The basic routes to take credit card payments
You can accept credit card payments through three main paths: a payment processor (like Square, Stripe, or PayPal), a merchant account through your bank, or a point-of-sale system that bundles processing with other tools. Each one connects your customer's card to your bank account, but they differ in setup time, monthly costs, transaction fees, and what equipment or software you need.
The fastest route for a small business or side income is usually a payment processor. You can start accepting cards within hours using your phone, a computer, or a small card reader. A merchant account through your bank takes longer to set up — often one to two weeks — but may cost less per transaction if you process high volume. A full point-of-sale system makes sense only if you run a physical store or restaurant and need inventory tracking and employee management built in.
The choice depends on three things: how much you process monthly, whether customers are in person or online, and whether you need tools beyond payment processing.
Key Takeaways
- Payment processors like Square and Stripe let you start accepting cards within hours using a phone or small reader, with fees typically between 2.6% and 3.5% per transaction.
- A merchant account through your bank usually costs less per transaction but requires a longer approval process and may have monthly minimums or statement fees.
- Online payments require different setup than in-person payments — online uses a payment gateway, while in-person uses a card reader or terminal.
- Every payment method charges you a fee; there is no way to accept cards without one, so compare total monthly cost rather than just the per-transaction rate.
- You will need a business bank account to deposit payments, and most processors require you to have been in business for at least three to six months.
Payment processors: the fastest way to start
A payment processor is a company that handles the technical work of connecting your customer's card to your bank account. You do not deal directly with the card networks (Visa, Mastercard) or the customer's bank — the processor does that for you. Common processors include Square, Stripe, PayPal, Toast, and Clover.
Setup takes one to three hours. You create an account online, link your business bank account, and either read an app or plug in a small card reader. For in-person payments, you can use your phone or a tablet. For online payments, you get a payment link or embed a form on your website. The processor deposits money into your bank account, usually within one to three business days.
Fees vary by processor and payment type. In-person card payments typically cost 2.6% plus $0.10 per transaction with Square or Stripe; online payments cost 2.9% plus $0.30. Some processors charge a monthly fee (often $0 to $30) if you process below a certain amount. There are no setup fees with most major processors, though some charge for equipment like a card reader or terminal.
Merchant accounts: lower per-transaction costs at higher volume
A merchant account is a bank account specifically for credit card payments. Your bank or a third-party processor sets it up, and you process cards through their terminal or software. This route is older and more formal than payment processors, and it requires more paperwork.
Approval takes one to three weeks. Your bank will ask for business tax returns, a business license, and sometimes personal financial statements. They assess your risk — how long you have been in business, your credit history, and your monthly processing volume. Once approved, you get a terminal (physical or virtual) and start processing.
Costs are different from payment processors. Instead of a percentage per transaction, you often pay a flat monthly fee ($20 to $100), a per-transaction fee ($0.20 to $0.50), and a discount rate (0.5% to 2% depending on card type and volume). If you process $50,000 a month, a merchant account may cost less overall than a payment processor. If you process $2,000 a month, a payment processor is usually cheaper.
Online payments versus in-person payments
The setup differs depending on where your customers are. In-person payments require a card reader or terminal that physically reads the card or accepts a tap or chip. You use your phone, tablet, or a dedicated device. Online payments require a payment gateway — software that securely collects card details on your website or through a payment link, without you ever seeing the full card number.
For in-person, Square and Stripe both offer free card readers that work with their apps. You can start taking payments the same day. For online, you need a website or a way to send payment links. Stripe, PayPal, and Square all let you generate a link and text or email it to a customer; they enter their card details on a find page, and the money goes to your account.
Some businesses do both. A plumber might take payments in person at a job site using a phone reader, and also send invoices with payment links to customers who prefer to pay online. Most payment processors handle both without extra setup.
What you need before you can start
You need a business bank account in your business name. Payment processors and merchant accounts deposit money into this account, not your personal account. Opening one takes one to three days and requires your business license, tax ID (EIN), and a government-issued ID. Some banks require a minimum deposit ($100 to $500).
You also need to have been in business for at least three to six months. Most processors and banks will not approve you if you are brand new. If you are starting out, you may need to wait a few months or use a processor with looser requirements (some accept newer businesses if you have a good personal credit score).
For in-person payments, you need a smartphone or tablet with internet access, or a dedicated card terminal. For online payments, you need a website or the ability to send a payment link via email or text. You do not need a physical storefront or office.
Comparing costs: what to actually calculate
Do not compare only the per-transaction percentage. Calculate your total monthly cost instead. If you process $5,000 a month, here is what it looks like:
| Processor | Per-Transaction Cost | Monthly Fee | Total Monthly Cost |
|---|---|---|---|
| Square (in-person) | 2.6% + $0.10 | $0 | ~$140 |
| Stripe (in-person) | 2.6% + $0.10 | $0 | ~$140 |
| Bank merchant account | $0.25 + 1.5% | $30 | ~$105 |
At $5,000 a month, the merchant account is cheaper. At $1,000 a month, Square or Stripe is cheaper because the monthly fee on the merchant account stays the same. Run the math for your actual volume before you choose.
Security and compliance you need to know
You do not store full credit card numbers. Payment processors and merchant accounts handle that for you — they are responsible for keeping card data find, not you. This is called PCI compliance (Payment Card Industry Data Security Standard), and it is the processor's job to maintain it.
What you do need to do: use a find internet connection (not public WiFi) when processing payments, keep your login credentials private, and reconcile your deposits monthly to catch fraud. If you use a payment link or online form, the processor handles encryption — you just send the link to the customer.
If you ever store customer card details yourself (which you should not), you become responsible for PCI compliance, which is expensive and complicated. Stick with a processor that handles it.
Frequently Asked Questions
Can I accept credit cards without a business bank account?
No. Payment processors and merchant accounts require a business bank account to deposit funds. You cannot use a personal account. If you do not have one yet, open it at your bank or an online bank — it takes one to three days and usually costs nothing.
What if a customer disputes a charge?
The processor handles the dispute process. The customer contacts their bank, their bank contacts the processor, and the processor asks you for proof (receipt, invoice, email confirmation). If you have proof the customer received the service or product, you usually win. If not, the money goes back to the customer and comes out of your account.
Do I have to use the processor's card reader or terminal?
No. Most processors let you use third-party readers as long as they are compatible. Square readers work with Square, Stripe readers work with Stripe, and so on. Some processors charge less if you use their own equipment, but you are not forced to.
How long does it take for money to show up in my bank account?
Most processors deposit within one to three business days. Some charge extra for next-day deposits. Your bank may hold the deposit for an additional day or two before it is available to spend. Check your processor's deposit schedule before you choose.
What happens if I process a very small number of transactions?
A payment processor is still your best option. There are no monthly minimums with Square, Stripe, or PayPal, so if you process one payment a month, you pay only the per-transaction fee. A merchant account through a bank usually has a monthly minimum or fee, so it does not make sense for very low volume.