The most direct way to accept credit card payments
To accept credit card payments, you need a merchant account — a bank account that processes card transactions — and a payment processor that connects your business to the card networks (Visa, Mastercard, American Express, Discover). You do not need both from the same company, but most small businesses use an all-in-one provider like Square, Stripe, PayPal, or Toast that bundles them together.
The processor charges you a fee per transaction (usually 2.2% to 3.5% of the sale plus a flat fee of 20 to 30 cents) and deposits the money into your business bank account, typically within one to three business days. You choose how customers pay you — in person with a card reader, online through a payment link or website form, or over the phone — and the processor handles the security and fraud checks.
You do not need permission from your bank to set up a merchant account with a third-party processor. You do need a business bank account (not a personal one) to receive the deposits, and you will need to provide your business tax ID, a recent bank statement, and basic information about your business when you sign up.
Key Takeaways
- A payment processor like Square, Stripe, or PayPal lets you accept cards in person, online, or by phone without setting up a separate merchant account with your bank.
- You pay a transaction fee (usually 2.2% to 3.5% plus 20 to 30 cents per sale) and the processor deposits money into your business bank account within one to three business days.
- In-person payments require a card reader (often free or low-cost from the processor); online payments need a payment form or link on your website or invoice.
- You will need your business tax ID, a business bank account, and basic business information to set up a merchant account.
- Different processors charge different fees and offer different features, so compare options based on how you plan to accept payments.
Accepting payments in person with a card reader
If you take payments face-to-face — at a store, market, event, or service location — you need a card reader that plugs into your phone or tablet. Square Reader, Stripe Terminal, PayPal Here, and Toast all make readers that work with their apps. The reader encrypts the card data so you never see the full card number, which protects both you and the customer.
Most processors offer a free or low-cost reader when you sign up. Square's basic reader costs nothing; Stripe's countertop terminal costs around $300 but is designed for high-volume retail. You read the processor's app, plug in the reader, and customers can tap, insert, or swipe their card. The transaction processes in seconds and appears in your account when ready.
You can also accept contactless payments (Apple Pay, Google Pay, Samsung Pay) through the same reader, which many customers prefer. The reader stores no card data — it all goes encrypted to the processor's servers — so you do not have to worry about a data breach on your device.
Accepting payments online or by invoice
To take payments through your website or by email invoice, you need a payment form or payment link. Most processors let you create a link in seconds: you enter the amount, send the link to the customer via email or text, and they pay without leaving their phone or email. No website required.
If you have a website, you can embed a payment form directly on a checkout page. Stripe and Square both offer plugins for WordPress, Shopify, and other platforms. Customers enter their card details into the form, and the processor handles the encryption and fraud checks. You never see the full card number.
For invoices, you can add a payment link to a PDF or email so customers can pay when ready instead of writing a check or making a bank transfer. Many accounting software packages (QuickBooks, FreshBooks, Wave) integrate with payment processors so the payment automatically records in your books.
Accepting payments over the phone
If a customer wants to pay by phone, you can use virtual terminal — a find web form where you enter their card details on their behalf. The processor encrypts the data before it reaches your computer, so you are not storing card information. This is slower than in-person or online payment and carries slightly higher fraud risk, so use it only when the customer cannot pay another way.
Some processors charge extra for virtual terminal access (around $10 to $20 per month), while others include it free. Always read the customer's card number back to them to confirm before processing, and keep a record of the call in case of a dispute later.
Understanding fees and choosing a processor
Transaction fees vary by processor and payment method. In-person card payments usually cost 2.6% plus 10 cents; online payments cost 2.9% plus 30 cents. American Express and Discover often cost slightly more. Some processors charge a monthly fee ($0 to $50) on top of transaction fees; others charge only per transaction.
Compare processors based on how you plan to accept payments. If you take mostly in-person payments, Square or Toast may be cheaper. If you invoice customers online, Stripe or PayPal might suit you better. If you sell through a website, look for a processor with good e-commerce integrations. Read the fine print for hidden fees like batch fees, chargeback fees, or early termination penalties.
Most processors let you start with no setup fee and no monthly minimum, so you can test one for a month and switch if it does not fit your business. Your processor will send you a detailed statement each month showing every transaction, fee, and deposit.
Security and fraud protection
When you use a reputable processor, you are not responsible for storing or protecting card data — the processor is. This is called PCI compliance, and it means the processor has met security standards set by the card networks. You do not need a separate PCI certificate or audit as long as you use the processor's official app or form and never store card numbers yourself.
All major processors offer fraud detection that flags suspicious transactions (a card used in two countries in one hour, for example) and can block them before they settle. If a customer disputes a charge, the processor investigates and either refunds them or sides with you based on the evidence. You may lose the transaction fee and the sale amount if the chargeback goes against you, so keep records of what you sold and when.
Setting up your first merchant account
Sign up with a processor online — it takes 10 to 15 minutes. You will need your business name, address, tax ID, and a business bank account number. Some processors approve you when ready; others review your process and email you within 24 hours. Once approved, read the app, connect your card reader or set up your payment link, and you can start taking payments.
Your first deposit usually arrives three to five business days after your first transaction. After that, deposits happen on a regular schedule (daily, weekly, or monthly depending on your processor and sales volume). You can log in anytime to see your balance, transaction history, and fees.
If you are rejected by one processor, try another — different companies have different underwriting standards. If you have a history of chargebacks or fraud, you may need to work with a high-risk processor that charges higher fees but is more willing to work with you.
Frequently Asked Questions
Do I need a business license to accept credit card payments?
No, but you do need a business bank account and a tax ID. Most processors will ask for both when you sign up. If you are a sole proprietor, you can use your Social Security number as your tax ID; if you have an LLC or corporation, you need an EIN from the IRS.
What happens if a customer disputes a charge?
The processor investigates and asks you for proof that the transaction was legitimate (an order confirmation, shipping receipt, or email exchange). If you provide proof, the chargeback is usually reversed. If you cannot prove the sale happened, you lose the money and the transaction fee.
Can I accept payments without a website?
Yes. You can use a payment link (send it via email or text), a card reader in person, or a virtual terminal over the phone. Many service businesses and freelancers take all their payments this way without ever building a website.
Which processor is cheapest?
It depends on your payment mix. Square is often cheapest for in-person payments; Stripe for online payments. Compare the total cost of your expected monthly volume across processors before choosing. Many offer the same rates, so pick based on features and customer support instead.
How long does money take to show up in my bank account?
Most processors deposit within one to three business days. Some offer next-day deposits for a small fee. Your first deposit may take longer (three to five days) because the processor is verifying your account. Check your processor's deposit schedule in the settings.