Accepting credit card payments can increase in-store sales by up to 40% compared to cash payments alone. It’s also necessary for businesses selling online. This guide shows you how to accept credit cards in a brick-and-mortar store, on a website, and with a mobile device.
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.
How to Accept Credit Card Payments
The way you accept credit card payments will depend on where you’re processing the transaction. To accept credit card payments in-store, you need a card reader and a merchant account. To accept credit cards online, you need an ecommerce site and a payment gateway.
All businesses can choose between two options for accepting credit cards:
- An all-one-one provider that has a solution for each step of the process like Square
- Select individual providers for separate point-of-sale (POS) systems and merchant accounts like Payment Depot
1. Select a POS System
A POS system is a software system that serves as the central hub of your business. POS systems manage transactions, track inventory, and provide business analytics. It is vital to choose a POS system first because some systems have built-in payment processing to accept credit card payments.
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. In either case, you can choose from an all-in-one solution that has built-in payment processing or a POS that will require third-party payment processing.
If you are a small business and for the sake of simplicity, we recommend choosing an all-in-one solution that has POS, payment processing, and merchant services built-in. However, here are the pros and cons of using an all-in-one system so that you can decide if it’s right for your business.
Pros of All-in-One System
- Customer relationship management (CRM) functions: Solutions like Square track customers automatically by their payment method, so it’s easy to associate transactions with customers and vice versa
- Easier to create and accept gift cards: Square has free digital gift cards that businesses can create and sell; when using a merchant account, businesses have to make sure that the gift cards are compatible with their system
- All-inclusive customer support: If something goes wrong, businesses contact one customer support team, instead of trying to figure out where the problem originated and which company to call
- Flat rates: Flat, predictable credit card processing fees
Cons of All-in-One System
- More expensive: Solutions like Square can be more expensive, especially for larger businesses because they charge flat fees per transaction; merchant accounts typically offer lower fees
- Less flexibility: All-in-one systems usually have fixed rates, whereas merchant accounts provide more flexibility with volume discounts; plus, if you are using a POS that works with multiple payment processors, you can always switch providers if needed
All credit card processing companies make it possible for you to accept credit card payments for your business. An all-in-one like Square provides hardware that makes processing credit cards a seamless process, plus every card you charge is managed in one central account.
Most all-in-ones use their own branded readers and POS hardware so that you tend to have fewer technical or connectivity issues. They also tend to work with many online shopping carts or, like Square, include a free online store. You can sign up in minutes to get a free account from Square today.
Pros of a Traditional Merchant Account
- Faster deposits: Traditional merchant accounts require an application and vetting process, so business funds from transactions are less likely to be frozen or held.
- Better pricing for established businesses: There is less risk involved for processors working with established businesses that go through an application process, so lower rates are typically available.
Cons of a Traditional Merchant Account
- Setup times and fees: Traditional merchant services often contract with third-party providers for readers and POS equipment. This can lead to a more difficult setup and getting tech support when needed can take longer.
- Add-on fees: For online sales, you likely will need to connect your merchant account to your online store using a payment gateway, which can add yet another fee.
To sum it up, if you sell in-store, mobile, and online, an all-in-one like Square can be the better choice. But if you sell in high volume in a retail location, the savings from an interchange plus or membership model merchant services provider can be worth a little-added work to set up.
If you opt for an all-in-one solution, you can skip down to the purchase needed equipment section. If you are a high-volume brick-and-mortar retailer interested in learning more about traditional merchant services, move on to Select a Merchant Account.
2. Select a Merchant Account (If Not Using All-in-One System)
Traditional merchant services providers are a good option for higher-volume sellers since their credit card processing fees tend to be lower than all-in-ones. Generally, you’ll see worthwhile savings when your sales reach about $20,000 per month for in-store sales.
If you want to go this route, it’s essential to understand the different fees they charge because they’re not as straightforward as the all-in-one providers. Along with the credit card processing and transaction fees, you might have an account fee, a gateway fee, fraud prevention fees, and more. Therefore, always make sure you’re clear on both the processing fees and any added fees when considering a traditional merchant services provider.
Traditional merchant services providers fall under three different types of fee structures.
Interchange Plus Merchant Services Providers
The credit card issuers―Visa, MasterCard, American Express, and Discover―charge a base processing rate to use their service called the interchange rate. These rates vary based on card types like rewards, corporate cards, and debit card and sale types like retail sales, business equipment sales, and so on.
What you need to understand is that interchange rates are what card issuers charge payment processors to run each charge. The payment processors, in turn, mark that up and call this plan interchange plus. This fee structure can be much cheaper for higher-volume sellers compared to all-in-one services.
Membership or Subscription Merchant Services Providers
Many of the interchange-plus merchant services that are popular with small businesses operate with a membership model. With membership models, businesses pay a flat monthly fee in exchange for much lower fees for each transaction. For example, Payment Depot, one of our recommended merchant service providers, charges a $49 monthly fee for small businesses, who then just pay interchange fees + 15 cents on each transaction.
Tiered Pricing Merchant Services Providers
Tiered pricing providers charge a different markup for every single type of card you process. Credit and debit cards each have different fees, but that’s not all. Rewards cards, corporate cards, and even airline miles cards have different fees as well, and you never know how much you’re being charged until you receive your bill.
This makes it very hard to understand how much you are paying to process credit cards. Plus, it makes it very easy for the merchant account provider to overcharge your business since tiered billing is very confusing to sort out. We don’t recommend tiered pricing providers for small businesses since there are many better options with all-in-one and interchange plus providers.
Most payment processors won’t advertise their pricing models as tiered. However, if their pricing is advertised as “rates as low as X,” that is generally a sign that the company has different pricing for different card types. If you are considering a processor that advertises pricing this way, ask to see some sample statements to get a better idea of the rate customers pay.
Other Considerations When Selecting a Merchant Account
When selecting a merchant account, there are other factors to consider in addition to the price. For example, as a small business, it may be best to work with a processor that offers dedicated support so that you know exactly who to contact when you have a question or concern.
The type of support offered can vary greatly by provider. Some providers have extensive online documentation while others prioritize email or phone support. Make sure to choose a company that offers the type of support and availability that is best for you.
“When it comes to selecting a credit card processor security, cost and customer support should be front of mind. As with most things in life, the devil is in the details. Invariably, you will require customer service, and you should look for a processor that offers 24/7 customer support. Ideally, you want direct help from an actual representative.”
—Steven Millstein, certified financial planner & editor, CreditRepairExpert
3. Select 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, PayPal, 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 like Square that include a built-in gateway with their service.
4. Purchase Needed Equipment
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:
- In-person (in-store and mobile): Credit card payments require card reading equipment that allows you to swipe a card physically. Square comes with a free magstripe credit card reader that can be used for accepting credit card payments on smartphones and iPads. Businesses can also purchase additional credit card readers to accept tap and chip payments.
- 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.
Merchant Account Service Providers
There are two main types of merchant accounts to choose from: an all-in-one service like Square and traditional providers like Payment Depot. All-in-one providers offer simplicity for small businesses by acting as the POS, merchant, and payment gateway. Whereas traditional merchant services perform one function but can offer lower rates for larger businesses. Both offer security by following the Payment Card Industry Data Security Standard (PCI DSS) so that your transactions are protected, but you may need to do more to achieve PCI-0compliance.
Top Merchant Account Service Providers
Merchant Services Provider
All-in-one solution for small and startup businesses
All-in-one solution for multichannel sellers
All-in-one solutions for online businesses
Traditional merchant services for most small businesses
Traditional merchant services for businesses that want to work directly with a bank
Traditional merchant services best for medium to large businesses
Which Merchant Account Service Provider is Right For You?
Square Payments is a free account that lets businesses process payments in-store, mobile payments, online, through a virtual terminal, and even invoice payments with flat rates. The standard in-person card processing fee is 2.6% + 10 cents per transaction, online is 2.9% plus 30 cents, and keyed-in payments are 3.5% plus 15 cents.
After signing up for a free Square Payments account, Square provides you with a free magstripe card reader for in-person payments. According to Square user reviews, it is easy to use, and it’s one of the best choices for mobile payments.
Square is a great choice for small businesses, startups, and people who sell only occasionally. There are no startup or monthly fees and no monthly transaction requirements. Businesses pay the flat rate whenever they make a sale. Funds are deposited in roughly one to two business days. Visit Square to create a free account.
Shopify is a POS and ecommerce solution that allows retailers to sell in-store, online, over mobile, and through social media. Shopify also has a built-in payment processing solution. Shopify is an all-in-one solution like Square but, unlike Square, businesses pay a monthly fee for Shopify software, so it is a good choice for serious retailers that want a robust ecommerce platform. In Shopify user reviews, business owners like that Shopify is super-efficient and helps streamline the process of running an ecommerce business.
Shopify Pricing Tiers
In-person Processing Fees
Online Processing Fees
2.9% + 30 cents
2.6% + 30 cents
2.4% + 30 cents
On May 4, 2020 Shopify released POS Pro for $89/month in addition to the free POS app. We will update this article to reflect the new pricing and features.
Overall, Shopify is a great option for retailers that focus on ecommerce or multichannel selling and want an all-in-one POS and merchant services provider. Visit Shopify for a free 14-day trial.
PayPal offers an all-in-one credit card processing solution for online and in-person card payments. Like Square, PayPal offers flat-rate processing. PayPal’s fees for in-person payments are 2.7%, online sales are 2.9% plus 30 cents, and keyed-in payments are 3.5% plus 15 cents.
However, unlike Square, PayPal does charge a fee for basic card readers, starting at $25 for a basic magstripe reader to plug into your smartphone. In PayPal user reviews, businesses like having the option of accepting PayPal payments in addition to traditional credit cards.
Like Square, PayPal does not have any monthly fees or minimum processing requirements, so it is a good fit for small businesses that want a simple solution. The big advantage of using PayPal as your merchant services provider is you can accept PayPal payments in addition to credit and debit cards, which is a preferred payment method for some shoppers. Visit PayPal to create a free account.
Payment Depot is a membership or subscription model merchant services provider. That means businesses pay a flat monthly fee and a very low fee for each transaction. Payment Depot has some of the most competitive payment processing rates available for small to medium-sized businesses. The one flat monthly fee allows businesses to accept credit card payments in-person through an in-store terminal, mobile payments, ecommerce, and virtual terminal payments. Payment Depot has four plans for different-sized businesses.
Payment Depot Pricing Plans
Monthly Processing Limit
Interchange + 15 cents
Interchange + 10 cents
Interchange + 7 cents
Interchange + 5 cents
Free Mobile Reader
Free Standard Terminal
Free Pin Pad
Payment Depot’s membership pricing model is ideal for businesses processing more than $20,000 per month. Payment Depot offers some of the lowest interchange-plus rates available to small businesses. All Payment Depot plans include free equipment reprogramming and a gateway for online payments. Unlike most merchant account providers, Payment Depot makes no distinction between online and in-person payments. The pricing is the same, and both kinds of payments are included with every membership. Visit Payment Depot for a free quote.
Chase Merchant Services (formerly Chase Paymentech) is part of JPMorgan Chase, one of the largest banks in the country. Chase offers traditional merchant services, including flat-rate payment processing and interchange-plus pricing. Unlike Square and the all-in-one services, businesses need to apply for a merchant account with Chase. All of the payment processing rates are quote-based, so there’s room to negotiate.
Chase is a great option for businesses that prefer to work directly with banks, especially if you have a business checking or credit account with Chase. Many people like the simplicity of having all their financials run through the same institution. Chase Merchant Services offers quick online transactions with no hidden fees or long-term contracts. You also get 24/7 customer support and next-business-day funding with a Chase business checking account.
Fattmerchant is a traditional merchant services provider that has some of the lowest per-transaction credit card processing rates. This is because Fattmerchant passes the actual card issuers’ interchange and assessment fees on to you with no percentage markup at all, a flat 6 cents or 8 cents transaction fee.
Fattmerchant is similar to Payment Depot in that it follows a membership pricing model with a flat monthly fee. In addition to the small transaction fees, Fattmerchant is $99 per month for less than $500,000 in annual sales and $199 per month for more than $500,000 in annual sales. Fattmerchant had a very sleek interface, making the payment processor super easy to use. Fattmerchant user reviews are extremely positive and report fast response times from the company’s support team.
Fattmerchant’s direct-interchange model can be a money-saving option for sellers processing around $20,000 per month or more in credit cards. Fattmerchant is one of few merchant services providers that offer a direct-interchange fee structure to smaller businesses. This model gives you the lowest possible interchange rate since there is no markup on card issuer fees at all. Visit Fattmerchant to apply.
How Credit Card Payments Work
In-store sales generally have the lowest processing fees since the risk of fraud is relatively low as you can see your buyer, confirm their identity, and physically process their card. With online payments, because the risk of fraud is higher, online sales have higher processing fees than in-person sales as you can’t see your buyer, confirm their identity in person, or physically process their card. Here is an overview of how each process works.
How to Accept Credit Card Payments 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.
How to Accept Credit Card Payments Online
To accept credit cards online, you need an ecommerce platform that, ideally, supports a secure checkout. If you choose Square for your credit card processing, you get a free Square online store with your account. Square and other payment solutions also work with most top-rated, low-cost ecommerce platforms, including BigCommerce and Shopify.
Depending on your merchant account solution, you might need a payment gateway to accept and process payments in your online store. However, all-in-one solutions like Square, PayPal, and Stripe include a built-in gateway with their service, so they’re often the simplest choice.
When an online customer enters their credit card information in your online store’s checkout page, the gateway encrypts 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.
Frequently Asked Questions (FAQs) for Accepting Credit Cards
For new business owners, navigating the ins and outs of credit card processing can be daunting. Below, we address some of the most commonly asked questions.
How to accept credit card payments online?
To accept credit card payments online, you need an ecommerce platform and a secure checkout solution. If you choose Square as your payment processor, it comes with the option to build a free ecommerce site.
How to accept mobile credit card payments?
To accept credit card payments in a mobile sales setting, you need a mobile credit card reader that connects to your smartphone or tablet, like the Square reader shown above. With it, you can accept every type of credit or debit card and swipe, insert (for chip cards), or tap (for e-wallets like Apple Pay), to complete the payment.
The payment information is sent through your cellular or Wi-Fi connection to your merchant account processor for approval. You receive confirmation instantly 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 two days.
How to accept credit card payments over the phone?
To accept credit card payments for phone sales, you need a virtual terminal. Most payment gateways include a virtual terminal in their service. It allows you to log into a secure screen, enter or key-in your customer’s payment information, and process the charge over the internet. The charge is approved or declined instantly. If approved, your merchant account provider deposits the funds into your account, generally within two days.
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 he or she used for the purchase. Mobile payment, 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, like PayPal, refund part of all of the original transaction fee. This is another question you should ask when deciding between providers.
What are chargebacks, and how do they work?
When a customer disputes a charge, your merchant account provider will notify you with all of the details and provide you with 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, which we detail below.
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.
A chargeback happens when the customer’s credit card company sides with the customer in a 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. So, it’s important to understand why chargebacks happen and how to minimize them.
Credit Card Processing Terms to Know
No matter where and how you want to accept credit card payments, you first need to be familiar with certain industry terms. Knowing specific credit card processing lingo will help when negotiating fees and contracts, and help you determine what exactly is needed for your business.
Credit card processing terms include:
- Merchant account: This is the account that you use to process credit card payments; you can get a merchant account from your bank, from an all-in-one provider like Square, or through traditional processors like Payment Depot
- Processing fees: These are what merchant account services charge and are figured as a percentage of each sale plus a per-transaction fee; some merchant account providers also tack on monthly fees
- Effective rate: The effective rate shows what you are paying in processing fees; take the total processing fees on your statement and divide by total sales volume for that statement
- Retail POS system: These handle credit cards, cash, and check payments for in-store sales; most also include business management features
- Payment gateway: This connects your website’s checkout page your payment processing solution; many payment processors like Square, PayPal, and Payment Depot include a payment gateway with their service; others require a separate payment gateway account
Accepting credit cards is a must for every business, whether you need to accept payments in-person, online, or over the phone. 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 upon.
If you are starting up, your monthly card sales are less than $30,000 per month, or most of your purchases are low value, such as less than $25, then we recommend using Square. It’s quick to set up, comes with many free features like POS software, an online store, and business management tools, and works anywhere you want to sell. Plus, each free Square account comes with a free magstripe credit card reader to accept credit cards anywhere. Visit Square to get a free account.