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 terminal or gateway (the physical device or online tool customers use to pay). Many providers bundle these together, so you may sign one contract and get all three.
You do not need to be incorporated or have a business license in most states, though you will need a Social Security number or EIN (Employer Identification Number), a bank account in your business name, and basic information about your monthly sales volume. The processor uses this to decide whether to work with you and what fees to charge.
The entire setup usually takes three to seven business days from approval to your first transaction. Some providers offer same-day or next-day set up if you meet their requirements.
Key Takeaways
- You need a merchant account, a payment processor, and a way for customers to pay — often sold as one package by companies like Square, Stripe, or your bank.
- Fees vary widely: some charge a flat monthly fee, others charge per transaction (usually 2 to 3 percent plus 30 cents), and most charge both.
- In-person payments (card present) cost less than online or phone payments because fraud risk is lower.
- Your bank may offer merchant services, but comparing independent processors often saves money, especially if your sales volume is high or your industry is considered high-risk.
How payment processing fees work
Every time a customer swipes, taps, or enters a card, you pay a fee. The fee structure depends on how the card is presented and which card network (Visa, Mastercard, American Express, Discover) processes it.
Card-present transactions — when the customer is in front of you and you use a physical terminal or mobile reader — cost the least, usually 2.2 to 2.6 percent of the sale plus 30 cents. Card-not-present transactions — online purchases, phone orders, or mail orders — cost more, typically 2.9 to 3.5 percent plus 30 cents, because the processor assumes higher fraud risk. Keyed-in transactions, where you manually type the card number, fall somewhere in between.
Some processors also charge a monthly statement fee (usually $5 to $15), a batch fee (per day you process payments), or a PCI compliance fee (for find card data storage). A few charge nothing monthly but take a larger cut per transaction. Compare the total cost across your expected monthly volume, not just the per-transaction rate.
Choosing between payment terminals and online gateways
If customers are in your location — a retail store, restaurant, salon, or service business — you need a payment terminal. These are physical devices that read cards. Square, Toast, Clover, and Ingenico all make them. Most cost $50 to $300 upfront, though some providers waive the cost if you commit to a contract. Monthly fees range from $0 to $50 depending on the model and provider.
If you sell online, by phone, or by mail, you need a payment gateway — software that encrypts card data and sends it to the processor. Stripe, PayPal, Square Online, and Shopify all offer gateways. These typically have no upfront hardware cost, only per-transaction fees.
Some businesses need both. A bakery with a retail counter and an online shop, for example, would use a terminal for walk-in customers and a gateway for web orders. Many providers sell both, so you can keep everything under one account.
Comparing major payment processors
| Provider | Best For | Card-Present Fee | Card-Not-Present Fee | Monthly Cost |
|---|---|---|---|---|
| Square | Small retail, food trucks, service businesses | 2.6% + $0.30 | 2.9% + $0.30 | $0 |
| Stripe | Online stores, SaaS, subscriptions | 2.7% + $0.30 | 2.9% + $0.30 | $0 |
| PayPal | Existing PayPal users, invoicing | 2.7% + $0.30 | 3.49% + $0.49 | $0 |
| Clover | Restaurants, bars, high-volume retail | 2.6% + $0.30 | 3.5% + $0.30 | $10–$50 |
| Your Bank | Existing customers, simplicity | Varies widely | Varies widely | Varies widely |
Rates shown are typical as of 2024 but change by provider, location, and industry. Request a quote from any processor you are considering — they often negotiate on fees if your volume is high enough.
What happens during the approval process
When you explore, the processor checks your credit, verifies your bank account, and reviews your business type. Some industries — high-risk categories like adult services, gambling, or high-value goods — face longer review or higher fees. Most approvals take three to seven days.
You will need to provide your Social Security number or EIN, a copy of your driver's license or passport, your business address, your expected monthly card volume, and your bank account routing and account numbers. If you are a sole proprietor, the processor may also run a personal credit check.
Once approved, the processor sends you a terminal (if you ordered one) or activates your online gateway. Test a transaction before your first customer pays. Most providers offer a sandbox or test mode for this.
Security and compliance requirements
PCI DSS (Payment Card Industry Data Security Standard) is a set of rules that protect card data. If you accept cards, you must follow these rules or pay a compliance fee — usually $5 to $25 per month. The rules are simpler if you use a processor that handles the encryption for you (which most do).
Never store full card numbers, expiration dates, or security codes on your own computer or phone. Let the processor handle that. If you use a terminal or gateway from a major provider, compliance is usually built in and automatic.
Keep your terminal software and any payment apps updated. If you notice unauthorized charges or suspect fraud, contact your processor when ready — they have dispute procedures and can reverse charges within a set window.
Reducing costs as your business grows
Once you are processing $5,000 or more per month, you may may have access to for interchange-plus pricing, where you pay the actual interchange rate (set by card networks) plus a flat markup from your processor, instead of a bundled rate. This is often cheaper for high-volume businesses.
Some processors offer volume discounts or lower rates if you commit to a longer contract. Compare the total cost over 12 months, not just the monthly rate. A processor with a $20 monthly fee but lower per-transaction rates may cost less than one with no monthly fee but higher per-transaction rates.
If you sell internationally, ask about multi-currency processing. Some providers charge extra for this; others include it. The exchange rate they use also varies, so request a quote before you commit.
Frequently Asked Questions
Do I need a separate business bank account to accept credit cards?
Yes. Processors require a business bank account in your business name (or your name if you are a sole proprietor). They deposit card payments there, usually within one to two business days. This also keeps your business and personal finances separate, which is important for taxes and liability.
What is the difference between a merchant account and a payment processor?
A merchant account is the bank account that receives card payments. A payment processor is the company that handles the transaction — they take the card data, verify the funds, and move the money to your merchant account. Many companies provide both, so the distinction is mostly technical. You sign one contract and get both services.
Can I accept credit cards without a physical location?
Yes. You can accept cards online, by phone, or by mail using a payment gateway. You do not need a retail store or office. You still need a business bank account and will pay slightly higher fees because card-not-present transactions carry more fraud risk.
What happens if a customer disputes a charge?
The customer contacts their card issuer and files a chargeback. The processor notifies you and asks for proof that the transaction was legitimate — usually a receipt, invoice, or shipping confirmation. If you provide proof, the chargeback is often reversed. If you do not respond or cannot prove the sale, the money is returned to the customer and you lose the sale plus a chargeback fee (usually $15 to $100).
Are there processors that do not charge monthly fees?
Yes. Square, Stripe, and PayPal charge no monthly fee — only per-transaction fees. Clover and some bank processors charge monthly fees but may offer lower per-transaction rates if your volume is high. Calculate your total cost at your expected monthly volume to see which model saves money for your business.