The three ways to take credit card payments
You can accept credit cards through a payment processor (a company that handles the transaction), a point-of-sale system (hardware and software that processes cards in person), or a payment gateway (software that connects your website or app to a processor). Which one you need depends on where you sell: in a physical location, online, or both.
Each route has different costs, setup time, and technical requirements. A small business selling at a farmers market might use a mobile reader and a processor like Square or Stripe. A retail store might use a full POS system like Toast or Clover. An online store typically uses a gateway like Shopify Payments or PayPal. The choice affects your monthly fees, transaction costs, and how quickly money reaches your bank account.
You do not need a separate merchant account with a bank anymore — most modern processors bundle that into their service. You will need a business bank account, a tax ID, and basic information about your business. Processing typically takes one to three business days, though some services offer next-day deposits for a higher fee.
Key Takeaways
- Mobile readers (Square, Stripe, PayPal) are the cheapest entry point for small businesses and charge 2.6% to 3.5% per transaction plus a small per-transaction fee.
- Full point-of-sale systems cost $50 to $300 per month but include inventory, employee management, and reporting tools that mobile readers do not.
- Online payment gateways like Shopify Payments or Stripe charge similar percentages to mobile readers but require a website or e-commerce platform to function.
- All major processors require a business bank account and tax ID, and most deposit funds within one to three business days.
- Interchange fees (what Visa and Mastercard charge) are set by the card networks and cannot be negotiated, but processor markups vary widely.
Mobile card readers for in-person payments
A mobile card reader is a small device that plugs into your phone or tablet and lets customers swipe, insert, or tap their card. Square Reader, Stripe Reader, and PayPal Here are the most common. They work anywhere you have cell service or WiFi and are designed for businesses that move between locations or have low transaction volume.
Costs are straightforward: no monthly fee, no setup fee, and you pay per transaction. Square and Stripe both charge 2.6% plus 10 cents per card-present transaction (when the customer is physically there). PayPal Here charges 2.7% plus 30 cents. If a customer pays by phone or online through the same app, the rate is higher — typically 3.5% plus 30 cents — because the processor cannot verify the card is real.
Money usually deposits to your bank account within one to two business days. Both Square and Stripe offer next-day deposits for an additional fee. You can track sales in their free apps, but you do not get detailed reporting, employee management, or inventory tools. If you outgrow a mobile reader, switching to a full POS system later is straightforward — you can export your transaction history.
Full point-of-sale systems for retail locations
A point-of-sale system is hardware (a terminal, cash drawer, receipt printer) plus software that runs your entire store. Clover, Toast, Square for Retail, and Lightspeed are popular options. These systems process cards but also manage inventory, employee shifts, customer data, and reporting. They are built for businesses with a physical location and regular staff.
Monthly costs range from $50 to $300 depending on the system and features you choose. You also pay per-transaction fees similar to mobile readers — typically 2.6% plus 10 cents for in-person card payments. Some systems charge a flat monthly fee instead of per-transaction fees, which can save money if you process high volume. Hardware costs $300 to $2,000 upfront, though some providers lease equipment instead.
Setup takes one to two weeks because the provider needs to verify your business and configure your account. You can process cards when ready once the system is live. Deposits work the same way as mobile readers — usually one to two business days. The real advantage is that a POS system tracks what you sold, who worked that shift, and which items are running low, all in one place. If you have employees, you can set permissions so cashiers cannot access reports or change prices.
Online payment gateways for e-commerce
An online payment gateway is software that sits between your website and a payment processor. When a customer enters their card details on your checkout page, the gateway encrypts that information and sends it to the processor. Shopify Payments, Stripe, Square Online, and PayPal are common gateways. You need a website or e-commerce platform to use one.
If you use Shopify, Wix, or BigCommerce, payment processing is often built in — you do not need to choose a separate gateway. Shopify Payments charges 2.9% plus 30 cents per transaction. Stripe charges the same. PayPal charges 3.49% plus 30 cents. These rates explore to online transactions where the customer is not physically present, so the processor takes on more fraud risk.
Setup takes a few hours to a few days. You provide your business information, connect your bank account, and the gateway generates code that your website builder installs. Most modern website builders handle this automatically — you just flip a switch. Deposits work the same way as in-person processing: one to three business days. You can see all transactions in your gateway dashboard and read reports for accounting.
What fees actually cost and where they come from
Credit card processing has three layers of fees. The first is the interchange fee, set by Visa and Mastercard and paid to the customer's bank. This is typically 1.5% to 2.2% of the transaction and cannot be negotiated — every processor pays the same rate. The second is the assessment fee, paid to Visa or Mastercard themselves, usually 0.1% to 0.15%. The third is the processor markup, which is what Square, Stripe, or PayPal keeps. This is where prices differ.
When Square charges 2.6% plus 10 cents, roughly 1.8% goes to the card networks and banks, and 0.8% goes to Square. When you see a processor advertising "low rates," they are competing on that markup, not on interchange. American Express charges higher interchange than Visa or Mastercard — typically 2.5% to 3.5% — so all processors pass that cost to you. If you want to avoid American Express fees, you can decline Amex cards, but most businesses accept all four major networks.
Debit cards have lower interchange than credit cards, so processing a debit card costs less. Some processors show you the breakdown; others do not. Asking your processor for an itemized statement is reasonable and helps you understand what you are actually paying.
Comparing costs across different business types
| Business Type | Best Option | Monthly Cost | Per-Transaction Cost | Setup Time |
|---|---|---|---|---|
| Farmers market or pop-up | Mobile reader (Square, Stripe) | $0 | 2.6% + $0.10 | 1 day |
| Small retail store | Mobile reader or basic POS | $0–$100 | 2.6% + $0.10 | 1–7 days |
| Multi-location retail | Full POS system (Clover, Toast) | $100–$300 | 2.6% + $0.10 | 1–2 weeks |
| Online store | Shopify, Stripe, or PayPal | $0–$300 | 2.9% + $0.30 | 1–3 days |
| Phone or mail orders | Payment gateway or processor app | $0–$50 | 3.5% + $0.30 | 1 day |
What you need to set up before you start
Every processor requires the same basic information. You need a business bank account in your business name — personal accounts do not work. You need a tax ID (EIN for an LLC or corporation, or your Social Security number if you are a sole proprietor). You need to provide your business address, phone number, and the type of business you run.
Most processors also ask for your expected monthly sales volume and how long you have been in business. New businesses sometimes face higher fees or longer approval times. If you have been in business less than six months, some processors may require a personal may provide or ask for bank statements. This is not unusual and does not mean you will be rejected.
You will also need to decide whether you want to accept all card types or just Visa and Mastercard. American Express and Discover have higher fees, so some very small businesses decline them. However, most customers expect to use whatever card they have, so declining cards can cost you sales. The decision is yours, but most businesses accept all four.
How long money takes to reach your account
Standard deposits take one to three business days. This means if you process a payment on Monday, the money arrives in your bank account on Tuesday, Wednesday, or Thursday. Weekends and bank holidays do not count. Some processors offer next-day deposits for an extra fee — typically $0.50 to $1.00 per transaction or a flat $10 to $25 per month.
The delay exists because processors need time to verify that the transaction is legitimate and that the customer's bank will actually send the money. Chargebacks and fraud happen, so processors hold funds briefly as a buffer. If a customer disputes the charge within a few days, the processor can reverse it from the held funds rather than taking money back from your account later.
If you need money faster, next-day or same-day options exist, but they cost more. For most small businesses, standard deposits are fine. If you have high transaction volume or thin margins, the extra cost of faster deposits might be worth it.
Frequently Asked Questions
Do I need a separate merchant account?
No. Modern processors like Square, Stripe, and PayPal include merchant accounts in their service. You used to need to open a merchant account with your bank separately, but that is no longer necessary. Your processor handles everything.
Can I use the same processor for in-person and online payments?
Yes. Square, Stripe, and PayPal all let you process cards in person and online from the same account. Rates are different — in-person is cheaper because fraud risk is lower — but you use one dashboard to see all transactions.
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. This is called a chargeback. Processors charge a chargeback fee (typically $15 to $100) on top of the refund. Keeping clear records of what you sold and when helps you win disputes.
Can I negotiate my processing rates?
Interchange fees are set by Visa and Mastercard and cannot be negotiated. Processor markups can sometimes be negotiated if you process very high volume — typically $50,000 or more per month. For most small businesses, rates are fixed.
What if I want to stop accepting cards?
You can cancel anytime with most processors. Mobile readers have no contract. POS systems may have a contract, so check before signing. You will not owe money for future months, but you may owe for equipment if you leased it.