The three ways to take credit card payments

You can accept credit cards through a payment processor (a company that handles the transaction), a point-of-sale system (hardware and software that rings up sales), 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.

In-person businesses typically use a point-of-sale system or a mobile card reader. Online stores use a payment gateway. Businesses that do both often use a processor that handles both channels. Each route has different costs, setup time, and technical requirements.

The processor is the company that actually moves money from the customer's bank to yours. Common processors include Square, Stripe, PayPal, Toast, and Clover. They charge a fee per transaction — usually 2% to 3% of the sale plus a flat fee of 10 to 30 cents. Some also charge monthly subscription fees if you want extra features.

Key Takeaways

  • Payment processors charge per transaction, typically 2% to 3% of the sale plus a flat fee, and this is how they make money instead of charging you a monthly subscription.
  • In-person businesses need either a point-of-sale system (a terminal that sits on your counter) or a mobile card reader (a small device that plugs into your phone).
  • Online stores need a payment gateway, which is software that lets customers enter card details on your website and sends that information securely to a processor.
  • You will need a business bank account and an Employer Identification Number (EIN) or Social Security Number to open a merchant account with a processor.
  • Setup typically takes one to three business days for mobile readers, and three to seven business days for full point-of-sale systems or online gateways.

In-person payments: card readers and terminals

If you take payments face-to-face, you have two main hardware options. A mobile card reader is a small device that plugs into your phone's headphone jack or charging port and lets customers tap, insert, or swipe their card. A point-of-sale terminal is a dedicated machine that sits on your counter, usually with a screen, a card slot, and a receipt printer built in.

Mobile readers are cheaper to start with — most cost $0 to $50 upfront — and work anywhere you have a phone and internet connection. They are common for food trucks, freelancers, small retail shops, and service businesses. Square Reader, PayPal Zettle, and Stripe Reader are the most widely used. Setup takes minutes: read the app, plug in the reader, and you can start taking payments.

Point-of-sale terminals cost $300 to $2,000 upfront and require installation and training. They are built for high-volume businesses like restaurants, bars, and retail stores. They often include inventory tracking, employee management, and detailed reporting. Clover, Toast, and Square Terminal are common choices. Setup usually takes three to seven business days because the processor needs to verify your business information first.

Both charge the same per-transaction fees. The choice comes down to volume and features: if you ring up fewer than 20 sales a day, a mobile reader usually makes sense. If you ring up more, or need detailed reporting and staff management, a terminal pays for itself.

Online payments: payment gateways and hosted pages

If you sell online, you need a payment gateway — software that sits on your website and lets customers enter their card details securely. The gateway encrypts that information and sends it to your processor, which charges the card and deposits money into your bank account.

You have two main setups. A hosted payment page is a page the processor provides; you link to it from your website, and the customer enters their card details there instead of on your site. This is simpler to set up because you do not have to handle sensitive card data yourself. Stripe Checkout, PayPal Checkout, and Square Online are examples.

An embedded gateway lets customers enter their card details directly on your website without leaving your page. This looks more professional and keeps the customer on your site, but it requires more technical setup and you have to follow stricter security rules. Stripe Elements, Authorize.Net, and Braintree are common choices.

Most online processors charge 2.9% plus 30 cents per transaction for card payments. Some charge extra for international cards or recurring payments. Monthly fees range from $0 to $300 depending on the features you need. Setup usually takes one to three business days once you submit your business information.

What you need to get your free guide

Before you sign up with any processor, gather these documents and information. You will need a business bank account in your business name — the processor will deposit payments there. You will also need either an Employer Identification Number (EIN) from the IRS or your Social Security Number if you are a sole proprietor.

Have your business address, phone number, and website (if you have one) ready. If you are a new business, the processor may ask for a copy of your business license or articles of incorporation. Some processors also ask for a recent bank statement to verify the account you are linking.

If you are taking in-person payments, you will need to provide your business type (retail, restaurant, services, etc.) and your average monthly sales volume. This helps the processor assess risk and set your fees. If you are selling online, you may need to provide your website URL and a description of what you sell.

The entire process usually takes 15 to 30 minutes. Most processors give you a decision within one to three business days. Once approved, you can start taking payments when ready with a mobile reader, or within a few days once your terminal or gateway is set up.

Comparing costs across processors

Transaction fees are the biggest cost difference between processors. Most charge between 2.19% and 3.49% plus 10 to 30 cents per transaction for card-present payments (in-person). Online payments usually cost 2.9% to 3.5% plus 30 cents. Some processors charge less if you process a high volume — $10,000 or more per month — so it is worth asking about volume discounts.

Monthly fees vary widely. Square and PayPal Zettle charge $0 per month for basic service. Clover and Toast charge $0 to $50 per month depending on which features you add. Stripe and Authorize.Net also charge $0 for basic service but add fees if you want advanced reporting or recurring billing.

Some processors charge extra for specific situations: international cards, recurring payments, chargebacks, or ACH transfers. A few charge a small fee to move money to your bank account faster than the standard two to three business days. Read the pricing page carefully and ask the processor to estimate your monthly cost based on your expected sales volume and payment types.

Security and compliance requirements

Any processor you choose must comply with PCI DSS (Payment Card Industry Data Security Standard), a set of rules that protect customer card information. This means the processor encrypts card data, stores it securely, and regularly tests their systems for breaches. You do not have to do this yourself — the processor handles it.

If you use a hosted payment page or a mobile reader, you have almost no compliance burden. The processor handles all the security. If you embed a payment gateway on your website, you have to follow a few rules: never store card details on your own server, always use HTTPS (encrypted connection), and keep your website software updated. Most processors provide code samples and documentation to help you do this correctly.

You should also have a clear refund policy and a way for customers to dispute charges. Most processors handle disputes through the card networks (Visa, Mastercard, etc.), but you need to respond to disputes within a set time — usually 7 to 10 days. Keep records of orders, receipts, and customer communication in case you need to defend a dispute.

Getting paid: timing and fees

Most processors deposit money into your bank account every one to two business days. Some offer next-day deposits for an extra fee — usually 1% of the transaction or a flat $1 to $2 per deposit. A few offer same-day deposits, but these are rare and typically cost more.

The processor holds onto your money for a day or two to make sure the transaction clears and the customer does not dispute it. This is called the settlement period. During this time, the money is not in your account yet, but it is reserved for you.

If a customer disputes a charge or requests a refund, the processor reverses the transaction and takes the money back from your account. This can happen weeks or even months after the sale. If you have already spent the money, you will have a negative balance and will owe the processor. Most processors charge a chargeback fee of $15 to $100 if a customer disputes a charge, so it is worth having a clear refund policy to avoid disputes.

Frequently Asked Questions

Can I take credit card payments without a business license?

Most processors require you to have a business license or be registered as a sole proprietor with a tax ID. Some will work with you as an individual if you have a Social Security Number and a personal bank account, but this is less common. Check with the processor before you explore — requirements vary by state and by processor.

What happens if a customer disputes a charge?

The customer's bank investigates and either sides with you or with the customer. If they side with the customer, the processor reverses the charge and takes the money back from your account. You also pay a chargeback fee of $15 to $100. You can dispute the chargeback by providing proof of the sale — a receipt, invoice, or email confirmation — but the burden is on you to prove the charge was legitimate.

Do I need a separate merchant account?

No. Most modern processors set up a merchant account for you automatically when you sign up. A merchant account is just a business bank account that can receive card payments. The processor manages it on your behalf. You do not have to do anything extra.

Can I use a personal bank account instead of a business account?

Most processors require a business bank account. Some will accept a personal account if you are a sole proprietor, but this is not recommended because it mixes personal and business money and makes taxes harder. Open a business account — it usually costs $0 to $15 per month and takes one to three business days.

What if I want to accept other payment methods like PayPal or Apple Pay?

Most modern processors support multiple payment methods automatically. When you set up Square, Stripe, or PayPal, customers can pay with their card, Apple Pay, Google Pay, or PayPal account — all through the same reader or gateway. You do not have to set up anything extra. The processor handles it.