Accepting credit and debit card payments is nearly a requirement to run any kind of business. It adds an enormous amount of convenience for your customers, and it reduces the burden of cash handling for you and your employees. Processing card payments comes with an added cost you have to weigh against the benefits for your particular business, but the setup isnβt as onerous as you might expect. Plus, many of todayβs leading credit card processing services bundle with features like e-commerce and inventory management to help you manage your business in one place.
This guide will walk you through how to accept credit card payments in a few steps, including a few payment processing methods, so you can choose the best one for your business.
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1
Stax
No
First Month Free
$99 per month, 7 cents to 15 cents per transaction plus interchange rate
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Finix
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Save up to 40% on credit card processing
Transparent subscription-based pricing with 0% markup on interchange fees
3
Payment Depot
No
First Month Free
$59 per month, $0.07 - $0.15 per transaction + interchange rate
How To Accept Credit Card Payments
Accepting credit cards is relatively quick and easy for any kind of business, and you can process purchases in person or online.
Steps to Credit Card Processing
Regardless of whether you receive card payments in person or online, the transaction process typically involves these basic steps:
- The customer swipes, inserts or taps their credit card or mobile device, or enters their credit card number, to input their information into the payment processor.
- The payment processor communicates with the cardβs issuing bank to ensure available funds or credit limit and detect potential fraud.
- If the bank approves the transaction, the payment processor debits the customerβs account and credits your merchant account with the transaction amount.
The differences among various ways to accept credit card payments are mainly in how you input card information on the front end.
You donβt necessarily need a special machine to process credit cards, though that often makes the job easier. Some mobile apps, for instance, let you enter customer card information into your phone to accept payments. Some of these apps also work with small card readers that can connect to your phone via a headphone jack or Bluetooth, so you donβt have to manually enter card information.
In-Store Credit Card Payments
To accept credit card payments in a retail locationβlike a restaurant or storeβyou need a point-of-sale (POS) system with a card reader or a credit card terminal that can process transactions on its own.
Older systems require you to purchase a separate credit card terminal and either connect it to your cash register or manually enter a transaction amount to run a card. The terminal might include a card reader and a printer, which is what you often see on the counter at a small business. More sophisticated systems include a card reader and a screen for a signature, which is what youβve probably seen at corporate enterprises.
Modern POS systems, such as Square and Clover, let you process check, ACH, card and cash transactions within a single system. These processors are software-based for online and mobile transactions, and you can choose from various hardware options to process in-store transactions:
- Handheld card reader. This kind of device typically includes a swipe and tap-to-pay reader and a printer, so you can process transactions anywhere in your storeβgreat for running cards tableside in a restaurant.
- Countertop card reader. This is the modern version of the old credit card readers. It includes a swipe and tap-to-pay reader and connects to your cash register.
- Tablet stand. You can run modern POS software on an Android tablet or iPad connected to a stand with a card reader that connects to a cash register. Customers can enter a personal identification number (PIN) or sign on-screen to authorize a transaction.
- Full register. This offers similar functionality to the tablet stand, but itβs all in one device. A modern POS register includes payment processing software for cash, check and card transactions; card swipe and tap-to-pay readers; and a screen.
How To Accept Credit Card Payments Online
To accept online payments for e-commerce or other business, you need an account with a payment service provider (PSP), such as PayPal, Stripe, Square or Shopify.
These services let a customer input their credit card information to make an online purchase. Then they handle the entire transaction for you: They run the payment and credit your account, and they send a payment receipt to your customer via email. Many PSPs also offer customers the option to save their credit card information on file, so itβs easy to check out when they return to your site.
To use a PSP, youβll have to connect it to your online storefront, which is usually fairly simple with the right website builder. Many modern website builders, such as Squarespace, Kajabi and Shopify, and marketplaces, such as Etsy, are designed to facilitate online purchases and integrate easily with payment processors. While most website builders come with a secure sockets layer (SSL) certificate to ensure your customersβ security, you might have to use a stand-alone service if you want to accept payments over the internet. You can check out our guide to the best SSL certificate services for more information.
If your existing website doesnβt play well with payment providers, you might have to link out to your accountβfor example, with a PayPal βpay nowβ button on your websiteβand let customers make payments through the third-party site. This process is less seamless and might require more manual work on your end to keep orders straight.
Mobile Payment Processing
You can accept physical cards anywhere with no other equipment than your mobile phone through mobile payment processing apps. These lightweight solutions are great for on-the-go sales, such as at farmers markets, art fairs, trade shows and parties.
Square is the best-known and simplest way to accept credit card payments on your phone. Its mobile card reader is a tiny attachment that fits right into the headphone jack (including Lightning connectors) on your smartphone.
You can simply download the Square Point of Sale app on your Android or iOS device, punch in the customerβs order or total and swipe the card to run the transaction, similar to an in-store POS. If required, customers can sign to authorize the transaction right on the screen.
Mobile payment processing requires an internet connection, just as in-store transactions do. Some processors allow offline transactions, so you can take customersβ payment information and the provider will run the transaction once you connect to the internet. Look for that feature if you expect to use mobile payments in places with spotty Wi-Fi access, like rural farmers markets.
Credit vs. Debit Card Transactions
Credit and debit card transactions look similar to customers, but theyβre processed differently by banks and hit your merchant account differently. Theyβre both facilitated by credit card networks, so the point-of-sale process looks the same: enter information, communicate with the bank and process the transaction.
On the customerβs end, the difference is that a debit card transaction immediately pulls money from their bank account, while a credit transaction does not.
Because of this, payment looks different on your end. Debit card transactions are usually settled faster, and the money lands in your merchant account the same day. Credit card processing requires the payment processor to put money into your account (and settle up with the customer later), and that can take up to a few days.
Merchant Account vs. Payment Service Provider
Traditionally, you needed to open a special kind of bank account, called a merchant account, to accept credit card payments. You would sign up with a bank and negotiate a contract for fees, then receive or purchase the necessary hardware (that old credit card terminal) to process payments. Now you can accept payments without a merchant account.
Payment service providers, such as PayPal, Square and Stripe, make this process a lot easier and, in many cases, cheaper. They look similar to merchant accounts, but you can easily sign up and manage the account online. And itβs easy to move money into and out of your PSP account to issue refunds, make purchases or deposit into your bank account.
A traditional terminal with a merchant account might be a fit for businesses processing a high volume of transactions (more than $5,000 in sales). These services usually come with a hefty monthly service fee, but their per-transaction fees are a fraction of those charged by PSPs.
If youβre starting fresh, a payment service provider is likely the simplest and most affordable way to accept credit card payments for a small business.
Credit Card Processing Fees
When you accept a credit or debit card payment, you could be subject to the typical credit card processing fees:
- Interchange rate: This is a percentage of the sale that goes to Visa, Mastercard or other credit card companies. Rates can be anywhere from 1.5% to 3.5%, generally higher for premium cards.
- Transaction fee: This is the cut you pay to the payment service provider or processor in addition to the interchange rate. Some processors charge a flat rate per transaction that covers their cut and the interchange rate and others use an interchange-plus model that charges you the interchange rate plus their own varying fee.
- Service fee: Depending on the provider, you might pay a monthly or annual subscription fee to use the service. Most small-business PSPs, such as Stripe and PayPal, forgo this fee and only charge flat-rate transaction fees of around 3%.
Fees for debit versus credit cards might be different, depending on what kind of account you have with the payment provider. A credit card network might set transaction minimums for debit cards but not for credit cards because of regulatory requirements, so youβd have to communicate those to your customers.
Many small business owners lament payment processing fees for eating away at their revenue, but consider credit card networks a service provider just like any other you pay to support your business. You might pay for a bank account, inventory or a cleaning service, for example. Transaction fees (or monthly service fees) are the way you pay for the ability to use a credit card network.
How To Overcome Credit Card Fees
No service processes credit card transactions completely free. But here are some ways to make up for fees if youβre concerned about the impact on your revenue:
- Use a provider that charges a service fee. If you can find a provider that only charges a monthly service fee, you might get a plan that skips transaction fees. However, these plans are typically designed for businesses with a high volume of sales, so the monthly service fees might cost your small business more than transaction fees in the long run.
- Find a cheaper provider. Check out our list of the cheapest credit card processing companies to compare fees.
- Incentivize cash payments. Depending on your state, you might be able to add a credit card surcharge at the register to pass the cost of credit card processing onto your customer. If credit card surcharging is limited or banned in your state, you could instead offer a similar percentage discount to customers who pay in cash.
- Raise prices. Just as you set prices for your goods and services to cover other costs of running your business, you can take payment processing fees into account. This could help you cover costs without customers feeling penalized for their payment method.
- Accept ACH payments. For larger online payments via invoices, consider asking or requiring clients to pay through ACH. Most payment processors have this option, and the fee is much lower than for credit card payments.
Featured Partners
1
Stax
No
First Month Free
$99 per month, 7 cents to 15 cents per transaction plus interchange rate
2
Finix
No
Save up to 40% on credit card processing
Transparent subscription-based pricing with 0% markup on interchange fees
3
Payment Depot
No
First Month Free
$59 per month, $0.07 - $0.15 per transaction + interchange rate
Get Paid Your Way
Many people starting businesses now are too young to remember the old-school credit card imprintersβthose clunky plastic devices that made a carbon print of a credit card next to a handwritten receipt. Lucky for us, payment processing technology makes the job way easier these days.
Whether youβre accepting payments online, in-store or on the go, modern payment processors make it effortless to accept credit cards so you never have to turn a customer away.
Frequently Asked Questions (FAQs)
What is the best way to accept credit card payments?
The most convenient and affordable way to accept credit card payments for your business depends on several factors, including what you sell, where you sell it, your sales volume and how your customers prefer to pay. Flat-rate payment service providers are best for businesses that do less than $5,000 per month in sales, while more complex models could be better for larger businesses.
How can I accept credit card payments for free?
You canβt accept credit cards without paying fees, because this is a major way credit card networks get paid for their service. However, you could overcome fees by adding a surcharge to credit card payments or raising prices. You could also incentivize cash payments by offering a discount for customers who pay with cash.
What is the cheapest way to take credit card payments?
Payment processors with flat-rate transaction fees are usually the most affordable option for businesses that make less than $5,000 in sales per month. Processors with interchange-plus models are best for larger businesses with higher sales volume.
