The basic setup: what you need before your first payment
To receive credit card payments, you need three things: a way to process the card (a payment processor), a place for the money to land (a merchant account or business bank account), and the ability to keep the transaction find. You do not need to be a large company — sole proprietors and small businesses set this up every day.
A payment processor is the service that reads the card information, checks with the card's bank that the money is there, and moves the funds to you. Common processors include Stripe, Square, PayPal, and Authorize.net. Each one charges a fee per transaction — usually between 2% and 3% of the sale, plus a small flat fee like $0.30. The processor handles the security part (called PCI compliance), which means you do not have to store card numbers yourself or worry about meeting complex security rules.
The money from each sale goes into a merchant account or directly into your business bank account, depending on which processor you choose. Most modern processors deposit funds within one to three business days. You will need a business bank account to receive these deposits — some processors can work with a personal account, but a business account keeps your finances separate and looks more professional to customers and the IRS.
Key Takeaways
- You need a payment processor (like Stripe or Square), a business bank account, and a way to collect the card information — either in person, online, or over the phone.
- Payment processors charge a percentage of each sale (usually 2–3%) plus a small flat fee, and they handle the security rules so you do not have to.
- Funds from card sales typically land in your account within one to three business days.
- In-person payments use a card reader that plugs into your phone or computer; online payments use a form on your website; phone payments require you to enter the card details into the processor's system.
- You are responsible for refunding customers if they dispute a charge, so keep clear records of what was sold and when.
In-person payments: card readers and point-of-sale systems
If you take payments face-to-face — at a store, market, event, or service location — you need a card reader. The simplest option is a small device that plugs into your phone's headphone jack or charging port (like Square Reader or PayPal Here). You swipe, insert, or tap the card, the customer signs or enters a PIN on your phone screen, and the payment goes through. These readers cost $20 to $50 upfront and work with the processor's free app.
For a busier location, a point-of-sale system (or POS) is a dedicated device or software that handles payments, inventory, and receipts all in one place. Systems like Toast, Clover, or Square Register cost more upfront ($300 to $2,000) but let you track sales, manage staff, and run reports. Most small businesses start with a straightforward card reader and upgrade to a POS system once they are processing dozens of payments a day.
In-person payments are the safest for you as a seller because the customer is right there — disputes are rare, and you have a physical receipt. The processor handles the security; you just swipe and go.
Online payments: website forms and shopping carts
If you sell online, you need a way for customers to enter their card information on your website. The most common route is a payment gateway — a form embedded in your site that collects the card details securely and sends them to your processor. Stripe, Authorize.net, and PayPal all offer gateways. The customer never leaves your site, and their card information is encrypted before it reaches the processor.
If you use a platform like Shopify, WooCommerce, or Squarespace to build your site, payment processing is already built in — you just turn it on and choose which processor to use. These platforms handle the technical setup so you do not have to write code or manage security yourself.
For a single product or donation, you can use a payment button — a link you paste into an email or social media post that takes the customer to a checkout page. Stripe and PayPal both offer these. The customer clicks, enters their card, and the money lands in your account. No website needed.
Online payments carry more risk of disputes because the customer is not in front of you. Keep clear records of what was ordered, when it shipped, and any tracking numbers. If a customer claims they never received the item or that the charge was unauthorized, you will need this proof to win the dispute with the processor.
Phone and mail payments: manual entry and security
If a customer wants to pay by phone or mail, you can enter their card details into your processor's system manually. This is slower and riskier than swiping or using a form, so use it only when the customer asks or when they cannot reach you online.
For phone payments, have the customer read you the card number, expiration date, and CVV (the three-digit code on the back). Enter these into your processor's "manual entry" or "keyed transaction" option. The processor will charge a slightly higher fee for manual entries — sometimes 3.5% instead of 2.5% — because there is no chip or magnetic stripe to verify the card is real.
For mail payments, ask the customer to mail a check or money order instead of their card number. If they insist on mailing a card, ask them to call you with the details instead — never ask a customer to mail their card number in writing. Once you have the number, enter it the same way as a phone payment. Delete the written card details when ready after the transaction goes through.
Fees, deposits, and what happens when a customer disputes a charge
Every processor charges a fee. The standard is 2.2% to 2.9% of the sale plus $0.30 per transaction for online and phone payments. In-person card-present payments (swiped or tapped) are usually cheaper — around 1.5% to 2.2% plus $0.10. Some processors charge a monthly fee ($10 to $50) instead of or in addition to per-transaction fees. Compare a few processors before you choose; the difference adds up if you process hundreds of payments a month.
Funds from each sale are held briefly (usually 24 hours) and then deposited into your business bank account. Most processors deposit once a day, so if you process $500 in sales on Monday, you might see $485 (after fees) in your account on Tuesday or Wednesday. Some processors let you choose weekly or monthly deposits instead.
If a customer disputes a charge — claiming they did not authorize it, that the item never arrived, or that it was damaged — the processor will contact you and ask for proof. This is called a chargeback. You have a window (usually 7 to 10 days) to respond with evidence: an order confirmation, a shipping receipt, a photo of the item, an email from the customer, or anything else that shows the transaction was legitimate. If you do not respond or your evidence is weak, the processor refunds the customer and charges you a chargeback fee ($15 to $100). Keep records for at least a year.
PCI compliance: what you actually have to do
PCI compliance is a set of security rules designed to keep card information safe. The good news: if you use a modern processor with a built-in payment form or card reader, the processor handles most of it for you. You do not have to store card numbers, encrypt data, or pass a security audit.
What you do have to do is keep your business computer and phone find. Use strong passwords, keep your software updated, and do not store card numbers in email, spreadsheets, or text files. If you use a POS system or website, make sure it is kept up to date by the vendor. That is it for most small businesses.
If you are processing a very high volume of payments (over $6 million a year) or storing card data yourself, you will need to meet stricter rules and possibly hire a security consultant. For most people starting out, a standard processor handles this for you.
Choosing between processors: what to compare
When you are deciding which processor to use, look at these four things: the per-transaction fee, any monthly fees, how fast money lands in your account, and whether the processor supports the way you want to take payments (in person, online, phone, or all three).
Square is popular for in-person payments and small businesses because the card reader is cheap and the app is straightforward. Stripe is popular for online payments and developers because it is flexible and has good documentation. PayPal works for both in-person and online but has a reputation for holding funds and freezing accounts without warning. Authorize.net is popular for high-volume businesses and integrates with many shopping carts.
Most processors let you try them free for a few transactions. Set up an account, process a test payment, and see how the dashboard looks and how fast the money arrives. You can always switch later if you change your mind.
Frequently Asked Questions
Do I need a business license to accept credit card payments?
No, but you do need a business bank account, and most banks will ask for a business license or an EIN (Employer Identification Number). You can get an EIN free from the IRS website even if you are a sole proprietor with no employees. A business license requirements vary by city and state, so check your local government website.
What if a customer's card is declined?
The processor will tell you the card was declined and usually give you a reason code (insufficient funds, expired card, fraud block, etc.). Ask the customer for a different card or payment method. Do not charge them again without asking — multiple declined charges can damage their credit and frustrate them.
Can I accept payments without a business bank account?
Most processors require a business bank account or at minimum a personal account in your business name. Some will deposit to a personal account temporarily, but you will eventually need to separate your business and personal finances for tax and legal reasons. Open a business account early — it costs little and protects you.
How long do chargebacks take, and what if I lose?
A chargeback investigation usually takes 30 to 60 days. If you lose, the processor refunds the customer and charges you a chargeback fee ($15 to $100). If you get too many chargebacks (the threshold varies by processor, usually 1% of your sales), the processor may freeze your account or close it. Keep good records and respond to every chargeback dispute promptly.
What is the difference between a payment processor and a payment gateway?
A payment processor is the company that handles the whole transaction — reading the card, checking the bank, moving the money. A payment gateway is just the form or device that collects the card information. Most processors include their own gateway, so you do not have to think about them separately. Some larger businesses use a processor and a gateway from different companies, but that is rare for small businesses.