How to Accept Credit Card Payments for Small Businesses

Pre-setup self-assessment: Know what you need before you choose

According to the Federal Reserve’s 2025 Diary of Consumer Payment Choice, cash accounted for just 14 percent of all payments, demonstrating a widespread consumer preference for card-based payments to cash. Digital wallet usage continues to expand rapidly, as well. Digital wallets accounted for 53 percent of e-commerce payments and 32 percent of point-of-sale payments worldwide in 2024, according to Worldpay’s 2025 Global Payments Report.

Businesses that don’t accept payments with credit cards and digital wallets are already missing out on revenue. But before comparing processors or ordering hardware, it helps to understand your own business requirements. Work through these questions to clarify what kind of setup will serve you best.

1. Where do you primarily sell — in a physical location, online, on the go or some combination?
2. What is your estimated monthly credit card processing volume?
3. What is your average transaction size?
4. Do you need to accept payments in person, over the phone or both?
5. Will you need to sell online, and if so, do you already have a website or e-commerce platform?
6. How many staff members will be processing payments, and will they need individual logins or permissions?
7. Do you need features beyond payment processing, such as inventory management, sales reporting or loyalty programs?
8. What hardware do you already own, and does it need to be compatible with a new processor?
9. Are you in a high-risk industry (e.g., travel, CBD, adult content) that may affect merchant account approval?
10. How important is same-day or next-day fund access to your cash flow?
11. What level of customer support do you expect — phone, chat, email or 24/7?
12. Are you prepared to sign a long-term contract, or do you prefer a month-to-month arrangement?

How credit card processing works

Understanding the basic lifecycle of a credit card transaction can help you evaluate processors more confidently and anticipate where fees come from.

1. Authorization: When a customer swipes, taps or enters their card, the payment terminal sends the transaction data to your payment processor.
2. Card network routing: The processor routes the request through the card network (Visa, Mastercard, American Express, Discover) to the customer’s issuing bank.
3. Issuing bank approval: The bank checks the customer’s available credit or funds and sends an approval or decline back through the network.
4. Capture: Once authorized, the transaction is captured, meaning the funds are earmarked for transfer.
5. Settlement: At the end of the business day, batched transactions are settled. Funds move from the customer’s bank through the card network to your merchant account, typically arriving in one to two business days.

Each step in this process involves a fee. The interchange fee is paid to the issuing bank, an assessment fee goes to the card network, and the processor markup is what your payment processor earns. Together, these make up the effective rate you pay per transaction.

Two setup paths: Payment service providers vs. traditional merchant accounts

There are two primary ways to start accepting credit cards. The right path depends on your transaction volume, growth stage and how much setup complexity you’re willing to manage.

Payment service providers (PSPs)

Payment service providers like Square, Stripe and PayPal aggregate merchants under a shared merchant account, which means you don’t need to apply for your own. Setup is fast — often the same day — and pricing is simple. These providers are best for newer businesses, low-volume sellers and those who want to get up and running quickly without lengthy contracts.

• Best for: Startups, freelancers, small businesses processing under $10,000 per month, and anyone who wants a straightforward, no-contract solution.

Traditional merchant accounts

A traditional merchant account is a dedicated account set up directly with an acquiring bank or merchant services provider. The application process is more thorough, but you gain access to more customizable pricing (typically interchange-plus) and potentially lower rates at higher volumes. Providers like Clover and Payment Depot operate in this space.

• Best for: Established businesses processing $10,000 or more per month, businesses in specialized industries with unique processing needs, and those who want more control over pricing and contract terms.

Step-by-step setup process

Step 1: Assess your needs

Before choosing a credit card processor and setting up your system, you must evaluate your business’s unique needs.

“Factors like business size, transaction volume, fee structures and security requirements should guide the decision,” said Todd Weiss, director of product at PayJunction.

For example, our Square review shows how these processors work well for new businesses with low transaction volumes because they don’t charge many of the fees you’d incur with other processors. However, their credit card processing rates are higher than many competitors, so they’re not always a cost-effective choice for high-volume businesses.

High-volume businesses should choose a processor with lower transaction fees, as it can reduce total costs, according to Weiss.

When evaluating payment processors, determine if their rates, service and technology meet your business’s requirements:

• Competitive rates: Don’t always look for the lowest rate possible. Some advertised rates are deceptively low because they apply only to specific transactions. Many processors also charge monthly and annual fees that you must consider when comparing costs.
• Knowledgeable and available customer service: You can’t afford system downtime when it comes to accepting payments. Payment processors should provide reliable and responsive customer support. Check out customer reviews before signing up with a payment processor to see if their customer service is up to the task.
• Fast, secure and reliable payment equipment: Payment processors tend to offer a limited range of equipment, so if you know what you want or you already have hardware, make sure the processor you’re considering is compatible with it. Some processors will provide hardware as well, so review it to make sure it meets your needs.

Step 2: Compare processors

Once you understand your needs, compare providers side by side. Look beyond the headline transaction rate and evaluate contract terms, hardware costs, integration options and customer support quality. See the processor comparison section below for a breakdown of leading options.

Step 3: Apply

Once you decide on the right payment processor for your business, you’ll need to apply. Generally, applications can be submitted online and take two days for the processor to review.

Step 4: Configure your system

Once approved, the processor should help you set up your account and walk you through the process of selecting hardware, if necessary. When the hardware arrives, the processor should help you set it up.

Branden Korf, marketing associate at EBizCharge, a payment processing company, provided an example of what a small business, such as a local coffee shop, should expect when setting up their credit card processing system.

“A local coffee shop looking to accept credit card payments would start by choosing a payment processor like Square, which offers simple pricing and integrates easily with a tablet-based POS system,” he said. “The shop would set up a business bank account, ensure their system is PCI-compliant and get a card reader for in-person payments. After training the staff on how to use the system, the coffee shop would be ready to process payments securely and offer customers the convenience of paying by card.”

Step 5: Test before going live

Before accepting your first real customer payment, run test transactions to make sure everything works as expected. Verify that receipts generate correctly, that funds route to the right account, and that your staff knows how to handle declined cards or refunds. Many processors offer a sandbox or test mode specifically for this purpose.

Payment methods: In-person, online, mobile, phone

In-person card acceptance

When you have a brick-and-mortar business location, a hardwired credit card reader or a POS system allows cashiers to take payments from customers at a fixed location. Hardwired systems tend to be more reliable than mobile systems, which require a strong network signal.

“Businesses will want to make sure the credit terminal supports their needs and is capable of supporting all payment types — tap, swipe, insert,” said Todd Weiss, director of product at PayJunction.

Businesses should also consider how their staff will use the system. Hardware should be selected based on the actual needs of staff and customers on-site.

“Will they need just one terminal or multiple?” Weiss asked. “Consider the volume of transactions and durability required for in-person, high-traffic use. With in-person transactions, reliability is key.”

Online card acceptance

To take credit card payments online, businesses can use a payment gateway to create a payment page or shopping cart on their website. These pages provide customers with an easy way to provide payment digitally, simply filling out a form with their payment information, billing address and shipping address.

“They can also provide customers with a direct payment link for quick and easy payments,” Korf said. “Simply check [to make sure] everything is secure and PCI-compliant.”

Mobile card acceptance

Mobile credit card readers are helpful for businesses that travel, sell at trade shows or simply want to accept payments anywhere within their establishment. These readers require a strong network connection, though, so you’ll want to make sure you have a reliable business internet provider as well.

“Mobile credit card processing technology helps businesses to accept payments at the customer’s location, improving ease and professionalism,” Korf said. “For example, a mobile hairstylist may utilize a Bluetooth card reader to receive payments right after a haircut.”

Tap to Pay on iPhone and Android has also expanded mobile acceptance options. Merchants using Square, Stripe or PayPal can now accept contactless card and digital wallet payments directly on a smartphone — no separate hardware required. This is particularly useful for service businesses and solopreneurs looking to minimize equipment costs.

Phone payments

If your business accepts credit cards over the phone — such as a restaurant that offers delivery or takeout — choose a virtual terminal or payment gateway. Virtual terminals and payment gateways allow businesses to take down the payment information from a caller in a secure way, rather than writing it down where it could easily be stolen. Similarly, service-based businesses, such as law firms and marketing agencies, can use virtual terminals to generate invoices and process payments.

Required tools: Gateways, processors, POS, merchant accounts, terminals

When selecting a payment processor and the types of hardware you’ll use, consider how your customers use their cards. If the vast majority come into your store and swipe or tap their cards, you may just need a standard credit card reader. However, you might also want to accept credit cards online, over the phone or on a mobile device. These methods may require additional hardware or software.

Payment gateway

Accepting credit card payments online requires a payment gateway, which you can set up through your credit card processor. Typically, a credit card processor charges you an additional monthly fee for this service; we recommend only setting up a payment gateway if you sell online regularly, or if your occasional online sales are large enough to cover the monthly cost.

POS systems and terminals

Most POS systems can do more than just process credit card transactions, including tracking sales, managing inventory and integrating with other systems like accounting software. You can also use a POS system to build a customer loyalty program.

However, feature-rich POS systems come at a significant cost. If you’re on a budget or don’t need a complete POS system, standalone card reader terminals are a good option. Most modern fixed credit card readers accept swipe, chip (EMV) and tap-to-pay (NFC) transactions.

Mobile equipment

To accept credit card payments on your phone or tablet, you’ll need a mobile credit card reader or app. You can connect readers by plugging them into a mobile device’s headphone jack or wirelessly via Bluetooth.

Mobile card readers can accept:

• Swipe-only
• Swipe plus chip (EMV)
• Swipe, chip and contactless (NFC) payments

A mobile credit card reader doesn’t limit you to accepting payments on your mobile device; these readers can be used as part of a larger system with additional hardware.

Merchant accounts vs. payment service providers

A merchant account temporarily holds funds from your credit card sales before transferring them to your bank account. Businesses need merchant account services before they can accept credit card payments with a traditional POS system and credit card processor. However, if you use a payment service provider — such as PayPal, Square, Shopify or Stripe — you can skip this step.

Processor comparison: Square, Stripe, Clover, Worldpay, MerchantOne, Stax

Choosing the right processor often comes down to matching your business type and volume to the provider’s strengths. Here’s how some of the most widely used processors compare.

Costs & fees: Full breakdown of expected fees and pricing models

Most processors charge 1.5 to 4 percent of the transaction value, plus a small transaction fee. This fee is usually based on your monthly processing volume, average ticket size, industry and processing history. In addition, processors may charge several other fees, such as chargebacks and PCI compliance fees.

Three primary pricing models

Payment processors typically charge one of three pricing models:

• Flat-rate pricing: Flat-rate pricing is a payment model used by payment facilitators such as Square and PayPal. It means fixed rates for specific transaction types. PayPal’s credit card fees are organized in a flat-rate pricing structure, for example. There are usually no additional fees or lengthy contracts with flat-rate pricing, making it ideal for businesses that process less than $3,000 per month.
• Interchange-plus pricing: This pricing model is based on the interchange rate that all credit card processors pay, plus a processor’s markup fee. It is the most transparent model available because it’s based on a universal rate. The markup, which is how the processor makes money, is usually negotiable in this pricing model. It is expressed as a percentage plus a per-transaction fee. For instance, you may be quoted a rate of “interchange plus 1.5 percent + $0.25.” That means you’ll be charged the current interchange rate plus the processor’s markup of an additional 1.5 percent plus $0.25.
• Tiered pricing: This pricing model differentiates between qualified, mid-qualified and nonqualified transaction types. Qualified transactions are generally made with basic debit and credit cards physically swiped or tapped at a terminal. These are the cheapest rates in a tiered pricing model. Slightly more expensive are mid-qualified transactions, which often include physically swiped rewards cards. Non-qualified transactions — the most expensive type — include premium rewards cards and card-not-present transactions, such as when you key in card numbers that your customers read to you over the phone.

Common credit card processing fees

In addition to the rates you pay for each transaction, credit card processors that use the interchange-plus and tiered pricing models charge account maintenance fees including monthly fees, monthly minimums, payment gateway fees, PCI compliance fees and various network fees. Some processors also charge a setup fee, a payment gateway setup fee and others.

EMV liability and compliance

If your business still uses a swipe-only card reader that doesn’t support EMV chip cards, you may be taking on more financial risk than you realize. Since the EMV liability shift, if a fraudulent transaction occurs on a chip card that was processed via swipe rather than chip, the liability for that chargeback falls on the merchant, not the card issuer. In plain terms, using outdated hardware could cost you money every time a bad actor exploits it.

Upgrading to an EMV-compliant terminal (ideally one that also supports NFC contactless payments) is one of the most straightforward ways to protect your business from chargeback exposure. Most modern card readers from Square, Clover, Stripe and PayPal support chip and tap payments out of the box.

Modern trends: Digital wallets, tap-to-pay, international payments

Digital wallet adoption

Digital wallets continue to gain momentum in the payments landscape thanks to the expansion of near-field communication (NFC) technology, which facilitates contactless payment methods. NFC mobile payments make checkout faster, are easy to implement and can help deepen consumer engagement.

The practice of making digital wallet payments via QR codes is also expanding market share. An estimated 100 million Americans used their smartphones to scan QR codes in 2025.

Buy Now, Pay Later (BNPL) expansion

Buy Now, Pay Later options are expanding given their flexible financing capabilities. As the cost of housing, utilities and groceries rises, BNPL usage has grown significantly. For example, a survey conducted by Experian found 43 percent of consumers say Buy Now, Pay Later services play a role in their holiday spending, up from just 20% in 2023. 

Popular BNPL services include Klarna, Afterpay and Affirm. Many payment processors can make these options available on online checkout screens.

AI and fraud prevention

Artificial intelligence has become increasingly important in payment processing. An estimated 94 percent of payment industry professionals believe AI is best used for fraud detection or preventing fraud. This trend aligns with the growing need for sophisticated fraud prevention as digital payments expand.

Approximately two-thirds of online merchants reported they were currently using or planning to use generative AI in e-commerce fraud management within the next 12 months.