How to accept credit card payments in person
- Payment processor. The service that actually initiates and completes the transaction with the card networks (such as Visa or Mastercard) and the banks is called a payment processor. Payment processors charge a transaction fee for every payment accepted.
- Point-of-sale system. This is the software used to ring up sales, track inventory and view your sales history. Hardware can include items like a terminal, card reader, bar code scanner and cash drawer. Free POS software exists, but POS systems with more features charge monthly or annual subscription fees.
- Card reader. A card reader might come with the POS system; if it isn't, you may have to shop for one that's compatible with your setup. Some providers offer free card readers. More elaborate setups can cost over $1,000.
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How to accept credit card payments online
- Payment gateway: This is a digital interface that allows customers to enter their card information securely. Companies such as Stripe and Braintree offer online payment gateways. Many in-person POS systems also allow merchants to accept payments online, either directly or through an integration with an e-commerce system.
- Payment processor: Like it does with in-person payments, a payment processor initiates and completes online transactions with credit card companies and banks. Payment processors charge a transaction fee for every payment accepted. Many payment gateways also include payment processing services.
What happens when a customer pays with a card?
- The card reader or online payment gateway securely captures the card information, and the payment processor transmits the data to the associated card network (like Visa) for approval.
- 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).
- The issuer evaluates the request and either approves or denies the payment.
- If the transaction is approved, you can accept the payment and complete the transaction.
- Once the transaction is approved, the payment processor instructs the issuing bank to send funds.
- The merchant gets access to those funds (less fees).
Payment service providers vs. merchant account providers
Payment service providers pros
- Fast to set up.
- Most cost-effective option for businesses with low sales volumes — generally, less than $10,000 a month.
Payment service providers cons
- Higher risk of account disruptions. Because the merchant account ultimately belongs to the payment service provider, you’re more likely to experience account holds or termination than with dedicated merchant accounts if the provider believes any transactions go against the terms of service.
- Generally not an option for 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.
Merchant accounts pros
- More cost-effective for businesses with higher sales volumes.
- Generally not tied to a single brand of POS system.
- Generally offers greater access to support representatives who know about your specific business and activity.
Merchant accounts cons
- Approval process and setup can take longer compared with a payment service provider.
- The fee structure — usually interchange-plus pricing — can be difficult to understand.
What else to consider before you accept credit card payments
What other services do you need?
Where will you accept credit card payments?
How much does it cost to accept a credit card payment?
Hardware cost: free to $1,000+
- Will you own or lease the hardware?
- Is the cost of the hardware part of the subscription cost, or is it separate?
Subscription fee: monthly based on options chosen
Transaction fee: percentage of sale plus a fixed amount
Other details to consider
- 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.
- More complex payment products, especially POS systems that allow highly customized menus, might require installation, setup or training, all of which can cost extra.
- Customer service varies. If there's a problem, will you want to speak to a person immediately?
- Some companies share pricing details openly while others offer custom quotes to each prospective client.
Popular payment processors to choose from
Square
Square POS |
Stripe
Stripe |
Payment Depot
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Accept payments, avoid surprises
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Accept payments, avoid surprises
Answer a few questions to match your business with our selected payment partners.