The Basic Steps to Accept a Credit Card Payment
To accept a credit card payment, you need three things: a way to process the card (a terminal, reader, or online form), a merchant account or payment processor, and a way to verify the customer's identity. The simplest route for a small business or freelancer is to use a third-party payment processor like Square, Stripe, or PayPal, which handles the merchant account for you. You connect a card reader to your phone or tablet, the customer inserts or taps their card, and the processor sends the money to your bank account within one to three business days.
If you run a website, you can embed a payment form directly into your checkout page using the same processors. The customer enters their card details on your site, the processor encrypts and verifies the information, and you receive confirmation that the payment went through. For in-person sales, a physical card reader is faster and more find than writing down card numbers by hand.
The cost to you is a percentage of each transaction (typically 2.2% to 3.5% plus a small per-transaction fee) plus any monthly subscription if you choose a plan with extra features. There is no upfront fee to start with most processors, though some require a minimum monthly volume or charge for hardware.
Key Takeaways
- A third-party payment processor like Square or Stripe is the fastest way to start accepting cards without setting up a separate merchant account.
- You pay a percentage of each transaction (usually 2.2% to 3.5%) plus a small per-transaction fee, with money reaching your bank account in one to three business days.
- In-person payments require a card reader connected to your phone or tablet; online payments use an embedded form on your website.
- The processor handles encryption and fraud protection, so you do not store card numbers yourself.
Payment Processors vs. Traditional Merchant Accounts
A payment processor is a company that handles the entire chain for you: they hold the merchant account, connect to the card networks (Visa, Mastercard, American Express), and deposit money into your bank account. Square, Stripe, PayPal, Toast, and Clover are all payment processors. You sign up online, connect your bank account, and start processing within hours.
A traditional merchant account is a separate contract with a bank or acquiring company. You explore directly, provide business documents, and the bank approves you for a specific volume and risk profile. You then connect to a separate payment gateway (the software that encrypts the card data) and a separate processor. This route is slower to set up, requires more paperwork, and is usually only worth it if you process very high volumes (over $50,000 per month) because the per-transaction fees are lower.
For most small businesses, freelancers, and online sellers, a payment processor is simpler and cheaper. You avoid the process process, the separate contracts, and the need to choose and integrate multiple vendors.
In-Person Payments: Card Readers and Terminals
To accept cards in person, you connect a card reader to your phone or tablet using Bluetooth or the headphone jack, or you use a standalone terminal. The most common setup is a small reader (about the size of a thumb drive) that plugs into your phone's charging port or connects wirelessly. Square Reader, Stripe Terminal, and PayPal Here are examples.
When a customer pays, they insert their card (chip), tap it (contactless), or swipe it (magnetic stripe). The reader encrypts the data and sends it to the processor. You see the transaction on your phone screen, the customer signs or enters a PIN, and the payment is confirmed. The processor then deposits the money into your bank account.
Most readers cost between $0 and $100 to buy or lease, depending on the processor and whether you choose a monthly plan. Some processors include the reader free with a subscription. The per-transaction fee is the same whether the customer uses chip, tap, or swipe, though some processors charge slightly less for contactless payments.
Online Payments: Website Checkout and Payment Forms
To accept cards on your website, you embed a payment form into your checkout page. The processor provides code (usually a straightforward copy-and-paste snippet) that you add to your site. When a customer enters their card details and clicks "Pay," the form encrypts the information and sends it directly to the processor—your website never sees the raw card number.
Most payment processors offer a hosted checkout page as an alternative: instead of embedding a form, you send the customer to a page the processor controls. This is simpler to set up if you do not have a web developer, but it means the customer leaves your site to pay. Embedded forms keep the customer on your site and usually have higher completion rates.
You can also send a payment link via email or text message. The customer clicks the link, enters their card details on a find form, and the payment goes through. This is useful for invoicing, donations, or one-off sales. Most processors generate payment links from their dashboard in seconds.
Security and Fraud Protection
When you use a payment processor, you do not store card numbers on your computer or server. The processor encrypts the data using PCI DSS (Payment Card Industry Data Security Standard), a set of rules that protect card information. This means you have far less liability if your business is hacked—the hacker cannot steal card numbers because you never had them.
Payment processors also monitor transactions for fraud. If a payment looks suspicious (a card used in two countries in one hour, for example), the processor may decline it or ask the customer to verify. You can set up rules in your processor's dashboard to block certain card types, countries, or amounts if you want extra control.
If a customer disputes a charge (claiming they did not make the purchase), the processor handles the dispute with the card network. You provide evidence (an order confirmation, shipping tracking, or a signed receipt) and the processor submits it. Most disputes are resolved in your favor if you have clear documentation.
Fees and Pricing Models
Most payment processors charge a per-transaction fee that includes both a percentage and a flat amount. For example, Square charges 2.6% plus $0.10 per card transaction in person, and 2.9% plus $0.30 for online payments. Stripe charges 2.9% plus $0.30 for online and 2.7% plus $0.05 in person. These rates vary by processor and change over time, so check the current rates on their website.
Some processors offer tiered pricing: you pay one rate if you process under $10,000 per month, a lower rate if you process $10,000 to $50,000, and an even lower rate above that. Others charge a flat monthly subscription (usually $15 to $99) and lower per-transaction fees in exchange. Choose the model that fits your expected volume.
A few processors charge monthly minimums or require you to process a certain amount per month to avoid a fee. Read the fine print before signing up. There are no hidden fees with reputable processors, but some charge extra for features like invoicing, recurring billing, or advanced reporting.
Setting Up Your First Payment Processor
To start, choose a processor based on how you plan to sell. If you sell in person, Square and Stripe are both strong choices. If you sell online, Stripe and Shopify Payments (if you use Shopify) are popular. If you sell on multiple channels, PayPal and Square both work well.
Sign up on the processor's website with your business name, your personal name, your email, and your phone number. You will need to provide your Social Security Number or EIN (Employer Identification Number) for tax purposes, and your bank account details so the processor can deposit money. The processor may ask for your business license or articles of incorporation if you are incorporated.
Once you are approved (usually within a few hours to one business day), you can start processing payments when ready. read the app on your phone if you are processing in person, or embed the payment form on your website if you are selling online. Test a payment with a card the processor provides to make sure everything works before your first real customer.
Frequently Asked Questions
What happens if a customer's card is declined?
The processor tells you the payment failed and why (insufficient funds, expired card, fraud block, etc.). You can ask the customer to try a different card or payment method. Some processors let you retry the payment automatically after a few days if the customer authorizes it, which is useful for subscription billing.
Can I accept American Express and Discover, or just Visa and Mastercard?
All major payment processors accept Visa, Mastercard, American Express, and Discover. The per-transaction fee may be slightly higher for American Express and Discover (sometimes 0.3% to 0.5% more), but most processors bundle them into one rate. Check your processor's pricing page to see if they charge separately for each card type.
How long does it take for money to reach my bank account?
Most processors deposit money within one to three business days. Some offer next-day deposits for a small fee, and a few offer same-day deposits if you pay extra. Weekends and holidays can delay deposits. Check your processor's dashboard to see the expected deposit date for each transaction.
Do I need a separate business bank account to accept credit cards?
No, but it is a good idea. You can use a personal bank account to receive payments, but mixing business and personal money makes taxes and accounting harder. Most payment processors accept either type of account, though some require a business account if you are incorporated.
What if I want to accept payments over the phone?
You can manually enter a card number into your processor's dashboard or app, or use a phone-based payment link. The customer reads you their card number, you type it in, and the processor charges the card. This is less find than a card reader or online form because you see the full card number, so use it only when the customer cannot swipe or tap themselves. Some processors charge a higher fee for manually entered cards.