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How to Accept Credit Card Payments

You'll pay for credit card processing, but you can find low-cost options.
Last updated on December 15, 2021

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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 65% of all in-person transactions — in 2020, according to the Federal Reserve Bank of San Francisco.
Before you start swiping, you’ll need:
  1. A way to securely gather customer card data. If you take payments in person, this means a card reader and probably a point-of-sale system. If you do business online or over the phone, you’ll need the right software, called a payment gateway.
  2. A payment processor. This is a company that interacts with various financial institutions to facilitate transactions.
  3. A destination for your payment. In some cases, this means you’ll need to open a merchant account.
At a minimum, you'll have to pay for payment processing. And getting the right point-of-sale software and hardware could add to the expenses.

How credit card payments work

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. 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).
  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 proceed with the payment and complete the transaction.
  5. Once the transaction is approved, the payment processor instructs the issuing bank to send funds.
  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 right hardware and software.

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How to accept credit card payments online

To accept payments online, you’ll need a payment gateway. This technology lets customers submit their card information securely.
First, assess the scope of services you want. Some companies, like Square, pair a payment gateway with tools that help you build your online store. Others, like Stripe, focus primarily on stand-alone payment gateways that you can add to any website.
You’ll also need a payment processor. Many popular payment gateways include payment processing services, which are convenient. But you can find stand-alone payment processors and payment gateways if you prefer.

How to accept credit card payments in person

You’ll need a card reader and a payment processor that works with it to accept card payments in person.
In many instances, it makes sense for this decision to be part of choosing a point-of-sale system. A POS system acts as the hub of your business, combining 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. Some POS systems also process payments, giving you everything you need to accept card payments and run your business in one system.
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 while Payment Depot is a payment processor that isn’t tied to any one POS system in particular.
Many payment companies support both in-person and online payments.

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)

With the ability to combine so many different components, you’re able to find POS systems that 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 lineup that addresses both ends of that spectrum while others focus primarily on software and services and rely on basic card readers from third-party companies. You’ll even find companies that create industry-specific systems; a restaurant POS system, for example, might have features like the ability to communicate with devices in the kitchen.
If you don’t want a POS system, or 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

If you have a designated spot to check out customers in your store, you can find card readers that attach to your register, including wirelessly, and some that are incorporated into the register itself.
If you take your business on the road, you’ll want to look into mobile card readers. However, mobile card readers also have a place for some in-person businesses, too. They might also be a good fit if you want to take payments anywhere in your space, like checking out restaurant guests right at their tables.

Payment methods you can support

Card payments used to mean one thing: swiping the magnetic stripe on the back. Now, there are multiple ways to read cards.
Swipe: While cards still have this capability, swiping is becoming a thing of the past. It’s less secure than chip cards. Also, merchants are incentivized to avoid swiping, if possible. Before 2015, card issuers assumed liability for counterfeit transactions. Since then, merchants that don’t support chip cards are liable if a counterfeit transaction takes place.
Dip: “Dipping” is another name for inserting a chip card, also called EMV chips, into a card reader.
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 mobile-based payments like Apple Pay, Google Pay and Samsung Pay.
Not every card reader reads cards in all of the ways listed above. If you know you want customers to be able to pay with their phones, for example, you’ll want to verify that the card reader can do so.

What does accepting credit card payments cost?

The price to take card payments can be broken down into three categories. First, if you need hardware, you’ll probably pay a one-time cost upfront, though some companies have flexible payment options that don’t require any money down. You’ll also have ongoing costs, including a set monthly fee in some cases and an amount based on the total dollar value of card transactions you process, which will fluctuate from month to month.

One-time costs

Typical prices for card readers range from about $50 for a basic reader that connects to a phone or tablet to $750-$1,000 for a reader that’s part of a large touch-screen terminal.

Fixed recurring costs

Some companies charge a monthly fee. Others don’t. This is true of both payment gateways for online payments and card readers for in-person payments. 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, but free options do exist.

Transaction-based costs

Every time someone pays with a card, you'll pay a fee. There are a few common fee structures, but you’ll often see them expressed as 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 used.

Payment service providers vs. merchant account providers

Once a card transaction is complete, the funds go to a particular kind of bank account called a merchant account. In most cases, the money is transferred to the business's account in one to two business days.
Depending on your payment processor, you might need to open your own merchant account. However, if you use a payment service provider, you won’t. Payment service providers aggregate funds from multiple companies that use their services into one merchant account. The funds are then transferred into each individual company’s bank account.
While the end result is the same, there are a few distinctions to consider.
Because they take care of the merchant account requirement, payment service providers are simple, can be set up quickly and are generally cost-effective for smaller businesses with monthly sales volumes below $10,000. However, they are more prone to disruptions like holds or terminations. Opening a merchant account requires an application and review process, but it can be more cost-effective for businesses with monthly sales above $10,000.
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.

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 your business operates outside of normal business hours, you might look for a company with extended customer service hours.
  • 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.

Popular payments companies

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

Square is a well-known payment service provider that includes card processing with its POS system and proprietary hardware. Fees for in-person payments start at 2.6% plus 10 cents. The company doesn't require a long-term contract or charge setup fees, batch fees, refund fees or chargeback fees. It has free and paid versions of its retail- and restaurant-specific POS systems.

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

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. For all online payments, Stripe charges 2.9% plus 30 cents per transaction, and it doesn't charge monthly fees.

Helcim: If you just want to accept payments

If you want to accept card payment but don’t need as many additional services as, say, Square, check out Helcim. The company supports in-person and online payments, and it uses interchange-plus pricing. Its pricing structure works best for businesses with higher volumes.

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

Using one company for multiple services can be more efficient, and if you use Chase for your payment processing and your business checking, there’s a financial perk, too. You’ll get your money more quickly than the standard two business days, and its pricing for online sales is a competitive 2.9% plus 25 cents per transaction as part of a partnership with Authorize.net. In-person transactions cost 2.6% plus 10 cents each.
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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