The three ways to accept 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. Most small businesses use one of three setups: a physical card reader at your location (in-person), a website checkout page (online), or a phone or invoice system (remote). Each has different costs, equipment needs, and fraud protections.
The processor takes a cut of each transaction, usually between 1.5% and 3.5% depending on the method and your volume. You also pay monthly fees, per-transaction fees, or both — the structure varies by provider. Before you choose, know what you'll actually pay on a typical sale, not just the advertised rate.
You don't need a separate business bank account to accept cards, but you do need a way to receive the money. Most processors deposit funds into whatever bank account you give them, often within one to three business days.
Key Takeaways
- In-person card readers (Square, Toast, Clover) charge 2.6% to 2.9% per swipe and require no monthly fee; online checkout (Stripe, PayPal) charges 2.2% to 2.9% plus 30 cents per transaction; phone payments cost 3.5% or more.
- You need a merchant account or a payment processor that handles one for you — most modern processors do this automatically.
- Interchange fees (set by Visa and Mastercard, not your processor) make up most of your cost and vary by card type and how you accept the payment.
- PCI compliance (Payment Card Industry standards) is required by law; most processors handle it for you, but you must never store full card numbers yourself.
- Chargebacks happen when a customer disputes a charge; keeping clear records and delivery proof protects you from losing both the sale and the fee.
In-person payments: card readers and point-of-sale systems
If you have a physical location or meet customers in person, a card reader plugs into your phone, tablet, or computer. Square Reader, Clover, and Toast are the most common. You swipe, insert, or tap the card, and the transaction goes through in seconds. The customer gets a receipt on your device or by email.
Costs for in-person payments are usually the lowest: around 2.6% to 2.9% per transaction with no monthly fee. Some providers charge a small monthly fee ($0 to $30) if you want extra features like inventory tracking or staff management. The card reader itself is often free or costs $20 to $100 upfront.
The trade-off is that you need to be present with the device. If you're a plumber, contractor, or service provider who visits customers, you can bring a portable reader. If you run a retail shop, a full point-of-sale system (which includes a register, receipt printer, and customer display) costs more but handles multiple transactions at once and tracks inventory.
Online payments: checkout pages and payment links
Stripe, PayPal, and Square Online let customers pay through your website or a link you send them. You embed a checkout form on your site, or you generate a unique payment link for each invoice and email it to the customer. They enter their card details, and the money goes to your account.
Online payment rates are typically 2.2% to 2.9% plus 30 cents per transaction. Some providers charge a monthly fee ($0 to $50) for additional features. The advantage is that you don't need to be present — customers can pay anytime, and the transaction is recorded automatically in your system.
Online payments are common for service businesses, freelancers, and e-commerce. If you sell physical goods, you'll want to integrate shipping and tracking so you can prove delivery in case of a dispute. If you sell services or digital products, keep records of what the customer received and when.
Phone and invoice payments: for remote or recurring sales
You can take card payments over the phone or through an invoice link. The customer reads their card number to you, or you send them an invoice with a "Pay Now" button. This method is slower and riskier than swiped or online payments because the card is not physically present and the processor can't verify it as easily.
Phone and invoice payments usually cost 3.5% or more per transaction because the fraud risk is higher. Some processors charge per-transaction fees on top of the percentage. This method is useful for one-off sales or customers who prefer not to enter their card online, but it's not ideal for high volume.
If you take payments over the phone, never write down or store the full card number. Read it once, process it when ready, and discard the number. Keeping card details on paper or in email violates PCI compliance rules and exposes you to liability if the information is stolen.
Merchant accounts and payment processors: what's the difference
A merchant account is a bank account that receives credit card payments. Your bank or a third party sets it up for you. A payment processor is the company that handles the transaction — they talk to the card networks (Visa, Mastercard) and your bank to move the money.
Most small businesses don't deal with this directly. When you sign up with Square, Stripe, or PayPal, they set up a merchant account for you behind the scenes. You just connect your business bank account, and they deposit the money there. You see one bill from the processor, not separate bills from a bank and a processor.
Some banks offer their own payment processing. If your bank is a large national one, they may have a business credit card processing service. Compare the rates and fees to independent processors — they're often higher because the bank is taking a larger cut.
Interchange fees and why your costs vary
Interchange fees are set by Visa and Mastercard, not by your processor. They're the percentage the card-issuing bank takes from each transaction. A rewards credit card has a higher interchange fee than a basic card. A swiped card has a lower interchange fee than a card entered by phone.
Your processor adds their own markup on top of interchange, but interchange is usually the bigger number. If your average transaction is $100 and the interchange is 1.5%, you pay $1.50 just to the card network. Your processor then adds another 1% to 1.5%, bringing your total cost to $2.50 to $3.00.
This is why "flat-rate" processors (who charge the same percentage for every card) are simpler but not always cheaper. If most of your customers use basic cards and you swipe them in person, you might pay less with a processor that breaks down interchange separately. If you take phone payments and customers use rewards cards, a flat rate might save you money because you're not paying extra for each high-interchange card.
PCI compliance and fraud protection
PCI compliance is a set of security standards required by law. It means you must not store full credit card numbers, you must use encrypted connections, and you must protect customer data. If you use a modern payment processor, they handle most of this for you — they store the card data on their find servers, not yours.
Never ask a customer to email you their card number, and never type it into a spreadsheet or document. If you take payments over the phone, process them when ready through your processor's system and then forget the number. If a customer's data is stolen because you stored it unsecurely, you're liable for the breach and the fines.
Fraud protection works two ways. Your processor flags suspicious transactions (a $10,000 purchase from a new customer, a card used in two countries in one hour). You can also set rules — some processors let you block certain card types or require a phone call for large orders. The best protection is keeping clear records: what the customer ordered, when it shipped, and proof of delivery.
Chargebacks: when a customer disputes a charge
A chargeback happens when a customer tells their bank the charge was unauthorized or the product never arrived. The bank pulls the money back from your account and charges you a fee (usually $15 to $100). You then have a window to dispute the chargeback by providing proof.
Proof means a signed receipt, an email confirmation, a tracking number showing delivery, or a photo of the customer receiving the item. Digital products are harder to prove — if you sell software or a course, keep records of when the customer accessed it and what they downloaded. If you can't prove delivery or authorization, you lose both the sale and the chargeback fee.
High chargeback rates (more than 1% of your transactions) can get your account closed. Some processors will drop you if you hit that threshold. The best defense is clear communication: send order confirmations, shipping updates, and delivery proof. For high-value sales, ask for a phone call or a signed agreement before processing the card.
Frequently Asked Questions
Do I need a business license to accept credit cards?
No, but you do need a business bank account or a personal account in your business name. Most processors ask for your Social Security number or EIN, your business address, and your bank account details. They may ask for a business license to verify you're legitimate, but the license itself isn't required to process cards.
What's the difference between a flat rate and interchange-plus pricing?
Flat-rate processors charge the same percentage (usually 2.9% plus 30 cents) for every card. Interchange-plus processors charge you the actual interchange fee plus their markup (usually 0.5% to 1%). Flat-rate is simpler and better if you take mostly phone or online payments. Interchange-plus is cheaper if you swipe mostly basic cards in person.
Can I accept credit cards without a website?
Yes. You can use a payment link (Stripe, Square, PayPal) and email it to customers, or you can use an in-person card reader. You don't need a website to process cards — you just need a way to send the customer a link or a way to swipe their card.
What happens if a customer's card is declined?
The processor tells you when ready, and the transaction doesn't go through. You can ask the customer for a different card, or they can contact their bank to find out why it was declined (insufficient funds, fraud alert, expired card). You're not charged a fee for a declined transaction.
How long does it take to get paid after a customer swipes their card?
Most processors deposit the money within one to three business days. Some offer next-day deposits for a higher fee. Weekends and holidays can delay deposits. Check your processor's settlement schedule before you sign up if timing matters for your cash flow.