The three ways to take credit cards: in person, online, or by phone
You can accept credit cards through a payment processor — a company that handles the transaction between your customer's bank and yours. The processor charges you a fee (usually 2 to 3 percent of each sale, plus a small flat fee). You pick the method that fits how you do business: a card reader plugged into your phone or tablet for in-person sales, a payment link or checkout page for online orders, or a virtual terminal where you type in card details over the phone.
Each method uses the same underlying system, but the setup and monthly costs differ. A coffee shop needs a different solution than a freelancer taking payments by email, which is different from an e-commerce store. The processor you choose determines which methods you can use, so start by deciding how your customers will actually pay you.
Key Takeaways
- Payment processors charge a percentage of each transaction (typically 2 to 3 percent) plus a small per-transaction fee, and these rates vary by processor and by card type.
- Square, Stripe, PayPal, and Toast are common processors for small business, each with different strengths depending on whether you sell in person, online, or both.
- In-person card readers cost $20 to $100 upfront and work with your phone or tablet; online checkout pages require no hardware but need a website or a payment link.
- You will need a business bank account to receive payments, and the processor will deposit funds there within one to three business days after each sale.
- Chargebacks (when a customer disputes a charge) happen occasionally and cost you the sale amount plus a $15 to $100 fee, so keep receipts and clear records.
In-person payments: card readers and point-of-sale systems
If you sell face-to-face — at a shop, market, event, or service location — you need a card reader that plugs into your phone or tablet. Square Reader, Stripe Terminal, and PayPal Here are the most common. The reader itself costs $20 to $100 depending on the model. You read the processor's app, insert or tap the card, and the payment goes through in seconds. The customer gets a receipt on your phone, and you get a copy in your email.
Some processors also offer full point-of-sale systems — software that tracks inventory, staff, and sales history in addition to taking payments. Toast and Square both offer this. A point-of-sale system costs more upfront (sometimes $50 to $300 per month) but saves time if you run a restaurant, salon, or retail store where you need to track what sold and who worked that shift.
For a straightforward setup, a basic card reader and the processor's free app are enough. You pay per transaction and nothing monthly. For a busier business, a point-of-sale system pays for itself by cutting down on manual work and theft.
Online payments: checkout pages and payment links
If you sell online — through a website, email invoice, or social media — you need a payment link or checkout page. A payment link is a URL you send to a customer; they click it, enter their card details, and the payment posts to your account. Stripe, PayPal, and Square all offer this. You do not need a website or any technical setup. You can send a link via email, text, or social media.
A checkout page is built into your website and lets customers pay without leaving your site. This requires a website (which you can build on Shopify, Wix, or WordPress) and integration with a processor. The processor handles the payment; your website handles the product display and order details. Most small e-commerce sites use Shopify or WooCommerce because the payment processor is already built in.
Both methods charge the same per-transaction fee as in-person payments. The difference is convenience: a payment link works when ready with no setup, but a checkout page looks more professional and keeps customers on your site longer.
Comparing the major processors for small business
| Processor | Best for | Per-transaction fee | Monthly fee | Hardware cost |
|---|---|---|---|---|
| Square | Retail stores, restaurants, markets | 2.6% + $0.10 | $0 (basic) to $300+ (point-of-sale) | $29 to $99 |
| Stripe | Online stores, invoicing, subscriptions | 2.9% + $0.30 | $0 | $29 to $79 |
| PayPal | Existing PayPal users, invoicing | 2.99% + $0.30 | $0 | $20 to $99 |
| Toast | Restaurants and bars | 2.49% + $0.10 | $99 to $300+ | $0 to $200 |
These rates are current examples and change by processor and by card type (debit cards, American Express, and international cards each have different rates). The fees listed are for standard credit cards in the United States. Keyed-in payments (where you type the card number instead of swiping) often cost more because they are riskier for fraud.
Square and PayPal are easiest to start with because they have no monthly fee and work on any phone. Stripe is popular with online stores because it integrates smoothly with most website builders. Toast costs more but is built specifically for restaurants and includes staff management and kitchen display systems.
What you need to set up: bank account, tax ID, and business details
Before you sign up with a processor, you need a business bank account in your business name. The processor will deposit payments there. If you use your personal account, the processor may freeze it or close it without warning because personal accounts are not meant for business income.
You will also need your Employer Identification Number (EIN) or Social Security Number, your business address, and a phone number. If you are a sole proprietor (you own the business by yourself), you can use your Social Security Number. If you have a business entity like an LLC or corporation, you need an EIN, which you get free from the IRS website.
The processor will ask for this information when you sign up. They use it to verify you are a real business and to report your income to the IRS at the end of the year. This takes 10 to 15 minutes. Most processors fund your account within one to three business days.
Fees, deposits, and what happens when a customer disputes a charge
Every time a customer pays with a card, the processor takes a cut. For a $100 sale at Square's standard rate (2.6% + $0.10), you receive $97.29. The processor keeps $2.71. This happens automatically — you do not have to do anything. The money lands in your business bank account within one to three business days, depending on the processor and your bank.
Occasionally a customer will dispute a charge — they claim they did not make the purchase, or the product did not arrive, or the charge was wrong. This is called a chargeback. The processor reverses the payment from your account and charges you a fee (usually $15 to $100). You can fight the chargeback by providing proof — a receipt, a shipping confirmation, an email from the customer — but this takes time and you might lose anyway. The best defense is clear communication: send receipts, confirm orders in writing, and keep records for at least 90 days.
Some processors offer chargeback protection or fraud insurance as an add-on, but these are expensive and rarely worth it for a small business. Instead, keep your records organized and respond quickly if a customer complains.
Getting started: which processor to choose and how to sign up
Start by deciding how you sell: in person, online, or both. If you sell in person, Square or PayPal are the fastest to set up — read the app, plug in a card reader, and you are ready. If you sell online, Stripe or Shopify (which uses Stripe) are the standard. If you run a restaurant or bar, Toast is worth the extra cost because it handles staff and kitchen operations too.
Go to the processor's website and click "Sign Up" or "get your free guide". You will enter your business name, address, phone number, and bank account details. The processor will verify your information (this usually takes a few minutes to a few hours) and then you can start taking payments. Most processors let you test the system with fake card numbers before you go live.
You do not need to commit to one processor forever. You can switch later if you find a better fit. But switching means updating your payment links, your website checkout, and telling customers about the change, so pick one that matches your business now and plan to stick with it for at least a year.
Frequently Asked Questions
Do I have to use a payment processor, or can I take cards directly?
You cannot process credit cards on your own. You must use a payment processor — they handle the connection to the card networks and your customer's bank. The processor is the middleman that makes the transaction safe and legal. You could also take cash or checks, but for cards, a processor is required.
What is the difference between a debit card and a credit card fee?
Debit card fees are usually lower (around 1 to 2 percent) because they are less risky for fraud. Credit card fees are higher (2 to 3 percent) because the card issuer takes a cut and the risk of chargeback is greater. Your processor charges different rates for each, so your actual cost per transaction varies depending on what card the customer uses.
Can I accept payments without a business bank account?
Most processors require a business bank account because they need somewhere to deposit the money. Some will accept a personal account if you are a sole proprietor, but this creates tax and legal problems. Open a business account — it is free or low-cost at most banks and protects you if there is ever a dispute.
How long does it take to get paid after a customer swipes their card?
The money usually lands in your bank account within one to three business days. Some processors offer next-day deposits for an extra fee. Weekends and holidays slow things down, so a Friday payment might not show up until Tuesday. Check your processor's deposit schedule when you sign up.
What happens if a customer's card is declined?
The processor will tell you the card was declined and why (insufficient funds, expired card, fraud block, etc.). You can ask the customer for a different card or payment method. The declined transaction does not cost you anything — you only pay fees on successful sales.