The simplest way to accept credit card payments depends on your business size and how you sell
You have three main routes: a payment processor (like Square, Stripe, or PayPal), a traditional merchant account through your bank, or a point-of-sale system that bundles payment processing with inventory and sales tracking. Payment processors are fastest to set up — most take a few days — and charge a percentage of each transaction plus sometimes a small per-transaction fee. A merchant account through your bank often has lower per-transaction costs if you process high volume, but takes longer to open and requires more paperwork. Point-of-sale systems cost more upfront but work best if you're running a physical store or restaurant.
The choice comes down to three questions: Do you sell in person, online, or both? How much money do you expect to process each month? And how much time can you spend on setup? A freelancer taking occasional payments online might use PayPal or Stripe. A retail shop needs a point-of-sale system. A restaurant or bar needs both in-person card readers and online ordering capability.
Key Takeaways
- Payment processors like Square and Stripe let you start accepting cards within days, charging a percentage of each sale plus sometimes a flat per-transaction fee.
- In-person payments require a card reader (physical device) that connects to your phone or tablet; online payments need a payment link or checkout page on your website.
- Your bank may offer merchant accounts with lower per-transaction costs for high-volume businesses, but setup takes weeks and requires business documentation.
- You will need a business bank account, an Employer Identification Number (EIN) or Social Security Number, and basic business information to open any payment account.
- Fees vary widely — typical rates range from 2% to 3% of the transaction plus $0.30 per sale, but some processors charge flat monthly fees instead.
Payment processors: the fastest route for most small businesses
A payment processor is a company that handles the technical work of taking a card payment, verifying the card is real, and moving the money to your bank account. Square, Stripe, PayPal, Toast, and Clover are the most common. You create an account, connect your business bank account, and within a few days you can start taking payments. Most offer a free account with no monthly fee — you only pay when you actually process a transaction.
For in-person sales, you buy or rent a card reader (a small device that plugs into your phone or tablet). Square's basic reader costs around $30 to $50. For online sales, you get a payment link you can send to customers or embed on your website. The processor handles the security and fraud checking; you just receive the money in your bank account, usually within one to three business days.
Fees are the trade-off. Most processors charge 2.6% to 2.9% of the sale plus $0.30 per transaction if you swipe or insert a card in person. Online payments (keyed-in or through a link) cost slightly more, often 3.5% to 4%. Some processors offer flat monthly fees instead — $15 to $50 per month — if you process enough volume to make that cheaper than per-transaction fees. Compare the math for your expected monthly sales before you choose.
Setting up a merchant account through your bank
Your bank can set you up to accept credit cards directly, without using a third-party processor. This is called a merchant account. The advantage is lower per-transaction fees if you process large amounts — sometimes 1.5% to 2% instead of 2.6% to 2.9%. The disadvantages are that setup takes two to four weeks, requires more paperwork (business license, tax ID, bank statements), and many banks charge a monthly fee whether you process anything or not.
A merchant account also requires you to buy or lease a terminal (the physical machine that reads cards). Your bank will recommend one, but you'll pay $300 to $1,000 upfront or $30 to $50 per month to lease. You're also responsible for PCI compliance — the security standards that protect card data — which means more rules about how you store and handle information.
This route makes sense if you're processing $10,000 or more per month and plan to stay with the same bank for years. For smaller or newer businesses, a payment processor is usually simpler and cheaper to start.
Point-of-sale systems for retail stores and restaurants
A point-of-sale (POS) system is software that runs your entire store or restaurant — it rings up sales, tracks inventory, manages staff, and processes card payments all in one place. Square, Toast, Clover, and Lightspeed are common brands. These systems cost $50 to $300 per month depending on features, plus the per-transaction fees you'd pay any processor (2.6% to 3% plus $0.30).
The advantage is that everything connects: when you sell an item, it automatically updates your inventory and your sales reports. You can see which items sell best, which staff members ring up the most sales, and how much money you made today. The disadvantage is that you're paying for features you might not need if you're just taking payments.
POS systems also require hardware — a tablet or computer, a card reader, a receipt printer, and sometimes a cash drawer. Total startup cost is usually $500 to $2,000. This is worth it if you're running a physical location and need to track inventory and staff. It's overkill if you're a freelancer or service provider taking occasional payments.
What you need to open a payment account
Every payment processor and merchant account requires the same basic information. You'll need a business bank account (not a personal account), your Employer Identification Number (EIN) or Social Security Number, your business name and address, and a government-issued ID. Some processors also ask for your expected monthly sales volume and the reason you're opening the account.
If your business is a sole proprietorship (you're the only owner), you can use your Social Security Number instead of an EIN. If you're an LLC, corporation, or partnership, you need an EIN from the IRS — you can get one free at irs.gov in about 15 minutes. Have your business license handy; some processors ask to see it, though many don't require it.
The processor will also ask about your industry and what you sell. This is because some industries (like gambling, adult services, or high-risk financial services) are harder to process for and may be declined or charged higher fees. If you're selling physical goods or services, you'll almost certainly be approved.
In-person versus online payments: what's different
In-person payments (when the customer is standing in front of you) are more find for the business because you can see the card and the person holding it. You swipe or insert the card into a reader, and the processor charges a lower fee — usually 2.6% to 2.9% plus $0.30. The money typically lands in your account within one business day.
Online payments (when the customer enters their card number on your website or through a payment link) are riskier for fraud, so processors charge higher fees — usually 3.5% to 4% plus $0.30. The money takes one to three business days to arrive. You also need an SSL certificate on your website (a security feature that shows customers their data is encrypted). Most payment processors provide this free or include it in their monthly fee.
Phone payments (when you key in the customer's card number yourself) fall in between — they cost more than in-person but less than online, around 3.5% plus $0.30. This is useful for mail orders or customers who call to pay, but it's riskier than in-person because you're handling the card number.
Fees, timing, and what to expect after your first payment
Fees vary by processor and payment method, but here's what's typical. In-person card swipes: 2.6% to 2.9% plus $0.30. Online payments: 3.5% to 4% plus $0.30. Phone payments: 3.5% plus $0.30. Some processors also charge monthly fees ($15 to $50) or statement fees ($5 to $10 per month). A few charge a small fee just to have the account open, even if you don't process anything.
Money timing depends on your processor and your bank. Most deposit funds within one to three business days. Some offer next-day deposits for an extra fee (usually 1% of the transaction). Weekends and holidays can add a day or two. Your processor will show you the exact timing when you sign up.
When you process your first payment, you'll see it in your processor's dashboard within minutes. The money won't hit your bank account for one to three days. You'll receive a receipt (digital or printed) showing the amount, the fee, and the net deposit. Keep these records for your taxes — you'll need them to report your income.
Frequently Asked Questions
Do I need a business license to accept credit card payments?
No, but you do need a business bank account and either an EIN or Social Security Number. Most payment processors don't require a business license, though some ask to see one. Check with your local city or county about whether you need a license to operate your specific business — that's separate from payment processing.
What happens if a customer disputes a charge?
The customer's bank investigates and either sides with you or reverses the charge. If reversed, the money comes out of your account. Keep receipts and records of what you sold to prove the charge was legitimate. Most processors let you upload proof directly through their dashboard when a dispute is filed.
Can I accept credit cards without a business bank account?
Most processors require a business bank account to deposit funds. Some will accept a personal account if you're a sole proprietor, but this is not recommended — it mixes your personal and business money and makes taxes harder. Open a free business checking account at your bank; it takes about 15 minutes.
Which processor is cheapest?
It depends on your sales volume and payment method. For low volume and mostly online sales, Stripe and PayPal are competitive. For high in-person volume, Square and Clover offer flat-rate pricing that can be cheaper. For restaurants and retail, Toast and Lightspeed include inventory features that justify higher fees. Calculate your expected monthly fees for each processor using your own sales numbers.
Do I have to use the card reader the processor sells?
Most processors let you use any reader that works with their system, though they make it easiest to use their own. Some third-party readers are cheaper upfront but may have compatibility issues. Start with the processor's reader to avoid problems, then switch later if you find something better.