The three ways to accept credit cards
You can accept credit cards through a payment processor (a company that handles the transaction), a point-of-sale system (hardware and software that runs in your store or office), or a payment gateway (software that connects your website to a processor). Which one you need depends on where you sell: in person, online, or both.
Each route involves different hardware, different fees, and different setup time. The processor is the company that actually moves money from the customer's card to your bank account—they charge you a percentage of each sale plus sometimes a flat fee per transaction. You cannot avoid this cost; it is how the card networks (Visa, Mastercard, American Express, Discover) get paid.
The choice between these three is not about which is "best"—it is about which matches how you do business. A bakery with a counter needs different tools than an e-commerce store, which needs different tools than a service business that invoices clients.
Key Takeaways
- You need a payment processor to accept credit cards; they charge a percentage of each sale (typically 2.2% to 3.5%) plus sometimes a per-transaction fee.
- In-person sales use a point-of-sale system or a mobile card reader; online sales use a payment gateway connected to your website.
- Setup takes one to three business days for approval, then minutes to install hardware or add code to your site.
- You are responsible for keeping customer card data secure; most processors handle this through encryption, but you must follow their rules.
- Chargebacks happen when a customer disputes a charge with their bank; you can contest them with proof of delivery or service.
In-person payments: point-of-sale systems and card readers
If you take payments face-to-face, you have two main options: a full point-of-sale system (like Square, Toast, or Clover) or a mobile card reader (like Square Reader or PayPal Here) that plugs into your phone or tablet.
A card reader is simpler and cheaper to start. You buy the reader (usually $30 to $100), download the app, and you can start taking payments the same day. The processor charges you per transaction—typically 2.75% plus $0.15 per swipe, or a flat rate if you key in the card number manually. This works for small businesses, pop-up shops, or anyone who does not need inventory tracking or detailed reports.
A full point-of-sale system costs more upfront ($500 to $2,000 for hardware) but gives you inventory management, employee tracking, customer data, and detailed sales reports. You still pay per-transaction fees, but some systems offer flat monthly rates instead. These systems are built for restaurants, retail stores, and service businesses that need to track more than just payments.
Both require you to have a business bank account and a tax ID. The processor will ask for these during setup and may run a soft credit check. Approval usually takes one to three business days.
Online payments: payment gateways and hosted checkout pages
If you sell online, you need a payment gateway—software that encrypts the customer's card information and sends it to your processor. The gateway sits between your website and the processor; it never stores the card number on your server.
You have two ways to set this up. The first is a hosted checkout page: the customer clicks "Pay" on your site, gets sent to a secure page run by the processor (like Stripe or Square Online), enters their card there, and returns to your site. You do not handle the card data at all. This is the simplest route and requires no coding.
The second is a payment form embedded in your site. This requires a developer to add code to your checkout page, but the customer never leaves your site. The code encrypts the card data before it leaves the browser, so your server never sees it. Processors like Stripe and Authorize.net provide the code and documentation for this.
Online processors charge 2.2% to 3.5% per transaction plus $0.30 per transaction, though some offer flat monthly rates for high volume. Setup takes one to three business days for approval, then minutes to add the code or link to your site.
What happens after the customer swipes or clicks
When a customer pays, the processor sends the card information to the card network (Visa, Mastercard, etc.), which checks with the customer's bank. The bank approves or declines the charge in seconds. If approved, the processor holds the money and deposits it into your bank account—usually within one to three business days, though some processors offer next-day deposits for a small fee.
During this time, the charge shows as "pending" on the customer's statement. Once it settles in your account, it becomes final. If the customer disputes the charge within 60 to 120 days, the processor will ask you for proof: a receipt, a delivery confirmation, an email showing the customer received the service, or a signed contract. If you can prove the customer got what they paid for, you keep the money. If you cannot, the charge is reversed and the money goes back to the customer.
This dispute process is called a chargeback. It is the customer's way of forcing a refund through their bank instead of asking you directly. You can prevent most chargebacks by sending a receipt or confirmation email immediately after payment, keeping records of delivery, and making your refund policy clear at checkout.
Fees you will pay
Every processor charges a percentage of the sale plus a per-transaction fee. The exact rate depends on how the card is processed:
| How the card is processed | Typical rate | Why it varies |
|---|---|---|
| Card present (swiped or tapped in person) | 2.6% + $0.10 | Lower risk; the card is verified in real time |
| Card not present (typed online or over phone) | 3.5% + $0.30 | Higher risk; no way to verify the customer has the card |
| Recurring or subscription payment | 2.4% + $0.10 | Lower risk; customer has already approved it |
Some processors also charge monthly fees ($10 to $50), statement fees, batch fees, or PCI compliance fees. Read the pricing page carefully before you sign up. The difference between processors is usually small—a few tenths of a percent—so compare based on features you actually need, not just the lowest rate.
Security and PCI compliance
You are responsible for keeping customer card data safe. The card networks enforce a standard called PCI DSS (Payment Card Industry Data Security Standard). If you use a processor with a hosted checkout page or a payment gateway, the processor handles most of this for you. Your job is to use HTTPS (the padlock in the browser), never store card numbers on your own server, and follow the processor's rules.
If you build your own payment form, you must follow PCI rules strictly. This usually means hiring a developer who knows the standard. Violations can result in fines of $5,000 to $100,000 per month, so do not try to cut corners.
Most processors offer fraud detection built in. They flag suspicious patterns—like ten charges in ten seconds from different countries—and can block them automatically. You can also set rules yourself: decline international cards, require a CVV, or flag orders over a certain amount for manual review.
Choosing a processor
The major processors are Square, Stripe, PayPal, Authorize.net, and Clover. Each has different strengths. Square is simple and good for small in-person businesses. Stripe is built for developers and online stores. PayPal works for both but has higher fees. Authorize.net is older and more complex but offers more customization. Clover is a full point-of-sale system for retail and restaurants.
Before you sign up, check whether the processor supports your type of business. Some do not take payments for high-risk categories like gambling, adult content, or cryptocurrency. Some have minimum volume requirements or long-term contracts. Read the terms of service, not just the pricing page.
You can use more than one processor. Many businesses use Square for in-person payments and Stripe for online payments, or switch processors if they find a better rate. There is no penalty for closing an account, though you should keep records of old transactions for tax and dispute purposes.
Frequently Asked Questions
Do I need a business license or tax ID to accept credit cards?
Most processors require a business tax ID (EIN) and a business bank account. Some allow sole proprietors to use a Social Security number instead. You do not need a business license in most states, but check your local rules. The processor will ask for these during signup and may verify them.
What if a customer disputes a charge and I do not have proof?
You lose the chargeback and the money goes back to the customer. The processor may also charge you a chargeback fee ($15 to $100). This is why keeping records is critical: send a receipt or confirmation email immediately after payment, and keep delivery confirmations or service records for at least 18 months.
Can I accept credit cards without a website or physical store?
Yes. You can use a mobile card reader to take payments in person, or send an invoice link via email that the customer can pay through. Most processors let you generate a payment link and text or email it to the customer. They click the link, enter their card, and you get paid.
How long does it take to get approved?
Most processors approve you in one to three business days. They run a soft credit check and verify your bank account. If you have a history of chargebacks or fraud, approval may take longer or be denied. Once approved, you can start taking payments immediately.
What if my processor goes out of business?
Your money in their account is protected by FDIC insurance up to $250,000. The processor must transfer your pending transactions to another processor or return the funds to you. This is rare, but it has happened. Keep records of all transactions and know which bank your processor uses.