send invoices, you need a way for customers to enter their card details securely. Stripe, Square Online, and PayPal all provide payment forms you can embed on your website or send as a link. The customer enters their card number, expiration date, and CVV, and the payment processes when ready.
Stripe is popular with developers because it integrates cleanly with custom websites. Square Online works well if you want a straightforward storefront without coding. PayPal is familiar to many customers and lets them pay without creating a new account. All three handle the security (called PCI compliance) so you do not have to.
Rates for online payments are usually slightly lower than in-person rates because card-not-present fraud is easier to dispute. Stripe charges 2.2% plus 30 cents per online transaction. Square charges 2.9% plus 30 cents. These percentages matter more for online sales because customers expect lower prices and your margins are often thinner.
Invoicing and payment links
If you bill customers after work is done (contractors, consultants, agencies), send them an invoice with a payment link. Square Invoices, Stripe Invoicing, and FreshBooks all let you create an invoice, email it to the customer, and they pay by clicking a link. The payment goes straight to your account.
This method is slower than in-person payment because the customer has to receive the email and remember to pay. But it removes the friction of asking for a card number over the phone. Many customers will pay faster when they can do it themselves.
Invoicing links usually cost the same as online payment forms — around 2.2% to 2.9% plus a small per-transaction fee. Some providers charge a monthly fee for invoicing (FreshBooks starts at $15 a month) but include other business tools like time tracking and expense management.
Choosing between providers based on your business type
Your business type determines which provider makes sense. A food truck or pop-up shop needs a mobile card reader and nothing else — Square or Stripe are both fine. A restaurant needs a full point-of-sale system with kitchen display screens and staff management — Toast or Square for Restaurants. An online store needs a shopping cart and inventory system — Shopify or Square Online. A service business that invoices clients needs invoicing software with payment links — FreshBooks or Stripe Invoicing.
Do not pay for features you will not use. A freelancer sending five invoices a month does not need a $50-a-month point-of-sale system. A retail store with ten employees does not need a straightforward card reader.
Volume also matters. If you process less than $1,000 a month in cards, the difference between a 2.6% rate and a 2.9% rate is $3 a month. If you process $50,000 a month, it is $150 a month. At high volumes, it is worth calling your bank or a dedicated processor to negotiate a custom rate.
What documents and information you will need
Most payment service providers ask for basic business information: your business name, address, phone number, and tax ID. If you are a sole proprietor, they may ask for your Social Security number. If you are an LLC or corporation, they will ask for your EIN.
Some providers ask for a copy of your business license or articles of incorporation. A few ask for a bank statement to verify your business address. High-risk businesses (like cannabis retailers or adult services) may need more documentation or may not be accepted at all.
The process usually takes 10 to 15 minutes. Approval is usually when ready or within 24 hours. Once approved, you can start accepting cards when ready.
Understanding fees and what they cover
Every payment processor charges a percentage of the transaction (the interchange fee) plus a small per-transaction fee. The percentage covers the cost of the card network (Visa, Mastercard, Amex) and the issuing bank. The per-transaction fee covers the processor's cost to handle the payment.
Some providers also charge a monthly fee, usually $0 to $50. This fee is often waived if you process a minimum amount each month. A few charge a statement fee or a PCI compliance fee. Read the pricing page carefully and add up the total cost for your expected monthly volume.
Chargebacks (when a customer disputes a charge) usually cost $15 to $100 per dispute, even if you win. Refunds are free. Some providers charge a fee to withdraw money to your bank account, though most do not.
American Express charges higher fees than Visa or Mastercard — usually 3.5% to 4% instead of 2.6% to 2.9%. If you accept Amex, your blended rate will be higher. Some small businesses decline Amex to keep costs down, though this is less common now.
Getting paid and when money hits your account
When a customer pays, the money does not go to your bank account when ready. Most processors hold the payment for 1 to 3 business days before depositing it. This is called the settlement period. Square and Stripe usually settle in 1 business day. Some banks settle in 2 to 3 days.
The processor deposits the money minus their fees. If a customer paid $100 and the fee was 2.9% plus 30 cents, you receive $96.71. The fee is deducted automatically — you do not pay it separately.
You can usually withdraw money to any bank account you own. Some processors let you withdraw to a debit card or PayPal account instead. A few charge a fee for withdrawals, though most do not.
Frequently Asked Questions
Do I need a business license to accept credit cards?
No. Payment processors do not require a business license. They do ask for a business name and address, which can be your home address if you work from home. Some high-risk businesses (like cannabis or gambling) may be declined regardless of licensing.
What is the difference between a payment processor and a merchant account?
A merchant account is a bank account that receives card payments. A payment processor is the company that handles the transaction. Many providers (like Square) are both — they hold the merchant account and process the payment. Separate merchant accounts through a bank are less common now.
Can I accept credit cards without a physical card reader?
Yes. You can accept payments online through a payment form, send invoices with payment links, or take card details over the phone using a virtual terminal. You do not need a physical reader unless you take payments in person.
What happens if a customer disputes a charge?
The processor contacts you and asks for proof that the transaction was legitimate (like a signed receipt or delivery confirmation). If you provide proof, you usually keep the money. If you do not respond or the proof is weak, the customer gets their money back and you pay a chargeback fee of $15 to $100.
Can I negotiate lower fees with my processor?
Yes, if you process high volume. Call your processor or bank and ask about custom rates. Processors are more willing to negotiate if you process $10,000 or more per month. For low volume, the standard rates are usually the best you will get.