The basic path: merchant account, payment processor, and a way to take the card
To accept credit cards, you need three things: a merchant account (a bank account that receives card payments), a payment processor (the company that handles the transaction), and a payment method (a terminal, online form, or mobile reader). You do not need all three from the same company, but most small businesses use one provider that bundles them together.
The processor charges you a fee each time someone pays with a card — usually a percentage of the sale plus a small flat fee per transaction. These fees vary by processor, by card type (debit cards cost less than credit cards), and by how you accept the payment (online is often cheaper than in-person). You will see these fees deducted from your deposits before the money hits your bank account.
The whole setup takes a few days to a few weeks, depending on the processor and how quickly you provide documents. Most processors ask for your business license, tax ID, and bank account details before they approve you.
Key Takeaways
- You need a merchant account and a payment processor; most small businesses use one company that provides both.
- Payment processors charge a percentage of each sale plus a per-transaction fee, which comes out of your deposit before you see the money.
- How you accept cards — in person, online, or by phone — changes which processor works best and what the fees will be.
- Setup takes a few days to a few weeks and requires your business license, tax ID, and bank account information.
- Your choice of processor affects your customer experience, your fees, and what happens if a customer disputes a charge.
In-person payment: terminals, readers, and point-of-sale systems
If you take payments face-to-face — at a store, restaurant, or service location — you need a physical way to read the card. The three main options are a traditional terminal (a countertop machine that reads the card and prints a receipt), a mobile card reader (a small device that plugs into your phone or tablet), or a point-of-sale system (software that runs on a computer or tablet and connects to a reader).
Mobile readers like Square, PayPal Here, or Clover are cheapest to start with — often under $100 — and work anywhere you have a phone signal. Traditional terminals cost more upfront but are faster for high-volume businesses. Point-of-sale systems are built for restaurants and retail shops and include inventory tracking, employee management, and detailed sales reports.
Fees for in-person payments are usually lower than online fees because the card is physically present, which reduces fraud risk. You will typically pay 2.5% to 3.5% per transaction plus a small flat fee, though this varies by processor and card type.
Online payment: checkout forms, payment links, and shopping carts
If you sell online — through a website, email invoice, or social media — you need a way to collect card information securely. The most common options are a payment gateway (software that encrypts the card details and sends them to the processor), a payment link (a unique URL you send to a customer that opens a checkout page), or a shopping cart (software built into your website that handles multiple items and shipping).
Processors like Stripe, Square Online, PayPal, and Shopify all offer these tools. Some are designed for straightforward one-time payments; others are built for subscription billing or complex inventory. Payment links are the fastest to set up — you can send a customer a link within minutes — but they do not work well if you sell many different products.
Online payments cost more than in-person because the card is not physically present, so fraud risk is higher. Fees typically run 2.9% to 3.5% plus a per-transaction fee of $0.30 to $0.50, though this varies by processor. Some processors charge a monthly fee instead of or in addition to per-transaction fees.
Phone and mail payments: keyed-in cards and manual entry
If a customer gives you their card number over the phone or you enter it manually from a paper form, that is called card-not-present or keyed entry. You type the card number, expiration date, and security code into your processor's system, and the processor handles the rest.
This method is slower and riskier than in-person or online payments, so fees are higher — usually 3% to 4% plus a per-transaction fee. You also have more liability if a customer disputes the charge, because you have no proof the cardholder authorized it. To protect yourself, keep written records of the customer's permission and the card details they provided.
Most processors allow keyed entry through their online dashboard or mobile app. Some require you to call them to process the payment, which is slower but adds a layer of verification.
Choosing a processor: what to compare
The right processor depends on how you sell, how many transactions you expect, and what features matter to you. Compare these factors: the per-transaction fee and monthly fee (if any), whether they charge different rates for different card types, how long they hold your money before depositing it, what customer support looks like, and what reports and tools they provide.
Some processors are better for straightforward businesses with few transactions; others are built for high volume or complex operations. Square and PayPal are popular for small businesses and service providers because they are straightforward to set up and have low upfront costs. Stripe and Shopify are common for online stores. Toast and Square are popular for restaurants. Ask other business owners in your field what they use and what they pay.
Read the fine print on fees, especially any monthly minimums, setup fees, or charges for disputes and chargebacks. Some processors charge extra if a customer disputes a charge or if a card is declined. These fees add up if you have a lot of disputes.
Security and compliance: what you have to do
When you accept credit cards, you are responsible for keeping card information find. You cannot store full card numbers on your own computer or in an email. If you use a processor's system to collect and store the information, they handle the security for you — that is their job.
If you manually enter card numbers or store them yourself, you must follow PCI DSS (Payment Card Industry Data Security Standard) rules. These rules require encryption, firewalls, regular security updates, and limited access to card data. Most small businesses avoid this by using a processor's system instead of storing card data themselves.
When a customer disputes a charge, the processor investigates and decides who is right. If the customer wins, the money comes back out of your account. Keep records of what the customer ordered, when, and for how much. For online sales, keep email confirmations and shipping records. For in-person sales, keep receipts. These records are your proof if you need to defend a dispute.
What happens after the payment goes through
When a customer swipes, taps, or enters their card, the processor checks with the card's bank to make sure the card is real and has enough money. This takes a few seconds. If the bank approves it, the processor deposits the money into your merchant account.
Most processors deposit money the next business day, though some hold it for two to five days. A few hold money longer if you are new or if you have a lot of disputes. This delay is called the settlement period. Check the processor's terms to see how long they hold your money.
You will see a detailed report of every transaction — the customer's name, the amount, the fee charged, and the deposit date. Use these reports to track your sales and reconcile your bank account.
Frequently Asked Questions
Do I need a business license to accept credit cards?
Most processors require a business license or tax ID, but the rules vary by processor and by state. Some allow sole proprietors without a formal business license if they have a tax ID. Contact the processor you are interested in to ask what documents they need.
What is a chargeback and what do I do if one happens?
A chargeback is when a customer disputes a charge with their bank and the bank reverses the payment. The money comes out of your account, and you lose the sale. If you have proof the customer authorized the purchase and received what they paid for, you can dispute the chargeback. Keep receipts, emails, and shipping records as proof.
Can I accept credit cards without a physical store or website?
Yes. You can use a payment link (a URL you send to customers) or accept payments over the phone. Payment links are the fastest to set up and work on any device. Phone payments require you to manually enter the card number, which has higher fees and more liability.
What is the difference between a debit card and a credit card fee?
Debit card transactions usually cost less than credit card transactions because the risk is lower — the money comes directly from the customer's bank account. Fees for debit cards might be 1.5% to 2%, while credit card fees are often 2.5% to 3.5%. The exact difference depends on your processor.
How long does it take to get approved to accept credit cards?
Most processors approve you within a few days to a week if you provide all the required documents quickly. Some approve you when ready for low-risk businesses. If the processor has questions about your business, approval can take two to three weeks. Ask the processor for an estimated timeline when you explore.