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How to Accept Credit Card Payments Using Your Phone
Accepting credit card payments has never been easier for small businesses. Here is a step-by-step process for how to accept payments with your phone.
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Accepting credit card payments has never been easier for small businesses. In addition to using credit card terminals and point-of-sale (POS) systems, you can accept payments directly on your mobile devices. Processing payments by phone requires signing up for an account with a payment processor that offers mobile credit card processing, downloading an app and purchasing a mobile card reader.
We’ll explain what you need to do to start accepting credit card payments and digital payment methods using your phone and share the costs, benefits and key considerations to keep in mind.
Editor’s note: Looking for the right credit card processor for your business? Fill out the questionnaire below to have our vendor partners contact you about your needs.
Can I use my phone to accept credit card payments?
Yes, you can accept credit card payments on your phone by partnering with a payment processor that supports mobile payments, such as Square or PayPal. These vendors provide mobile credit card readers, apps and flexible, pay-as-you-go terms specifically for mobile credit card processing.
Accepting mobile credit card payments is cost-effective and convenient for many business types. For example, restaurants with mobile processing functionality can accept tableside payments and retailers can move lines along quickly by taking payments throughout the store (think Apple Store-style checkout).
Bob Legters, chief product officer at payments platform Paysafe, noted that on-site service businesses are also ideal candidates for mobile credit card processing. “Mobile card processing is especially valuable for small and medium-sized businesses that provide services on-site, such as home repair, personal training or delivery services,” Legters explained. “It allows businesses to go cashless, enabling customers’ payment choice and allowing businesses to collect payments in real time.”
Businesses that use one of the best POS systems can likely enable mobile functionality easily through their current payment processor. If you haven’t yet begun accepting credit cards, setup is typically straightforward with the right facilitator.
How to accept credit card payments on your phone, step-by-step
Follow these steps to start accepting credit card payments via your phone.
1. Sign up with a credit card processor or payment facilitator.
If you don’t already accept credit cards, you’ll need to open a merchant account with a credit card processor or set up an account with a credit card facilitator (like PayPal or Square). Make sure the processor provides mobile card readers and supports mobile payments — many of the best credit card processors do:
- Credit card processors: Partnering with a full-service processor for mobile credit and debit card payments typically requires applying for a merchant account. These companies may ask for extensive business information and documentation and some businesses, such as those in high-risk industries, may not be approved.
- Payment facilitators: A payment facilitator, such as PayPal or Square, acts as a middleman between your business and the credit card networks. These providers offer a faster, easier setup and typically don’t require underwriting or credit checks. Most businesses can start accepting payments shortly after signing up online — a great option for startups and small businesses just beginning to accept credit cards.
2. Download the payment app.
Each processor or facilitator has its own dedicated payment app. You’ll need to download it, enter some basic business information and complete your account setup. Most apps are available for both iOS and Android devices and include guided setup steps to walk you through linking your bank account and customizing your payment settings.
Some apps may also let you set tax rates, add inventory and enable tipping options — useful features for those in retail or service-based industries.
3. Get a mobile reader.
Many processors provide a free mobile credit card swiper so you can begin accepting payments. However, you should also order a mobile credit card reader that accepts chip cards to help fight against credit card fraud. This EMV technology helps shield you from liability if you unknowingly accept a fake card.
Mobile credit card readers connect to your phone through Bluetooth or the headphone jack. When you accept card payments, the transactions are encrypted and transmitted to the processor, meaning no sensitive card data is stored on your phone.
Peter Galvin, chief marketing officer at payment solutions provider NMI, believes mobile and software-based POS systems are the future and offer numerous benefits over legacy systems.
“Since they utilize existing smartphones or tablets, they are cost-effective by reducing hardware expenses,” Galvin explained. “Additionally, they are simple to set up, usually only requiring the download of an app and features are easy to update through the app store. The primary challenge is consumer hesitation in using tap-to-mobile payments. However, as awareness and trust grow, adoption is expected to rise rapidly.”
4. Enable a virtual terminal.
If you process only a few mobile transactions and don’t want to buy a mobile reader, you can still accept payments by phone using a virtual terminal. A virtual terminal is typically a secure webpage hosted by your payment processor where you can manually enter the customer’s credit card information.
To process a payment using a virtual terminal, you may need the following details:
- Credit card number
- Expiration date
- CVV (security code)
- Customer’s name as it appears on the card
- Billing ZIP code
- Billing address
5. Accept your first payment.
Now that your payment account is set up and your mobile reader or virtual terminal is ready to go, you can start accepting payments. Enter the order into the virtual terminal or process the customer’s card using your mobile card reader.
If you’re using a mobile reader, typically you’ll select or enter the customer’s items in the app, insert or tap their card and follow the on-screen prompts to complete the mobile phone transaction.
If you’re using a virtual terminal, you’ll enter the customer’s payment details manually and submit the charge through the secure payment form.
6. Process a receipt.
Send the customer a receipt or print one out if you have a mobile receipt printer. Most payment apps and virtual terminals allow you to email receipts.
After the transaction settles, the money will be deposited into your bank account, minus the processor’s fee.
Benefits of accepting credit cards by mobile phone
Accepting mobile payments isn’t necessary for every industry but, in many cases, it expands where you can do business and enhances your checkout process. Here are some key benefits of mobile credit card processing.
Customer convenience
For mobile businesses, such as food trucks, home service providers or craft vendors at farmers’ markets, accepting credit cards by phone is essential for accommodating customers. Few people carry cash, so accepting cards and digital payments increases convenience and helps you deliver a great customer experience.
“[Mobile phone payments] don’t just provide the best customer experience — they [help businesses] build stronger, lasting relationships with their clientele, improving their operational model and creating flexibility in how they do business,” explained Matt Downs, EVP and president of Global Platforms at international payment processor Worldpay.
Flexibility
Even if your business has a fixed location, mobile payment functionality gives you the flexibility to try out new sales channels and venues. For example, if you own a restaurant, having an Android payment app or the ability to accept payments with an iPhone allows you to process transactions at food festivals, catering events or community pop-ups.
Retailers like clothing or jewelry stores can explore new opportunities through trunk shows or pop-up shops. Even independent sales consultants can accept payments on-site when visiting client locations — no countertop hardware required.
Shorter customer wait times
Even fixed-location businesses can use mobile payment devices to speed up checkout lines. This is especially helpful for high-volume stores or during popular promotions.
When customers face a long wait to pay, some may abandon their purchase. But with cashiers using mobile payment equipment to check out customers in line, you can significantly reduce wait times and maximize sales.
More closed sales
Accepting mobile payments can improve your closing ratio — especially for businesses that require a deposit to initiate a sale, such as roofing contractors.
Instead of giving customers time to reconsider, your rep can accept payment on the spot while at the customer’s home or business. This reduces cancellations and helps close deals faster.
Improved bill collection
Instead of chasing down overdue bills or waiting for customers to mail a check, you can accept payment at the time of service. Collecting payment on the spot saves time and money — and helps you avoid the debt collection process and write-offs from bad debt.
Instant access to your financial data
In addition to mobile credit card readers, you’ll have a smartphone app that displays your sales, product and customer data in real time. If you need to make a decision or share information with a third party, the data is at your fingertips.
How much does it cost to accept cards using your phone?
Your exact rates will depend on your processor or facilitator, their plan and pricing model and several factors related to your business, including:
- Monthly processing volume
- Average transaction value
- Industry
- Processing history
- Business and personal credit
Considering these factors, expect most processors’ rates to fall between 2 and 4 percent of each transaction.
Pricing models
Pricing models vary. If you work with a payment facilitator like Square, SumUp or PayPal, you’ll likely pay flat-rate pricing. If you work with a full-service credit card processor, you may have a choice between interchange-plus or tiered pricing.
Here’s how each pricing model works:
- Flat-rate pricing: Flat-rate pricing is the simplest model. Although its rates often appear higher than the advertised prices for other models, there are usually no additional fees or long-term contracts. This makes it a better value for businesses that process less than $3,000 per month. Flat-rate pricing is usually expressed as either a flat percentage of the transaction amount or a flat percentage plus a small per-transaction fee.
- Interchange-plus pricing: Downs advised larger businesses to consider interchange-plus pricing. “As transaction volumes increase, interchange-plus pricing often offers better transparency and cost savings,” Downs explained. With interchange-plus pricing, you pay what’s known as the wholesale rate plus the processor’s markup. The wholesale rate consists of:
- The interchange fee (set by the card networks and paid by all processors)
- The assessment fee (another nonnegotiable fee charged by the card brands)
The processor’s markup is their profit from facilitating your transactions — and it’s the only negotiable part of the cost. This is the rate you’re typically quoted when you call for pricing. Industry experts favor this model for its transparency.
- Tiered pricing: Tiered pricing groups transactions into three categories: qualified, midqualified and nonqualified:
- Qualified transactions are basic credit or debit cards swiped at the POS. They have the lowest rates, usually the ones advertised by the processor.
- Midqualified transactions typically include reward cards swiped at the POS.
- Nonqualified transactions often include premium rewards cards, corporate cards or any keyed-in or card-not-present transactions. These carry the highest rates.
Additional fees
Full-service payment processors may also charge additional fees, including the following:
- Monthly fees: Monthly fees, also called statement fees, cover some of the processor’s administrative costs, such as preparing monthly statements and providing customer service. These fees typically range from $5 to $15.
- Gateway fee: If you want to accept online payments, you’ll need a payment gateway. This fee varies depending on the provider. While a flat monthly fee is usually offered, some providers also charge a small per-transaction fee.
- Payment Card Industry (PCI) compliance: The PCI sets strict regulations to ensure your credit card transactions are secure. You’re required to certify annually as compliant and most full-service processors charge a fee to help with this. It’s usually billed annually and costs approximately $100.
- PCI noncompliance: If you fail to comply with PCI standards, you’ll be charged this fee monthly until you certify. This fee is typically high — sometimes $50 or more — to discourage businesses from letting their compliance lapse.
- Monthly minimum: Some processors charge a monthly minimum, meaning you must process a certain dollar amount in processing fees each month. For example, if the monthly minimum is $25 and you only incur $12 in fees, you’ll be charged an additional $13. Note: The minimum is usually based on processing fees — not transaction value — so check with your processor to confirm the requirement.
- Contract termination fees: You may be asked to sign a service contract. While month-to-month contracts are preferred, many processors require three-year terms with steep early cancellation penalties.
Downs advised businesses to evaluate all potential and hidden charges carefully before signing a contract with a payment processor.
“Beyond the basic pricing models, businesses should evaluate processors based on their transparency, contract flexibility and ability to scale with business growth,” Downs recommended. “Payment processors that offer customized fee structures or volume-based discounts can provide significant savings as your business expands.”
Accepting credit cards on iPhone vs. Android
Most top mobile credit card processors offer mobile apps for both iOS and Android devices. These apps generally have very similar features with some slight variations. For example, iOS apps may receive more frequent updates because of the popularity of iPhones.
Additionally, functionality can differ depending on the type of device. For example, some mobile payment processing apps offer more advanced features on a tablet than on a smartphone, regardless of operating system.
Mobile credit card payments improve POS transactions
Accepting credit card payments on your phone offers numerous benefits to your small business. For new companies, mobile credit card processors lower the barrier to entry by cutting costs and allowing virtually anyone to accept card payments. For established businesses that travel to trade shows or want to offer added convenience and flexibility, mobile payments can increase sales and boost customer satisfaction.
Whatever your reason for accepting card payments using your phone, you have plenty of options. Choose a credit card processor or payment facilitator that offers competitive rates and a user-friendly app. Once you’ve found the right vendor for your mobile transactions, consider investing in hardware that is both EMV-compliant and NFC-enabled.
By following these tips, you’ll be processing mobile payments in no time — and your customers and bottom line will thank you.
Mark Fairlie contributed to this article.
