How to Accept Credit Card Payments in 4 Steps

Accepting credit card payments can increase in-store sales by up to 40% compared to cash payments alone. It’s also necessary for businesses to sell online. This guide shows you how to accept credit cards in a brick-and-mortar store, on a website, and with a mobile device.

1. Choose a Payment Processor

The first step in accepting payments is choosing a credit card processing company. There are two major types of payment processors: merchant accounts, and payment service providers.

For most small businesses, a payment service provider like Square is your best choice. There are no monthly fees or minimums, and no application or approval process. The credit card processing fees are predictable and it comes with free point-of-sale, ecommerce, and invoicing software.

Square: Best payment processor for new and small businesses

However, for established businesses, a merchant account can be the most cost-effective option. Once you are consistently processing over $10,000 per month, a merchant account provider like Payment Depot offers a membership pricing model with very low transaction fees.

Payment Depot: Best payment processor for established or growing businesses

💡 Learn more: How Credit Card Processing Fees Work

2. Select Your Point-of-Sale Software

A POS system is a software system that serves as the central hub of your business. It’s also the user-friendly interface that sits between your employees ringing up the sale and the payment processor.

POS systems manage transactions, track inventory, and provide business analytics. If you are selling in-person, you will need a POS to help manage customer interactions.

If you’re selling online, you need a digital or ecommerce POS platform that will let shoppers purchase from your site. Many payment processors offer some kind of POS functionality like a mobile POS app, virtual terminal, or invoicing tool.

💡 Selling online and in-person? Choose a multichannel POS

3. Connect a Payment Gateway

When an online customer enters their credit card information in your online store’s checkout page, the payment gateway encrypts, or secures the information and sends it over the internet for approval via your processor. The purchase is approved or declined instantly. If approved, your online store completes the sale automatically, and your merchant account provider deposits the funds into your account, generally within one to two days.

Many payment processors like Square and Payment Depot include a payment gateway with their service. Others require a separate payment gateway account. For sheer simplicity, we recommend using all-in-one solutions that include a built-in gateway with their service.

However, if you choose a payment processor that does not come with a free gateway, Authorize.net is one of the best and most popular standalone payment gateways because it is affordable and easily connects with different web builders and ecommerce platforms.

4. Purchase Card Reader Hardware

The type of equipment you need will vary based on where you are selling. If you plan to accept mobile payments or sell in-store, you will need a card reader. If you are selling online, you won’t need any physical hardware.

Here are the details on what equipment and hardware you need to accept credit card payments:

1. In-person (in-store and mobile): Credit card payments require card reading equipment that allows customers to tap, dip, or swipe their payment card.

Square’s mobile card reader allows you to accept chip, swipe, and contactless payments and connects to Square POS on your iPhone or iPad via Bluetooth.

2. Online (ecommerce and virtual terminal): Credit card payments use a payment gateway that lets customers or sales staff enter credit card information into a secure online form. So, no physical hardware purchases are necessary.

You can accept payments online without hardware via a virtual terminal or online store.

Which Merchant Account Service Provider is Right For You?

How to Accept Credit Cards in Person

To accept credit card payments in an in-store retail setting, a credit card reader lets customers swipe, insert (for chip cards), or tap (for e-wallets like Apple Pay) credit cards physically to complete their payment. Your card reader is connected to the internet directly, or through your POS system like the one pictured below.

After swiping, inserting, or tapping the card, the payment information is sent for approval via your merchant account processor. Within a moment, you receive confirmation that the transaction was approved or declined. If approved, you complete the sale, and your merchant account provider deposits the funds into your account, generally within one to two days.

After accepting a credit card payment in-person, the funds will generally be deposited into your account within a few business days.

How to Accept Credit Cards Through an Online Store

To accept credit cards online, you need an ecommerce platform that, ideally, supports a secure checkout, such as Square Online Store. Depending on your merchant account solution, you might need a payment gateway to accept and process payments in your online store. However, most major ecommerce platforms (Square, Shopify, BigCommerce, etc.) all have built-in payment gateways.

When an online customer enters their credit card information in your online store’s checkout page, the gateway encrypts (secures) the information and sends it over the internet for approval via your processor. The purchase is instantly approved or declined. If approved, your online store completes the sale automatically, and your merchant account provider deposits the funds into your account, generally within one to two days.

💡Learn more: How to Set up Square Online Store

Frequently Asked Questions

What is PCI compliance?

PCI stands for Payment Card Industry. PCI compliance means you adhere to the Payment Card Industry Data Security Standard (PCI DSS) guidelines for protecting consumer data. If, as a merchant, you do not adhere to the guidelines, you could be fined by the PCI DSS. Payment processors also have PCI guidelines they need to follow. Measure your security with a Self-Assessment Questionnaire.

How do refunds work?

Refunds are processed using the same system that you originally used to process the sale. Basic in-store credit card processing equipment may require you to swipe the card for a refund, but most modern POS systems let you reverse the charge in the on-screen dashboard, so it’s fine if your customer didn’t bring the card they used for the purchase. Mobile payments, online sales, and virtual terminal refunds all can be processed on-screen too.

Most payment processors have a time limit on refunds, often between 60 days to 120 days. This is important to note for your return policies. If you have an unlimited time frame for returns, you won’t be able to credit the payment back after a certain date, but you can always offer store credit instead.

Once you process a refund, your merchant provider removes those funds from your daily deposit, or if the refund exceeds that day’s deposit, your processor deducts the difference from your bank account the following business day. After that, it takes about two to four business days for the refund to appear in your customer’s credit card account.

Some payment processors charge a transaction fee for processing refunds. However, some refund part of all of the original transaction fee.

What are charge disputes?

When a customer disputes a charge, your merchant account provider will notify you and provide a form to document and submit key transaction information. How a dispute is resolved depends on several factors, but you never want to ignore a notification. If you do, you’re guaranteed to lose money through a chargeback.

If a customer disputes a charge because they don’t recognize the transaction, a quick call to your customer usually clears up any confusion. In this case, the customer contacts their card provider and clears the charge. However, it’s always best to respond on your end as well by completing and submitting the dispute form and noting your conversation with your customer.

In cases where a customer claims an item did not arrive for online sales, that it was defective, or that the charge was fraudulent, you need to submit information to defend the charge. However, you should know that these cases are decided in the buyer’s favor more often. Sometimes, it’s best to refund the charge in question so that you don’t have a chargeback.

What are chargebacks?

A chargeback happens when the customer’s credit card company sides with the customer in a charge dispute and deducts money from your merchant account to refund the charge. If you have a high rate of chargebacks, you risk paying higher processing fees or having your account suspended altogether.

Bottom Line

Accepting credit cards is a must for every business, whether you need to accept payments in-person, online, or over a virtual terminal. Getting set up to accept credit cards can be easy. The hard part is knowing you are getting a good rate and signing up with a company that offers the support you can rely on.

If you’re a new business, Square offers an affordable and immediate way to accept credit card payments in-person through Square’s POS app, online through Square’s free Online Store, or through invoices. Square’s flat-rate fees are transparent and offer good value for new businesses or occasional sellers. Visit Square to create a free account.

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