Most consumers expect that every business will accept credit and debit cards – a standard you are all too familiar with if you must repeatedly explain to customers that your business accepts cash only. Luckily, accepting credit and debit cards is as easy as partnering with a credit card processing company.
This guide will walk you through the ins and outs of the credit card processing industry and highlight the factors you need to consider when choosing a processor.
How do you accept credit card payments for your small business?
Accepting credit and debit cards begins with selecting a processor, followed by considering which piece of payment technology you'll utilize to accept payments.
1. Determine the type of processor you need.
Choosing the type of credit card processor you want to work with comes down to what you value from this type of company. Our PayPal review and Square review, for example, show that they are great for businesses that are just starting out and process a low transaction volume, thanks to their lack of fees. Because their credit card processing rates are higher than those of other options, though, they're not always a cost-effective choice for high-volume businesses.
When choosing a processor, consider what you value, such as rates, service, and technology.
- Competitive rates: Don't always look for the lowest rate possible. Some advertised rates are deceptively low, as they only apply to a certain type of transaction. Many companies also charge various monthly and annual fees that you need to consider when comparing costs.
- Knowledgeable and available customer service: If your payment technology stops working during peak business hours, what are you going to do? What is the backup plan for processing cards? How will it get fixed, and how can your processor's customer service be reached? You can't afford to have any downtime, so you need a processor that can support you and be there when you need them.
- Fast, secure and reliable payment equipment: There is a plethora of payment equipment on the market, but not every processor offers every kind. A processor can help you decide which equipment is best for your business.
2. Consider how you will accept credit cards.
When you begin accepting credit cards, it's generally because your customers prefer using them or because doing so makes accounting easier. So, it's important to consider how your customers use their cards. If the vast majority come into your physical location and swipe their cards, perhaps that's the only method you need to accept. However, you might also want to accept credit cards online, over the phone, on a mobile device or across multiple channels. Determining the methods of payments you will accept can help you understand what type of credit card processing equipment you need.
The COVID-19 pandemic made it essential for merchants to have a card reader with near-field communication (NFC) technology that can accept contactless payments such as Apple Pay, Google Pay, and contactless credit cards. Consumers don't want to touch payment technology; they want the convenience of tapping their card or phone on a payment terminal, then being on their way. NFC payments also make checkout faster, are easy to implement, and can help deepen consumer engagement.
3. Examine pricing models and fee structures.
Pricing models and fee structures vary greatly by processor, so this is one of the more arduous parts of the buying journey. There are multiple pricing models available that determine the rates you will pay on certain transaction types.
Most processors charge 2% to 4% of the transaction value, plus a small transaction fee based on your monthly processing volume, average ticket size, industry and processing history. In addition, processors often charge several fees.
4. Compare quotes.
Using the criteria above, narrow your list of candidates down to three. Then, contact each of these three credit card processors to request a quote. A processor's rates are negotiable sometimes, so don't be afraid to haggle – especially if you've already received estimates from other companies.
After comparing quotes, request a contract from one or two companies that offer the most competitive rates. However, keep in mind that the lowest rate is not always best. Consider what else each company offers to add value to your service.
Do not complete an application until you are ready to sign up with a company. If you read the fine print, you'll discover that the application is part of the contract, and by signing it, you've agreed to accept the company's services.
5. Review contracts.
As always, review these contracts very carefully – some companies try to hide fees. If something does not look right to you, ask about it. When possible, have legal counsel look at the contract as well to ensure everything is aboveboard. Consider whether the contract includes automatic renewal clauses, early termination fees and other binding clauses. Once you are satisfied that the contract is fair, sign with the company you believe is the best fit for your business.
Once you've completed these steps and decided which credit card processor you'd like to partner with, you are ready to apply. Generally, applications can be submitted online and take two days for the processor to review.
Once your application is approved, the processor will set up your account and walk you through the process of selecting any hardware you might need. Once the hardware arrives, the processor will help you set it up and test it.
Editor's note: Looking for the right credit card processor for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.
Recommended credit card processors
When looking for the best credit card processing services, we found these processors were best for different use cases and business types.
| Credit card processor | Best for | Key points | Our review |
| Clover | Point of sale (POS) | One-stop shop for small businesses, offering excellent POS software and hardware with competitive card processing rates | Full Clover review |
| Merchant One | Easy approval | Willing to approve small businesses that have been turned down elsewhere; offers a comprehensive selection of services and equipment | Full Merchant One review |
| ProMerchant | Businesses in high-risk industries | Willing to work with even high-risk businesses such as legal sportsbook or CBD product stores; no long-term contracts | Full ProMerchant review |
| Payment Depot | High transaction volumes | Membership pricing with wholesale rates; includes a merchant account and dedicated account rep | Full Payment Depot review |
Where and how do you sell?
There are three main ways to sell to customers and accept credit card payments: in person at a fixed location, online or over the phone, and on the go.
1. In person at a fixed location
This is when you have a brick-and-mortar business such as a retail store or medical office. You accept payments at one or several cash registers at your business location.
Equipment needed: A point-of-sale (POS) system that includes functions such as inventory management and loyalty/gift card programs, or a hardwired countertop credit card terminal
2. Online or by phone
This means you have an e-commerce business where people buy from you online (on a marketplace site like Amazon or on your own website through an e-commerce solution like Shopify) and/or accept payment by phone, with customers reading you their card numbers.
Equipment needed: Back-end integration from your website to your payment gateway and/or a virtual terminal where you can manually enter credit card information
3. On the go
This means you have a mobile business, such as a food truck or an in-home pet grooming service, or sell at events like craft fairs and need to accept payments wherever you are.
Equipment needed: Mobile card reader
How to accept credit cards at a fixed location
When you have a brick-and-mortar business location, you will probably want a regular hardwired credit card reader or a POS system, although you could get a mobile card reader if your cashiers move around your location to accept payment. Hardwired systems tend to be more reliable than mobile systems, which require a good mobile signal.
Fixed credit card processing equipment
The best POS systems are a complete set of hardware and software that gives you a range of useful tools, such as the ability to track sales by product, time period, and promotion. A POS system also keeps track of inventory levels and allows you to institute a loyalty program with any associated discounts, all in addition to processing credit card transactions. Since they give you so much functionality, POS systems tend to be the most expensive option for credit card processing.
If you don't need all the bells and whistles, or if you have an existing POS system that doesn't include payment processing, you could get a stand-alone credit card reader. Most modern fixed credit card readers accept both swipe and chip (EMV) transactions, and some also accept contactless payments (NFC).
How to accept credit cards on a mobile device
Mobile credit card readers are useful for businesses that travel, often sell at trade shows, or simply want the ability to accept payments anywhere within their establishment.
Benefits of mobile credit card processing
In addition to portability, a big reason to accept credit and debit card payments on your phone is that some mobile credit card processing apps include basic POS features. Besides accepting payments, a mobile POS system helps you manage your sales and inventory, which can be very helpful for small businesses that aren't ready to invest in a full-fledged POS system.
Mobile credit card processing equipment
To accept credit card payments on your phone or tablet, you will need a mobile credit card reader or app. Many readers plug into the headphone jack of the mobile device. More advanced mobile credit card readers connect to your mobile devices via Bluetooth. Mobile card readers can accept swipe-only, swipe plus chip (EMV), or swipe, chip, and contactless (NFC).
A mobile credit card reader doesn't limit you to accepting payments on your mobile device. These readers can be used as part of a larger system with additional hardware.
How to accept credit card payments online
Accepting credit card payments online requires a payment gateway. Credit card processors often provide payment gateways, either directly or through a third party.
Payment gateway cost
Typically, a credit card processor charges you an additional monthly fee for this service, so you should only set up a payment gateway if you sell online or if your online sales, though infrequent, are large enough to cover the cost.
In addition to the monthly fee, some credit card processors charge a gateway setup fee and a per-transaction fee, so review each processor's terms and conditions before signing up.
Different ways to accept credit cards online
Depending on the gateway, to accept credit cards online, you'd have these options.
1. Sending your customers a direct payment link
Get the payment link from your payment service provider. Depending on your provider, you may be able to customize the link to your liking. Then, determine where to put the link on your website. The customer will then follow these steps:
- Click on the link to open a payment page.
- Enter the dollar amount.
- Enter their contact information and billing information.
- Click a button to complete their order.
2. Accepting credit cards with a payments page
St. Jude Children's Research Hospital is a good example of an organization that uses this method. The payment page is already generated. Contributors then:
- Choose a donation (or payment) amount and frequency.
- Select a payment method.
- Enter their credit card information.
- Enter their billing information.
- Select "Donate" (or perhaps "Pay," in your business's case) to finalize their order.
3. Accepting credit card payments online with a shopping cart
These are the payment pages you've seen anytime you've shopped retail online. Customers browse e-commerce shops for products, then add them to their cart. When they are ready to check out, they follow these steps:
- Enter their shipping information.
- Enter their credit or debit card information.
- Enter their billing information.
- Click "Pay Now" to complete their order.
4. Processing payments manually
If your business accepts credit cards over the phone – for instance, if you have a restaurant that offers delivery or takeout – and you've been writing down credit card information on paper, then entering it into a terminal or POS after you get off the call, you are doing things insecurely.
Instead, use a virtual terminal or your payment gateway to accept phone payments or to generate and process payments for invoices (if you run a service-based business such as a law firm or marketing agency).
- Log in to your payment gateway.
- Either generate an invoice for your customer or select the Payments tab.
- Enter the payment and customer information.
- Click the button to finalize payment.
- Choose how you'd like to send a receipt.
With each of these methods, your funds will be processed to go into your account after you've batched out and will be posted to your dashboard.
How much does it cost to accept credit cards?
The price of each transaction depends on the method by which a card is accepted and the pricing plan you've chosen. You are likely to come across three main pricing models in your research: flat-rate, interchange-plus and tiered pricing.
- Flat-rate pricing: Generally a model of payment facilitators like Square and PayPal, flat-rate pricing means fixed rates for certain types of transactions. For example, PayPal charges 2.7% for a card-present transaction, meaning the card was swiped at a physical location. For online transactions, PayPal charges 2.9% plus 30 cents per transaction. For a card that is keyed in over the phone, PayPal charges 3.5% plus 15 cents per transaction. The elevated price here is due to the increased risk of fraud associated with this payment method. There are usually no additional fees or lengthy contracts with flat-rate pricing, making it ideal for businesses that process less than $3,000 per month.
- Interchange-plus pricing: This pricing model is based on the interchange rate that all credit card processors pay, plus a processor's markup fee. It is the most transparent model available because it is based on a universal rate. The markup, which is how the processor makes money, is usually negotiable in this pricing model. It is expressed as a percentage plus a per-transaction fee. For instance, you may be quoted 0.25% plus 15 cents. Remember, this is what you will pay in addition to the interchange rate for the transaction (which varies by the type of card, your industry and how you accept the card).
- Tiered pricing: This pricing model differentiates between qualified, midqualified and nonqualified transaction types. Qualified transactions are generally made with basic debit and credit cards that are physically swiped at a terminal. These are the cheapest rates in a tiered pricing model. Slightly more expensive are midqualified transactions, which often include physically swiped rewards cards. Finally, nonqualified transactions – the most expensive type – include premium rewards cards and card-not-present transactions, such as when you key in card numbers that your customers read to you over the phone.
In addition to the rates you pay for each transaction, the credit card processors that use the interchange-plus and tiered pricing models charge account maintenance fees. These include a monthly fee, a monthly minimum, payment gateway fees, a PCI compliance fee and various network fees. Some processors may also charge a setup fee, a payment gateway setup fee and others.
These fees all vary by processor, so request a breakdown of all pricing and fees in writing, then read the contract before signing it to verify everything you'll be required to pay.
What is the cheapest way to accept credit card payments online?
The cheapest way to accept credit card payments online comes down to your business's situation. A small business with less than $3,000 in monthly credit card sales is in different circumstances from a larger-volume business, and the processor that benefits one might be a detriment to the other.
For the low-volume merchant, using a processor that has flat rates and provides its services on a pay-as-you-go basis is more cost-effective than working with a processor that charges multiple account maintenance fees, even if that processor's transaction rates are lower. Once a small business eclipses $3,000 in monthly volume, though, a processor with lower rates might be more cost-effective, even with the associated fees.
No matter which type of processor you choose, avoid long-term contracts if you are unsure of the future of your business. Some credit card processors offer month-to-month terms and don't charge early termination fees. Even though most processor contracts have a standard three-year term, many sales reps are eager for your business and will offer a month-to-month contract if you ask for it and their management team allows it.
How do you accept credit card payments on Square Cash and other apps?
You should accept credit card payments on mobile wallets or peer-to-peer applications only when you know and trust the people sending payment. It is much easier for a customer to dispute transactions and recoup money with these platforms, including Cash App (formerly known as Square Cash) and PayPal.
Freelancers working with well-known clients, however, can benefit from peer-to-peer payment platforms. Simply set up an account and link your bank account to begin receiving payments or sending money to other users.
For established businesses that want to accept payments from a customer's mobile wallet, an NFC-enabled terminal or card reader is the way to go. NFC-enabled readers allow you to accept contactless payments, so your customers can pay with apps like Google Pay or Apple Pay and your business is more protected from chargebacks and transaction disputes.
Accepting credit cards: A must for customer service
In the modern business landscape, it's imperative to accept debit and credit cards. Cards have become such a ubiquitous payment method that many customers don't carry cash any longer. Accepting credit cards is a means of boosting customer satisfaction and driving more sales. Choosing the right credit card processor for your business can ensure not only that your customers are happy but that it doesn't cost you an excessive amount to accept credit and debit cards.
Credit card payment FAQs
What are the benefits of accepting credit card payments?
Accepting credit card payments makes it more convenient for your customers to buy from you. This, along with the fact that cardholders generally spend more than cash buyers, means that accepting credit cards will help you increase your overall sales. Especially if you have an e-commerce business, accepting cards is a must, since 90% of online purchases are made with credit cards.
What types of business can accept credit card payments?
Nearly any type of business can accept credit card payments, including the following:
- A brick-and-mortar business
- An e-commerce business
- A mobile business, like a food truck or farmers market vendor
- An independent contractor, freelancer or sole proprietor
- A professional service company, like a legal or accounting firm
- A traditional business with employees
Will I get approved for a merchant account?
Getting approved for a merchant account is not a guarantee, but if you have an existing business, it is likely you'll be approved. Certain things make it easier to get approved and may lower your costs once you have been approved:
- A positive business and personal credit rating
- At least three years in business
- An open business bank account
- A good record with any previous merchant accounts
If you are missing one or more of these qualifications, you can probably still get approved, but with higher costs.
How long will it take before I can begin accepting credit card payments?
This depends on the size and complexity of your business and what equipment you have ordered. An online-only business can get set up on the same day it signs up in some cases, but the setup for an established company with multiple locations can take up to 48 hours, plus a couple of days for the POS or card reader equipment to be delivered and set up.
Jennifer Dublino and Simone Johnson contributed to the writing and research in this article.