The three ways to take credit card payments
You can accept credit cards through a payment processor (a company that handles the transaction), a payment gateway (software that connects your business to the processor), or a point-of-sale system (hardware and software combined). Most small businesses start with one of three setups: a mobile card reader plugged into a phone, an online payment form on a website, or a countertop terminal in a physical location.
The choice depends on where you take payments. If you're selling in person — at a market, a service location, or a retail shop — you'll want a mobile reader or terminal. If you're selling online or invoicing clients, you'll want a payment gateway or form. If you do both, you might use a system that handles all three.
Every setup involves the same basic flow: the customer enters their card details, the processor checks with the card issuer (Visa, Mastercard, American Express), the issuer approves or declines, and the processor deposits the money into your business bank account. The time between transaction and deposit is usually one to three business days.
Key Takeaways
- Mobile card readers and online payment forms are the cheapest way to start, with per-transaction fees between 2.2% and 3.5% plus a small flat fee.
- You will need a business bank account, an Employer Identification Number (EIN) or Social Security Number, and basic business information to open a merchant account.
- Interchange fees (set by Visa and Mastercard) are unavoidable, but processor markups vary widely, so comparing quotes from three providers saves money.
- Monthly fees, setup fees, and early termination fees vary by processor — read the contract before signing, because some lock you in for a year.
- PCI compliance (data security standards) is required by law; most processors handle this for you if you use their system correctly.
Mobile readers and online payment forms: lowest barrier to entry
A mobile card reader is a small device that plugs into your phone's headphone jack or charging port. You swipe or insert the card, the reader connects to the processor's app, and the payment goes through. Square, PayPal, Stripe, and Toast all offer these. The hardware is usually free or costs $10 to $30. You pay a percentage of each transaction (typically 2.7% to 3.5%) plus a small flat fee per transaction (usually $0.30).
An online payment form lets customers enter their card details on your website or in an invoice you email them. Stripe, Square, PayPal, and Shopify all offer these. There is no hardware cost. You pay the same per-transaction fee. This works well if you invoice clients, sell through email, or have a straightforward website.
Both options require a business bank account and either an EIN or your Social Security Number. The processor will ask for your business name, address, and the type of business you run. Most approve you within a few hours to a few days. You can start taking payments when ready after approval.
Countertop terminals and point-of-sale systems: for retail and restaurants
A countertop terminal is a standalone device that sits on your counter. Customers insert or tap their card, and the payment processes. These are common in retail shops, restaurants, and service businesses. Square, Toast, Clover, and Ingenico all make them. The hardware costs $100 to $500 depending on features. You pay the same per-transaction fees as a mobile reader, plus sometimes a small monthly fee ($10 to $30).
A point-of-sale system combines the terminal with software that tracks inventory, employees, and sales. These are more expensive — $500 to $2,000 for hardware, plus $50 to $300 per month for software — but they give you reports, employee management, and integration with accounting software. They are worth the cost if you have multiple employees or need detailed sales data.
Both require the same setup as a mobile reader: a business bank account, an EIN or SSN, and basic business information. Installation usually takes a few hours. The processor will walk you through it, or you can hire a technician for a fee.
Understanding the fees you will pay
Interchange fees are set by Visa and Mastercard and go to the card issuer's bank. You cannot avoid them. They are usually 1.5% to 2.2% of the transaction, plus $0.10 to $0.30. The processor adds a markup on top — this is how they make money. A processor might charge you 2.7% total: 1.9% interchange plus 0.8% markup.
Monthly fees range from $0 to $50 depending on the processor and plan. Some processors charge nothing if you process a certain amount per month. Others charge a flat fee regardless. Setup fees are usually $0 to $100. Early termination fees can be $100 to $500 if you cancel before your contract ends — some processors have no contract, others lock you in for a year.
To compare costs, get quotes from at least three processors. Ask for the total monthly cost if you process $5,000 per month (or whatever your expected volume is). Include all fees: per-transaction, monthly, setup, and any others. The processor with the lowest total cost for your volume is the best choice, not necessarily the one with the lowest advertised rate.
What you need to set up a merchant account
A merchant account is the account the processor opens for you to receive payments. You will need a business bank account in your business name (not your personal account), an Employer Identification Number (EIN) from the IRS or your Social Security Number if you are a sole proprietor, your business name and address, the type of business you run, your expected monthly sales volume, and a government-issued ID such as a driver's license or passport.
Some processors also ask for a business license, articles of incorporation (if you are an LLC or corporation), or a voided check from your business bank account. The processor will tell you what they need. Most approve you within 24 to 72 hours. A few may ask for more information if your business type is considered higher risk, like e-commerce or subscription services.
Once approved, the processor will deposit payments into your business bank account. The deposit schedule varies: some deposit daily, others weekly. Check the contract to see what your processor offers. You should also confirm the exact business bank account where deposits will land before you complete the setup.
PCI compliance and data security
PCI compliance is a set of security standards set by Visa, Mastercard, and other card networks. It requires you to protect customer card data. If you use a processor's app, terminal, or payment form, the processor handles most of the compliance for you — they encrypt the data and store it securely on their servers.
You are responsible for keeping your login credentials find, not storing card data on your own computer or phone, and not writing down card numbers. If you use a third-party system (like a custom website or software), you must make sure it is PCI-compliant. This usually means paying for a find hosting service and using a certified payment gateway.
If you are breached and customer data is stolen, you may face fines from the card networks and lawsuits from customers. Using a reputable processor with strong security is the easiest way to avoid this. Ask the processor about their security certifications and insurance before signing up.
Comparing the major processors
| Processor | Best for | Per-transaction fee | Monthly fee | Hardware cost |
|---|---|---|---|---|
| Square | Mobile readers, retail, online | 2.6% + $0.30 | $0 | Free to $30 |
| Stripe | Online, invoicing, custom sites | 2.2% + $0.30 | $0 | $0 |
| PayPal | Online, invoicing, existing PayPal users | 2.29% + $0.30 | $0 | $0 |
| Toast | Restaurants, bars, high volume | 2.5% + $0.25 | $0 to $50 | $500 to $2,000 |
| Clover | Retail, restaurants, inventory tracking | 2.6% + $0.10 | $0 to $30 | $100 to $500 |
These rates and fees change frequently and vary by location and business type. Use this table as a starting point, then visit each processor's website or call for a current quote. The difference between processors can be $50 to $200 per month depending on your volume, so it is worth comparing.
Square and Stripe dominate for small businesses because they have no monthly fees and low setup barriers. Toast and Clover are stronger if you need inventory tracking or employee management. PayPal works well if you already use PayPal for other business purposes and want everything in one place.
Frequently Asked Questions
Do I need a separate business bank account to take credit card payments?
Yes. Processors require a business bank account in your business name. They will not deposit to a personal account. If you do not have one, open it before you sign up with a processor. Most banks open a business account in one to three business days if you have an EIN or SSN and a government ID.
What happens if a customer disputes a charge?
The customer's bank investigates and either sides with you or reverses the charge. If reversed, the money comes out of your account. You can dispute the chargeback by providing evidence (a receipt, invoice, or email confirmation). Most processors have a process for this. Keep records of all transactions for at least a year.
Can I accept American Express and Discover, or just Visa and Mastercard?
Most processors accept all four. Amex and Discover have higher fees (sometimes 3.5% or more), so some small businesses decline them. You can choose which cards to accept, but most processors recommend accepting all four to avoid losing sales.
How long does it take to get paid after a customer swipes their card?
Usually one to three business days. Some processors offer next-day deposits for a higher fee. Check the processor's deposit schedule before signing up. Weekends and holidays can delay deposits.
What if I process a very small amount per month — is it still worth it?
Yes. Even if you process $500 per month, the fees are low enough to make it worthwhile. A mobile reader or online form costs almost nothing to set up. The per-transaction fee is the only ongoing cost. If you process nothing, you pay nothing.