The three ways to accept credit cards online
You can take credit card payments online through a payment processor (a company that handles the transaction), a payment gateway (software that connects your website to a processor), or a point-of-sale system (hardware and software together). Most small businesses start with a payment processor because it requires no technical setup — you sign up, get a link or form, and start accepting cards the same day.
The processor keeps a small percentage of each transaction, usually 2.2% to 3.5% plus a flat fee per sale. That fee is how they make money, and it's the main cost you'll pay. Different processors charge different rates depending on how you accept the card — in person, online, or over the phone — so the route you choose affects what you pay per transaction.
Your choice depends on three things: how you want customers to pay you (through your website, a text link, an invoice, or in person), how much technical help you need, and whether you already have a business bank account. Most processors require one before you can start.
Key Takeaways
- Payment processors like Stripe, Square, and PayPal let you start taking cards online within hours, with no upfront fees or long contracts.
- You pay a percentage of each transaction (typically 2.2% to 3.5%) plus a small per-transaction fee, and nothing else unless you add extra features.
- Different processors charge different rates depending on whether you accept cards online, in person, or by phone, so compare the rate that matches how you'll actually receive payments.
- You'll need a business bank account, a way to describe what you're selling, and a record of your business structure (sole proprietor, LLC, or corporation) before you sign up.
- Most processors hold a small amount of your money in reserve for the first few months to protect against chargebacks, so your first payout is usually smaller than later ones.
Payment processors for online-only businesses
If you sell only through your website or send payment links to customers, Stripe and Square Online are the most common choices. Stripe lets you embed a payment form directly into your website or send a link via email or text. Square Online is similar but also includes a basic website builder, so you can create a storefront without coding.
Both charge around 2.9% plus $0.30 per online transaction. Neither charges a monthly fee unless you add features like recurring billing or a subscription plan. You can start accepting payments the same day you sign up, though the first payout to your bank account usually takes 2 to 5 business days.
PayPal is another option if you already have a PayPal account. It charges 3.49% plus $0.49 per transaction for online sales, which is slightly higher than Stripe or Square, but many customers recognize the PayPal name and trust it. If you're selling through an existing platform like Shopify or WooCommerce, the payment processor is often built in — you just connect your bank account and turn it on.
Payment processors for in-person and phone payments
Square and Toast are built for businesses that take payments face-to-face or over the phone. Square sells a small card reader that plugs into your phone or tablet, and you can swipe or insert a card right there. Toast is designed for restaurants and bars but works for any business that takes in-person payments regularly.
Square charges 2.6% plus $0.10 per in-person transaction if you use their card reader, which is cheaper than online rates because the card is physically present (lower fraud risk). If you take payments over the phone, the rate jumps to 3.5% plus $0.15 per transaction. The card reader itself costs $29 to $99 depending on the model, but there's no monthly fee.
Toast charges a percentage per transaction plus a monthly software fee, usually $99 to $299 depending on features. It's more expensive than Square but includes built-in tools for inventory, staff management, and customer loyalty programs. If you're a restaurant or retail store, those tools might save you money elsewhere, but if you just need to take payments, Square is usually cheaper.
What you need before you sign up
Every processor asks for the same basic information: your legal business name, your Social Security number or Employer Identification Number (EIN), your business address, and your business bank account number. If you're a sole proprietor (you own the business by yourself), you'll use your personal Social Security number. If you have an LLC or corporation, you'll use your EIN, which you can get free from the IRS website.
You'll also need to describe what you're selling — not just "services" but what kind. A processor needs to know whether you're selling physical goods, digital products, or services because different categories have different fraud and chargeback rates. Be specific: "freelance writing" instead of "services", or "handmade jewelry" instead of "retail".
Finally, have your business bank account open before you explore. Processors send your money there, and they won't start processing until they can verify the account. If you don't have one yet, most banks open a business account in a few days online, though some still require a visit to a branch.
How payment processors protect themselves and you
When a customer disputes a charge with their credit card company, it's called a chargeback. The processor holds back a small percentage of your money — usually 1% to 5% of your total sales — to cover chargebacks and refunds. This reserve is called rolling reserve or held funds.
In your first few months, the processor might hold back 10% to 25% of every payment you receive. As you build a track record with few chargebacks, the reserve shrinks. After 6 to 12 months of clean transactions, most processors release the reserve and you get the full amount of each sale within 1 to 2 business days.
You're also responsible for refunding customers if they're unhappy. Most processors let you issue a refund through your dashboard, and the money goes back to the customer's card within 3 to 5 business days. If a customer claims they never received what they paid for, the processor will ask you for proof — a tracking number for shipped goods, or a record of service delivery — before they side with you in a dispute.
Comparing rates across processors
The difference between 2.2% and 3.5% seems small, but it adds up. On $10,000 in sales, the difference is $130. Over a year, that's $1,560. Before you sign up, write down how you'll actually receive payments — online, in person, or by phone — and then look up the rate for that specific method at each processor you're considering.
Don't just look at the percentage. Add the per-transaction fee too. Stripe charges 2.9% plus $0.30 online; PayPal charges 3.49% plus $0.49. On a $50 sale, Stripe costs $1.75 and PayPal costs $2.23. On a $500 sale, Stripe costs $14.80 and PayPal costs $17.94. The bigger your average sale, the more the percentage matters. The smaller your average sale, the more the flat fee matters.
Also ask about hidden fees. Some processors charge extra for things like chargebacks, refunds, or monthly statements. Most don't, but it's worth asking before you commit. Read the pricing page carefully — it should list every fee you might pay.
Getting started with your first processor
Sign up on the processor's website. You'll fill out a form with your business information, bank account details, and a description of what you sell. The processor will verify your information — this usually takes a few minutes to a few hours, though some do a deeper background check that takes 1 to 3 business days.
Once you're approved, you'll get a dashboard where you can see all your transactions, issue refunds, and read reports. If you're taking payments online, you'll get a payment link or embed code to put on your website. If you're taking payments in person, you'll read an app to your phone or tablet and connect your card reader.
Test the payment flow before you tell customers about it. Make a small test purchase yourself to make sure the form works, the payment goes through, and the money appears in your bank account. This usually takes 2 to 5 business days for the first payout, so don't panic if you don't see it when ready.
Frequently Asked Questions
Do I need a website to take credit card payments online?
No. You can send a payment link via email or text message, and the customer clicks it to pay. Stripe, Square, and PayPal all let you generate a link without a website. If you want a storefront where customers can browse and buy, you'll need a website or a platform like Shopify, but a straightforward payment link works for invoices, donations, or one-off sales.
What happens if a customer disputes a charge?
The processor will contact you and ask for proof that the customer received what they paid for — a tracking number, a receipt, an email confirmation, or a record of service. If you can prove delivery or completion, the processor sides with you and the customer loses the dispute. If you can't prove it, the processor refunds the customer and takes the money from your account.
Can I use a personal bank account instead of a business account?
Most processors require a business bank account, but some will accept a personal account if you're a sole proprietor. Check the processor's requirements before you sign up. Even if they allow it, a business account keeps your personal and business money separate, which makes taxes and record-keeping easier.
How long does it take to get paid after a customer buys something?
Your first payout takes 2 to 5 business days. After that, most processors pay you daily or weekly, depending on your settings. Some hold back a percentage as rolling reserve for the first few months, so you might see a smaller payout than you expected at first.
What's the difference between a payment processor and a payment gateway?
A processor is a company that handles the whole transaction — they take the payment, verify the card, and send you the money. A gateway is just the software that connects your website to a processor. Most small businesses use a processor because it's simpler. You only need a separate gateway if you already have a processor and want to use a different one, or if you're building a custom system.