Accepting credit card payments is proven to increase in-store sales by 40% and is absolutely necessary for businesses selling online. If you’re searching for the right credit card processing solution, this guide shows you how to accept credit cards anywhere, in a brick-and-mortar store, on a website, or using a smartphone or tablet to accept mobile payments.

Our research shows that Square is the best solution for small businesses that average less than $30,000 in monthly credit card sales. It’s quick to set up, has no monthly fees (you just pay a flat 2.75% for in-store transactions), and works for retail stores, ecommerce, and on mobile devices. You also get a free mobile credit card reader when you sign up. Click here to get started today.

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How to Accept Credit Cards

It’s important to first understand that accepting credit cards in person differs from accepting credit cards online. Here are the three things you need to know:

1. In-person (in-store and mobile) credit card payments require card reading equipment that allows you to physically swipe a card.
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.
3. The credit card processing fees for in-person sales are lower than online sales since in-person sales carry a far lower risk of fraud.

You also need to know that credit card processors differ, too. Some, like Square and PayPal, are all-in-one solutions that support all types of payments from one central account. Others, like bank merchant services, can require separate accounts for in-store and online sales.

Since Square does it all and has very clear, simple fees, we’ll use them to quickly illustrate how processing costs and equipment differ for various types of payments:

Square’s Credit Card Processing Fees & Equipment

Payment Type	Square Fee	Square Equipment
In-Store Sales	2.75% per transaction	Card reader or POS Station (Free to $500)
Online Store	2.9% + 30¢ per transaction	Online Ecommerce Store (Free Square Store)
Mobile Sales	2.75% per transaction	Mobile Card Reader (Free to $49)
Phone Sales, Invoice & Recurring Payments	3.5% + 15¢ per transaction	Online Virtual Terminal (Free with Square account)

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Square’s simplicity for all types of payments makes it a top choice for startups and small sellers. But if you’re interested in learning about your other credit card processing options, read on to see how to accept credit card payments for specific sales scenarios.

Credit Card Processing Terms To Know

No matter where and how you want to accept credit cards, you first need to be familiar with certain industry terms. These are:

• 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 Cayan.
• 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.
• Retail Point of Sale (POS) System – these handle credit card, 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 Cayan include a payment gateway with their service. Other require a separate payment gateway account.

Now we’ll explore all the ways you can accept credit cards, what you need for each scenario, how each option works, and what it costs.

How to Accept Credit Cards for In-Store Sales

You Will Need:

• Credit Card Reader or a POS System
• Merchant Account with a retail merchant services provider like Cayan or all-in-one provider like Square

How it Works:

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

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 1-2 days.

What it Costs:

In-store sales generally have the lowest processing fees since the risk of fraud is relatively low (you can see your buyer, confirm their identity, and physically process their card). Square charges just 2.75% for in-store sales and offers a free mobile card reader and POS systems, pictured above, starting at $169. Click here to visit Square.

How to Accept Credit Cards for Online Sales

You Will Need:

• Ecommerce Platform with a secure checkout
• Secure Payment Gateway (if not using an all-in-one provider)
• Merchant account that supports online payments or an all-in-one provider like Square

How it Works:

To accept credit cards in an online store you need an ecommerce platform that, ideally, supports a secure checkout, as shown above. If you choose Square for your credit card processing, you get a free Square online store with your account. Or, Square and other payment solutions 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 (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 automatically completes the sale and your merchant account provider deposits the funds into your account, generally within 1-2 days.

What it Costs:

Because the risk of fraud is higher, online sales have higher processing fees than in-person sales (you can’t see your buyer, confirm their identity in person, or physically process their card). Square charges 2.9% + 30¢ per transaction for online sales and offers a free online store. Click here to visit Square.

How to Accept Credit Cards for Mobile Sales

You Will Need:

• Mobile Credit Card Reader
• Smartphone or Tablet
• Merchant Account that handles mobile payments like Square

How it Works:

To accept credit cards 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 simply swipe, insert (for chip cards), or tap (for eWallets like Apple Pay), to complete the payment.

The payment information is sent to your merchant account processor for approval via your mobile device’s cellular or wifi connection. You instantly 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 1-2 days.

What it Costs:

Mobile sales generally have low processing fees since the risk of fraud is relatively low (you can see your buyer, confirm their identity, and physically process their card). As a result, Square charges the same low fee of 2.75% for both mobile sales and in-store sales and offers a free mobile card reader when you sign up. Click here to try Square.

How to Accept Credit Cards Over the Phone & for Invoices and Recurring Payments

You Will Need:

• An Online Virtual Terminal
• Merchant Account with a secure payment gateway or an all-in-one provider like Square

How it Works:

To accept credit cards for phone sales or invoice payments, or to set up automatic recurring charges for memberships or services, 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 instantly approved or declined. If approved, your merchant account provider deposits the funds into your account, generally within 1-2 days.

Here’s a look at Square’s virtual terminal in action:

Most virtual terminals provide important features like online invoicing and recurring payments. Online invoicing helps you get paid quickly by allowing customers to conveniently pay invoices online using their credit card. Recurring payments are a handy way to set up automatic credit card billing for all sorts of business needs, from sales and service payments to subscriptions and lessons.

What it Costs:

Like online sales, virtual terminal payments have higher processing fees since the risk of fraud is higher (you can’t see the buyer, confirm their identity in person, or physically process their card). Square charges 3.5% + 15¢ for each virtual terminal transaction and offers a free online virtual terminal when you sign up. Click here to visit Square.

That sums up the many different ways you can accept credit cards for all types of sales and other business needs. Next, we’ll examine how credit card processing fees work in detail, plus how to handle refunds, charge disputes, and fraudulent activity.

Understanding Credit Card Processors, Rates, & Fees

Above, we touched on the different types of merchant account providers you can use and mentioned that their fees can differ greatly. Now we’ll take a closer look at these differences.

There are basically two types of credit card processing services you can use to accept credit cards. To make it easy, we’ll refer to them as:

• All-in-one processors like Square and PayPal, for details see our Square vs PayPal matchup
• Traditional merchant accounts like Cayan and others

It’s important to understand how each works so you can make the best choice for your specific business. Here’s a quick comparison:

How to Accept Credit Cards: Your Processor Options

Type of Processor	Fee Structure	Best For
All-in-One Processors	Simple flat-rate fees	Sellers needing a simple all-in-one solution
Traditional Merchant Accounts	Interchange Plus Pricing	Businesses looking to lower processing fees and that don’t need all-in-one simplicity
	Tiered Pricing	Very large businesses with high sales volumes. Rarely a good choice for small businesses

Let’s explore each in detail to see which is the best solution for your business.

All-in-One Credit Card Processors

All-in-one processors, like our recommended provider, Square, are the simplest way to accept credit cards anywhere you sell. Most all-in-one credit card processors handle in-store, mobile, online, and virtual terminal payments all in one convenient account. Even better, they have transparent, no-surprises fee structures and just a few simple-to-understand processing fees.

For example, here are Square’s simple flat-rate processing fees for any type of payment you might process:

Square Credit Card Processing Fees

Payment Need	Square Payments Fee
In-person Sales Mobile payments & in-store POS sales	2.75% per transaction
Online Payments Online store sales & online invoice payments	2.9% + 30¢ per transaction
Virtual Terminal & Recurring Payments Phone orders, automatic & keyed-in payments	3.5% + 15¢ per transaction

Unlike the traditional merchant accounts, which we’ll discuss below, with all-in-one providers, all types of cards, credit or debit, run under the same fee structure. That way you always know what you’re being charged, and why. All-in-one processors also tend to be very simple and fast to set up compared to traditional merchant services. For all of these reasons, most startups and small businesses find all-in-ones to be the best way to accept credit cards.

Traditional Merchant Services Credit Card Processors

Traditional merchant services providers are a great 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 $30K/month for in-store sales.

If you want to go this route, it’s important 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. So 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 two different types of fee structures:

1. 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 type (rewards, corporate cards, debit card, etc.) and on sale type (retail sale, business equipment sale, etc.).

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.

For example, our recommended provider, Cayan, charges:

Interchange Rate + 0.5% & 15¢ per transaction

This means that Cayan will add .5% to the card issuers’ interchange rate, plus charge you 15¢ per transaction. Interchange rates can vary, but based on an average Visa retail interchange rates for credit card and debit card sales, here’s a look at the fees you’ll pay with a provider like Cayan:

An Example of Cayan’s Interchange-plus Rates for Visa Charges

For Credit Cards Visa Charges: 1.51% + 10¢ per transaction	PLUS	Cayan Adds On: .5% & 15¢ per transaction
Final Interchange-plus Fee for Credit Card Charges: 2.01% + 25¢ per transaction
For Debit Cards Visa Charges: .05% + 21¢ per transaction	PLUS	Cayan Adds On: .5% & 15¢ per transaction
Final Interchange-plus Fee for Debit Card Charges: .55% + 36¢ per transaction

2. 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.

How to Know Which Merchant Provider is Right For You

Since tiered pricing is not a very practical solution for small businesses, you really have two main options for accepting credit cards: all-in-ones like Square, or a traditional merchant services interchange-plus provider like Cayan.

To decide if an all-in-one or traditional merchant account is best for your business, you need to consider three factors:

1. How and where do you sell?
2. What is your average monthly credit card revenue?
3. What is your average sale amount?

Now let’s explore these factors to help you decide which solution is best for your business.

1. How and where do you sell?

Most credit card processors can handle all types of credit card sales: in-store, mobile, online, and more, but some make it easier to accept credit cards in certain scenarios than others.

All-in-ones like Square provide hardware that makes processing credit cards anywhere a seamless process, plus every card you charge is managed in one central account. Most all-in-ones use their own branded readers and point-of-sale hardware so you tend to have fewer technical or connectivity issues. They also tend to work with many online shopping carts or, like Square, provide a free online store.

Traditional merchant services often contract with third-party providers for readers and point-of-sale equipment. This can lead to a more difficult setup, and getting tech support when needed can take longer. Also, 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 just a retail location, the savings from an interchange-plus merchant services provider can be worth the added setup.

2. What is your average monthly credit card revenue?

Generally speaking, if your average credit card revenue is below $30K/mo., a flat rate provider like Square is the best choice. If you sell over $30K/mo., an interchange-plus provider like Cayan can be more economical.

Here’s a comparison of Square and Cayan at two different revenue points: $10,000 and $30,000 in monthly in-store credit card sales.

Comparing Fees per Monthly Revenue: Flat-rate vs. Interchange-plus

Credit Card Revenue	Merchant Account Provider	Processing Fees per month	Service Fees per month	POS Software per month	Total Annual Cost
$10K/month 120 total sales (avg. $83/sale)	Square 2.75% No transaction fee	$275	$0	$0	$3,300
	Cayan 2.01% + 25¢ per transaction	$231	$16	$99 (Lightspeed)	$4,152
$30K/month 361 total sales (avg. $83/sale)	Square 2.75% No transaction fee	$825	None	None	$9,900
	Cayan 2.01% + 25¢ per transaction	$697	$16	$99 (Lightspeed)	$9,744

As shown above, Square is more economical if you’re charging $10K/mo. in credit card payments. However, Cayan is more economical at $30K/mo. This is because Square charges slightly higher processing fees (2.75%), but doesn’t have any monthly charges. Cayan has lower rates (2.01% + 25¢ for Visa charges) but charges a $16 service fee every month, plus you need to pay for a POS system separately.

The takeaway here is that at a certain revenue point, Cayan’s lower rate beats Square’s flat-rate, but under that, Square is the more affordable option. It’s important to note that this example compares just in-store sales. If you combine in-store, mobile, phone, and online sales in your operation, your fees can differ greatly. It always pays to run your own numbers.

3. What is your average sale amount?

Overall monthly charges are just part of the equation. Your average sale amount also plays a role in your credit card fees, as you can see in this comparison:

Comparing Fees per Average Sale: Flat-rate vs. Interchange-plus

	Merchant Account Provider	Processing Fee per Purchase	Monthly Processing Fees for $10K
$10 average sale (1000 sales/month)	Square	27.5¢	$275
	Cayan	45.1¢	$451
$100 average sale (100 sales/month)	Square	$2.75	$275
	Cayan	$2.26	$226

As shown above, Square charges the same rate regardless of the sale value. This is because they charge a fixed fee of 2.75% for in-person sales.

Since Cayan charges both a percentage rate (2.01%) plus a per-transaction fee (ie: 25¢ for a Visa charge), this makes Cayan more costly for selling high volumes of low-cost items. As the table shows, Cayan’s fee is nearly 18¢ more than Square on a $10 purchase. This can add up tremendously over time.

On the other hand, Cayan can be significantly cheaper for high-value purchases. Cayan’s fee was 49¢ lower than Square on a $100 purchase, and this savings becomes even more pronounced as the sales values increase.

Clearly, you need to consider more than just the processing rates and fees when choosing a merchant account. It pays to do a little homework and run your numbers to see which credit card solution offers the best range of services at the best cost for your unique needs.

So, we’ve discussed many ways to accept credit card payments, how rates and fees work, and what to look for in a credit card payment provider. Next, let’s look at how you can handle common credit card processing issues and prevent costly losses.

Tips for Handling Refunds, Disputes & Chargebacks

Like it or not, refunds, disputes, and chargebacks can occur when you accept credit cards. You can minimize them by always being upfront with your return policies and, if selling online in particular, having detailed product descriptions for every item you sell. Here’s a look at how to handle all three:

Refunds

Part of providing great customer service is offering hassle-free refunds for returned, damaged, or defective merchandise.

How it Works:

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 just let you reverse the charge in the on-screen dashboard (so it’s okay if your customer didn’t bring the card they 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 timeframe for returns, you won’t be able to credit the payment back after a certain date, but you can always offer a 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 2-4 business days for the refund to appear in your customer’s credit card account.

What it Costs:

Most processors will charge you a transaction fee to process a refund, but a few, like PayPal, actually refund some or all of your original transaction fees. This is something to consider when selecting a payment provider, especially if you sell products with a high return rate, like apparel.

Disputes & Chargebacks

Every so often, a customer will dispute a charge. Here are a few of the reasons you may encounter this:

• They do not recall the purchase
• They did not receive the item (in the case of online sales)
• A family member made the purchase with or without permission
• The customer is unhappy with the item or service but does not want to go to the trouble of returning it or requesting a refund

How it Works:

When a customer disputes a charge, your merchant account provider will notify you with all of the details and provide you 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. But know that many times these cases are decided in the buyer’s favor. Sometimes it’s best to just refund the charge in question so 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.

What it Costs:

Usually, the funds in question are frozen for the duration of the dispute, plus you’re billed a chargeback fee of around $25.00. If you win the dispute, the funds are released to you and the fee usually is refunded. If you lose the dispute, the funds in question and the fee are deducted from your account. If you don’t respond to the notification promptly and provide all details, you may also be charged an additional fee or risk account suspension.

Handling refunds, disputes, and chargebacks in a timely manner are important to maintain a healthy merchant account, but that’s not all. You also need to protect yourself from thieves who use credit cards to steal in many creative ways. Here’s how.

How to Protect Yourself From Credit Card Fraud

Credit card fraud is another reality you face when you accept credit cards, but there are ways you can protect yourself. Most top merchant account providers offer powerful fraud detection tools and you should put these in place per their direction. Plus, always be sure to do the following:

For In-store and Mobile Transactions:

• Verify identification with a photo id for in-person transactions
• Visually check the signature and card number
• Don’t offer cash for refunds for credit card charges, process refunds amounts only to the original card

For Online and Virtual Terminal Transactions:

• Use a secure ecommerce solution with a secure checkout
• Use a secure payment provider and gateway that requires Address Verification Service (AVS) with ZIP code and street address match
• Use Card Identification Number (CID) verification that requires customers to enter the 3-digit code on the back (Visa and MasterCard) or the 4-digit code on the front (American Express)
• Require contact information including phone and email
• Follow applicable PCI-security standards and don’t store any payment data on your own computer

These steps can help prevent chargebacks and protect yourself and your customers from fraudulent credit card activity. If you do suspect that a fraudulent charge has occurred, report it to your merchant account provider immediately and refuse the sale.

The Bottom Line

Most people find the subject of credit card processing complicated and difficult to understand. However, it’s essential that you understand the basics to avoid putting the wrong solution in place and paying more than you should when you accept credit cards.

For More Than $30K Card Sales Per Month: Cayan

When your monthly card sales exceed $30K per month, you might consider an interchange-plus model. We recommend Cayan since they provide some of the lowest interchange-plus processing rates in the industry. We also suggest trading-up from free to paid POS software to benefit from more advanced inventory, employee management, and customer outreach features.

For Less Than $30K Card Sales Per Month: Square

If you are just starting up, your monthly card sales are less than $30K per month, or most of your purchases are low-value (below $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. Swipe readers are free or you can get a reader that processes swipe, chip, and eWallet payments for just $49.

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