Accepting credit card payments increases in-store sales by 40% compared to cash payments alone and is necessary for businesses selling online. This guide shows you how to accept credit cards in a brick-and-mortar store, on a website, and over mobile.
Our research shows that Square is the best solution for small businesses with less than $18,000 in monthly credit card sales. It’s quick to set up, has no monthly fees ― you 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. Sign up with Square and start accepting credit cards today.
How to Accept Credit Cards
The way you accept credit cards will depend on where you’re taking the payments. To accept credit cards in-store, businesses need a card reader and a merchant account. To accept credit cards online, businesses 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 POS systems and merchant accounts like Cayan
Here is a step-by-step guide for how to accept credit card payments.
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 important that we choose a POS system first because some systems have built-in payment processing to accept credit card payments. For help choosing a POS system, check out our choices for top retail POS systems.
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, if you are a larger business or have a higher sales volume ― $20,000 or more per month ― you may want to consider using a separate merchant account, such as Cayan, one of our recommended merchant account providers.
We recommend that most small businesses use an all-in-one system. 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
- CRM functions: Solutions like Square automatically track customers 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
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 typically have fixed rates, whereas merchant accounts offer 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-in-ones like Square provide 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 and Cons of Using Traditional Merchant Accounts
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. 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 a retail location, the savings from an interchange plus merchant services provider can be worth a little-added work to set up. Visit our Square review page to read feedback from other business owners.
If you opt for an all-in-one solution, you can skip down to Purchase Needed Equipment. 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 $30,000 per 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. 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 two 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 type like rewards, corporate cards, and debit card and sale type like retail sale, business equipment sale, 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.
For example, our recommended provider, Cayan, charges interchange rate plus 0.5% and 15 cents per transaction.
This means that Cayan will add 0.5% to the card issuers’ interchange rate, plus charge you 15 cents 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
2.01% + 25 cents per transaction
.55% + 36 cents per 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.
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 Cayan include a payment gateway with their service. Other 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 sell in-person, whether it’s over mobile or 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 cards:
- 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 Cayan. 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.
Top Merchant Account Service Providers
|Square||All-in-one solution for small and startup businesses|
|Shopify||All-in-one solution for multichannel sellers|
|PayPal||All-in-one solution for online businesses|
|Cayan||Traditional merchant services for high-volume sellers|
|Chase Merchant Services||Traditional merchant services for businesses that want to work directly with a bank|
|Fattmerchant||Traditional merchant services offering direct-interchange model for any size business|
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 2.75%, 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. On our Square review page, users like that Square is easy to use.
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. Click here to get 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 a robust ecommerce platform. On our Shopify review page, users 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|
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. Click here 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. On our PayPal review page, businesses like having the option of accepting PayPal payments.
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 to 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.
Cayan offers traditional merchant services with a variety of rate options. For most smaller businesses, that is interchange plus pricing. So, with Cayan, businesses typically pay a monthly fee of around $7, and annual Payment Card Industry (PCI) compliance fee of about $99, and a fee for each transaction processed. The specific transaction fee you pay will be negotiated when you sign up for a Cayan account. But average interchange plus pricing for Cayan is .55% for debit cards and 2.01% for credit cards. On our Cayan review page, business owners don’t like the extra monthly and annual fees but say that Cayan has excellent customer service.
Cayan tops our list of best merchant services providers for growing businesses because interchange plus plans provide lower processing rates than flat-rate services when you reach a certain sales volume. But for sellers focusing on specific markets, like B2B or government sales, tiered pricing can provide even more savings. Essentially, using a service like Cayan makes sense if you have high sales volumes where the savings on transaction fees will outweigh the monthly and yearly fees.
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 business checking or credit accounts 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-sale 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. However, Fattmerchant has hefty monthly fees: $99 per month for less than $500,000 in annual sales, and $199 per month for more than $500,000 in annual sales.
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.
Comparing All-in-One Fees to Merchant Account Fees
Generally speaking, if your average credit card revenue is less than $30,000 per month, a flat-rate provider like Square is the best choice. If you sell more than $30,000 per month, an interchange plus provider like Cayan can be more economical.
Comparing Fees per Monthly Revenue: Flat Rate vs. Interchange Plus
120 total sales
2.75% per swipe
No transaction fee
2.01% per swipe
25 cents per transaction
361 total sales
2.75% per swipe
No transaction fee
2.01% per swipe
25 cents per transaction
As shown above, Square is more economical if you’re charging $10,000 per month in credit card payments. However, Cayan is more economical at $30,000 per month. This is because Square charges slightly higher processing fees of 2.75% but doesn’t have any monthly charges. Cayan has lower rates of 2.01% plus cents 25 for Visa charges but requires 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, for most small businesses, Square is the more affordable option.
Overall monthly charges are 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
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 at 2.01% plus a per-transaction fee, such as 25 cents for a Visa charge, this makes Cayan costlier for selling high volumes of low-cost items. As the table shows, Cayan’s fee is nearly 18 cents 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 cents lower than Square on a $100 purchase, and this savings becomes even more pronounced as the sales values increase.
Tips for Accepting Credit Cards
Accepting credit cards can create uncertainty and take up a lot of time and energy if you don’t know what you need. Hopefully, you now have a good idea of whether you need an all-in-one solution like Square, or if need to process transactions with a more traditional merchant services provider. Below are some additional tips that can help you get set up quickly without all the hassle that can come with this process.
Make Sure You Have Dedicated Customer Support
When selecting a credit card processor, or any software or service provider for your business, it’s important to know what kind of customer support they offer. Ideally, the provider you choose will have free 24/7 phone support. But, some companies only offer email support, phone support during certain hours, or businesses have to pay extra for dedicated support.
“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. You will invariably 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, Editor, CreditRepairExpert & Certified Financial Planner
Customer support is especially crucial when money is involved. Small businesses rely on having funds quickly. A large percentage of your cash flow comes from credit card payments, so it’s important to be able to get help right away if something ever goes wrong.
“When it comes to account service, remember that your payment processing company is managing anywhere from 60% to 100% of your money, so make sure you have a go-to person or a good support desk. Otherwise, when you are looking for your money or something has gone wrong, this issue rises to the top of your list very quickly.”
― Eric Brown, Founder & CEO, Aliant Payment Systems
Avoid Higher Fees for Different Credit Cards
Some merchant accounts charge higher fees for different types of cards, such as American Express. This is important to consider when comparing providers, and why many businesses opt for a flat-rate provider.
“One important thing businesses owners need to think about when selecting a credit card processor is how much they charge for different types of credit cards. For example, if you run a small business in a tourist area, you need to check how much your processor will charge you to process international credit cards as these may make up a significant portion of your sales. Similarly, if your business is in a business district, you should probably look at the cost of processing American Express cards as this will be a popular option.”
― Ian Wright, Founder, Merchant Machine
Protect Against 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.
“Focus on finding a secured provider. Make sure you find a provider that prioritizes data security. Only go with processors that flag or deny risky transactions and store and encrypt their data securely.”
― David Ambrogio, Consultant, Tower Books
Always Negotiate for the Best Rate
Many providers are willing to negotiate volume discounts for credit card processing. If you are a larger business, definitely ask about any discounts or tiered pricing structures available.
“Like anything else in business, shop around for the best rates. Always ask for discount rate plus ― typically 0.2%, depending on your volume ― never accept a flat rate.”
― Yungi Chu, Owner, Headset Plus
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. However, if you don’t see the information you’re looking for, head to the FitSmallBusiness forum to ask us a question.
How Do You Accept Credit Card Payments Online?
To accept credit cards 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 Do You Accept Mobile Credit Card Payments?
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 swipe, insert, or tap 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 one to two days.
How Do You Accept Credit Card Payments Over the Phone?
To accept credit cards 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 instantly approved or declined. If approved, your merchant account provider deposits the funds into your account, generally within one to two days.
Here’s a look at Square’s virtual terminal in action:
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 & 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 many times these cases are decided in the buyer’s favor. 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 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 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; others require a separate payment gateway account
How Credit Card Payments Work
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). With online payments, 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). Here is an overview of how each process works.
How to Accept Credit Card Payments in Person
To accept credit cards 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 in an online store, you need an ecommerce platform that, ideally, supports a secure checkout, as shown below. 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 (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 one to two days.
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.
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. Click here to get a free account.