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How to Accept Credit Card Payments

Offering customers the convenience of paying with a card comes with processing fees and other costs to your business.
By Kurt Woock, Carol J. Alexander
Last updated on December 21, 2022
Edited bySally Lauckner

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Accepting credit card payments at your small business can make it faster and easier for customers to pay you. Customers also prefer it: Credit and debit card payments accounted for more than half of all transactions — and 62% of all in-person transactions — in 2021, according to the Federal Reserve Bank of San Francisco.
Here are the steps you’ll need to take to accept credit card payments.
1. Figure out how you’ll gather card data from your customers in person. 
If you sell and take payments in person, this means getting a card reader and probably a point-of-sale system so people can swipe, dip or tap their cards somewhere. A point-of-sale, or POS, system combines the hardware functions of a cash register and card reader with software that lets you take orders or ring up customers, track inventory and monitor financial trends. 
2. Figure out how you’ll gather card data from your customers online. 
If you do business online or over the phone, you’ll need a payment gateway so customers can enter their card information securely. Some companies, such as Square, pair a payment gateway with tools that help you build an online store. Others, such as Stripe, focus on stand-alone payment gateways that you can add to any website.
3. Sign up with a payment processor. 
This is a company that interacts with various financial institutions to facilitate transactions. Many popular payment gateways include payment processing services, which is convenient. But you can find stand-alone payment processors if you prefer. Some POS systems also process payments, giving you everything you need to accept card payments and run your business in one system.
4. Establish a place to receive the payments. 
In some cases, this means you’ll need to open a merchant account. Another option is to use the merchant account of your payment service provider.

What is the cheapest way to accept credit cards?

The cheapest way to accept credit card payments depends on whether you’re accepting payments in person or online, as well as which providers you choose. At a minimum, you'll have to pay for payment processing. Getting the right point-of-sale software and hardware could add to the expenses.

What is the cost to accept credit card payments?

The price to accept credit card payments falls into three categories. 

Hardware cost

If you need hardware, you’ll probably have to pay for it upfront, although some companies have flexible payment options that don’t require any money down. Typical prices for credit card readers range from about $50 for a basic reader that connects to a phone or tablet, to $750-$1,000 for a full point-of-sale system.

Monthly fees

Some payment gateways and card readers come with monthly fees. If your card reader is part of a POS system, you can expect to see a higher upper range of prices because the ability to accept card payments is just one of many other features offered. However, free options do exist.

Payment processing fees

Every time someone pays with a card, you'll pay a fee. There are a few common fee structures, but often they’re a percentage of the sale price plus a fixed amount, like 2.9% plus 15 cents. You'll pay more for online transactions than for in-person transactions because the risk of fraudulent activity is higher online. Depending on the plan, other factors may affect the cost, such as the type of card the customer uses.

How credit card payments work

You need a payment processor in order to accept credit card payments because behind the scenes, a card payment is not a straight line between a customer’s bank account and yours. Instead, each transaction sets off a chain of interconnected events involving multiple financial institutions:
  1. Your card reader or online payment gateway securely captures the card information, and the payment processor transmits the data to the associated card network (such as Visa).
  2. As this is happening, the payment processor requests information from the card's network, which routes the request to the card issuer (such as Chase or Bank of America).
  3. The issuer evaluates the request and either approves or denies the payment.
  4. If the transaction is approved, you can complete the transaction.
  5. Once the transaction is approved, the payment processor instructs the issuing bank to send funds to the appropriate merchant account.
  6. The merchant gets access to those funds (minus fees), usually after a couple of business days.
These complex interactions usually only take a few seconds to complete, but you can’t do them without the payment processor or the right hardware and software.

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Choosing a POS system

Clover's Station Duo with a screen on top of a cash drawer, a receipt printer beside it and a customer screen facing the reader.

POS system made by Clover. (Image courtesy of Clover)

POS systems range in scale from a $50 Bluetooth card reader that connects to your phone, to a stand-alone touch-screen monitor that costs more than $1,000.
Some POS companies have their own product lineups that address both ends of that spectrum. Others focus primarily on software and services and rely on basic card readers from third-party companies. Some companies create industry-specific systems: For example, a restaurant POS system might have a kitchen display system, or KDS.
In other cases, you can assemble a system with components from different companies. For example, Vend POS is a point-of-sale system compatible with various card readers and payment processors, but Payment Depot is a payment processor that isn’t tied to any one POS system in particular.
If you don’t want a POS system, or you already have a system that works, there are companies with card readers that allow you to simply input a dollar amount and initiate payment.

Choosing a card reader

A card reader is a device that collects card information during an in-person checkout. Some card readers are attached to the cash register, while others are mobile. Mobile card readers can be a good fit if you want to take payments anywhere in your space, such as checking out restaurant guests right at their tables.
There are multiple ways to read credit cards. Not every card reader reads cards in all of these ways. If you know you want customers to be able to pay with their phones, for example, verify that the card reader can do so.
Swipe: This refers to reading the magnetic strip on the back of a card by physically pushing the card through a reader. Although many cards still have this capability, swiping is becoming a thing of the past. Because it’s less secure than chip cards, avoid swiping, if possible. 
Dip: “Dipping” is another name for inserting a chip card, also called an EMV chip card, into a card reader. Merchants that don’t support chip cards may be liable if they swipe those cards instead and a counterfeit transaction takes place.
Tap: Some cards will work if you simply hold one a few inches from a card reader that supports contactless payments.
NFC: Near-field communication is the technology behind Apple Pay, Google Pay and Samsung Pay, which allow the contactless transfer of card data from your smartphone.

Choosing a payment service provider or merchant account provider

Once a card transaction is complete, the funds go to a merchant account. In most cases, the money then transfers to the business's account in one to two business days.
You might need to open your own merchant account. However, if you use a payment service provider, you won’t. Payment service providers aggregate, or group, funds from multiple companies that use their services into one merchant account. The funds then transfer into each individual company’s bank account.
The end result is the same, but there are a few distinctions to consider:
  • Because they take care of the merchant account requirement, payment service providers are simple to use, can be set up quickly and are generally cost-effective for smaller businesses However, they are more prone to disruptions like holds or terminations. 
  • Opening a merchant account requires an application and review process. It can be more cost-effective for businesses with large monthly sales.
  • Some high-risk businesses, including businesses with high rates of fraud or chargebacks, or those selling items whose sales are regulated at the state or federal level — such as firearms or cannabis — have fewer options than other businesses. The terms and conditions of many payment service providers prevent these businesses from becoming customers. As a result, these types of businesses usually have no choice but to open a merchant account, often through a company that specializes in high-risk merchant accounts.

Considerations related to cost and service

  • Contracts: Some companies require a contract, and canceling before the contract is up can be costly. Other companies offer month-by-month subscriptions that you can end at any time.
  • Setup costs: More complex payment products — especially POS systems that allow highly customized menus — might require installation, setup or training, all of which can cost extra.
  • Pricing transparency: Some companies share pricing details openly while others offer custom quotes to each prospective client. Quote-based pricing can be competitive, but it can be time-consuming to get quotes from multiple companies.
  • Customer service: The assistance offered varies by company. If your business operates outside of normal business hours, you might look for a company with extended customer service hours.

Popular payments companies for accepting credit cards

Square: Well-rounded, all-in-one system

Payment processing fees:
  • 2.6% plus 10 cents for in-person transactions (2.5% plus 10 cents with Retail Plus plan).
  • 2.9% plus 30 cents for online transactions or invoices without a card on file.
  • 3.5% plus 15 cents for manually keyed transactions or card-on-file invoices.
Why we like it: Square is a well-known payment service provider that includes card processing with its POS system and proprietary hardware. Square doesn't require a long-term contract or charge setup fees, refund fees or chargeback fees. It has free and paid versions of its POS systems specific to restaurant and retail businesses.

Stripe: If you’re building a website or app from the ground up

Payment processing fees:
  • 2.9% plus 30 cents for online transactions.
  • 2.7% plus 5 cents for in-person transactions.
  • 3.4% plus 30 cents for manually keyed transactions.
  • 3.9% plus 30 cents for international cards or currency conversion.
Why we like it: Stripe focuses on online payments with an emphasis on customizability, though it supports in-person payments, too. Its platform allows you to accept card payments without a merchant account. Stripe doesn't charge monthly fees and there’s no charge to refund a transaction, but you may pay $15 per chargeback that’s not resolved in your favor.

Helcim: If you just want to accept payments

Payment processing fees:
  • Interchange plus 0.3% and 8 cents per in-person transaction (if less than $25,000 in monthly card transactions).
  • Interchange plus 0.5% and 25 cents per online transaction (if less than $25,000 in monthly card transactions).
  • Interchange plus 0.5% and 25 cents per manually keyed transaction (if less than $25,000 in monthly card transactions).
  • 0.5% plus 25 cents for ACH payments.
Why we like it: If you want to accept card payment but don’t need many additional services, check out Helcim. The company supports in-person and online payments, doesn’t require a contract and doesn’t charge a monthly fee. Helcim uses interchange-plus pricing and offers fee discounts when a business has over $25,000 in monthly credit card volume. Its pricing structure works best for businesses with high volumes.

Chase Payment Solutions: Best if you want to partner with a bank

Payment processing fees:
  • 2.6% plus 10 cents for in-person transactions.
  • 2.9% plus 25 cents per transaction for online transactions.
  • 3.5% plus 10 cents for keyed transactions.
Why we like it: If you want to use one company for multiple services to be more efficient, consider Chase for your payment processing and your business checking. You can get your money as soon as the same day and its pricing is competitive.
Randa Kriss, a NerdWallet small-business writer, contributed to this article.
A version of this article was first published on Fundera, a subsidiary of NerdWallet.

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