Many people starting new businesses today are too young to remember the old-school credit card imprinters—you know, those clunky plastic devices that made a carbon print of a credit card next to a handwritten receipt? Lucky for us, payment processing technology over the past 30 or so years has made it easier than ever to accept credit cards. Plus, many of today’s leading credit card processing services bundle payments with other features, such as e-commerce and inventory management.
In this guide, we’ll walk you through how to accept credit card payments in just a few simple steps. We’ll provide an overview of the basic process along with a few different payment processing methods, so you can select the best option for your needs and budget.
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Stax
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$99 per month, 7 cents to 15 cents per transaction plus interchange rate
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Paysafe
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SAVE or get a $200 gift card + FREE payment equipment*
Industry-low rates starting at $0.15 batch fee + 0% Cash Discount Plans available
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Payment Depot
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$0 Setup & No Cancellation Fees
Customized Interchange+ Pricing - Rates as low as 0.2% - 1.95%
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Finix
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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 card’s issuing bank to ensure available funds or credit limit and detect potential fraud.
- If the bank approves the transaction, the payment processor debits the customer’s account and credits your merchant account with the transaction amount.
The difference among various ways to accept credit card payments is mainly in how you input card information on the front end.
In-store Credit Card Payments
To accept credit card payments in a retail location—like a restaurant or store—you need a point-of-sale (POS) system with a card reader or a credit card terminal that can process transactions on its own.
Modern POS systems, such as Square and Clover, include hardware and software that let you process both card and cash transactions.
If required, customers can usually enter a personal identification number (PIN) for a debit card or sign to authorize the transaction onscreen or on a receipt printed from the credit card terminal.
Online Payments
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.
You’ll 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 customer’s security, you might have to use a standalone 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 doesn’t play well with payment providers, you may have to link out to your account—for example, with a PayPal “pay now” button on your website—and let customers make payments through the third-party site. This process will be less seamless and may 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 at places, such as farmers markets, art fairs, trade shows and parties.
Square is the best-known and simplest mobile payment processor to use. Its 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 customer’s 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.
Credit vs. Debit Card Transactions
Credit and debit card transactions look similar but are different on the back end. They’re 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 customer’s end, the difference is that a debit card transaction immediately pulls money from their bank account and a credit transaction does not.
On your end, payment looks different. 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.
Fees for debit versus credit cards might be different too, depending on what kind of account you have with the payment provider. And a credit card network might restrict transaction minimums for debit cards but allow them for credit cards (because of regulatory requirements).
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 to process payments.
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 it’s easy to move money into and out of your PSP account to issue refunds, make purchases or deposit into your bank account.
If you’re starting fresh, a payment service provider is likely going to serve as the simplest and most affordable way to accept credit card payments for a small business.
Featured Partners
1
Stax
No
First Month Free
$99 per month, 7 cents to 15 cents per transaction plus interchange rate
2
Paysafe
No
SAVE or get a $200 gift card + FREE payment equipment*
Industry-low rates starting at $0.15 batch fee + 0% Cash Discount Plans available
3
Payment Depot
No
$0 Setup & No Cancellation Fees
Customized Interchange+ Pricing - Rates as low as 0.2% - 1.95%
4
Finix
No
Save up to 40% on credit card processing
Transparent subscription-based pricing with 0% markup on interchange fees
Credit Card Processing Fees
When you accept a credit or debit card payment, you’ll be subject to these typical fees:
- Interchange rate: This is a percentage of the sale that goes to Visa, Mastercard or other credit card company. 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.
Frequently Asked Questions
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 can’t 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 incentivize cash payments by offering a discount for customers who pay with cash.
Is there an app to accept credit card payments?
Several mobile apps exist to accept mobile credit card payments, including Square, PayPal Zettle, Payanywhere, Clover and QuickBooks apps. Square is the simplest to use and transport because of its small card reader that fits right in your pocket.
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.
Can you accept credit card payments without a merchant account?
In the past, it was necessary to open a merchant account to take card payments. Today, businesses can skip this step by working directly with an all-in-one payment service provider (PSP). This tends to also be cheaper for businesses compared to a merchant services account.
How can I take card payments online?
Payment service providers, such as PayPal, Stripe and Square, allow you to accept card payments online. Simply open an account with one of these providers and include a link for your customers to pay. Many modern web builders feature integrations with today’s most popular payment processors, making it easy to accept payments directly through your website as well.
Do you need a machine to process credit cards?
You do not need a machine to process credit cards. There are mobile apps, for instance, that will allow you to 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 don’t have to manually enter card information.
