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How to Accept Credit Card Payments for Small Businesses
Learn the ins and outs of the industry and how to choose a processor.
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Table of Contents
Accepting credit card payments starts with choosing a payment processor, setting up a merchant account or payment service provider, and equipping your business with the right hardware or software. The process can take as little as a day for simple setups or a few days for businesses with more complex needs. This guide walks you through everything — from understanding how credit card processing works and assessing your needs, to comparing providers, setting up your system and staying compliant.
Pre-setup self-assessment: Know what you need before you choose
According to the Federal Reserve’s 2026 Diary of Consumer Payment Choice, credit and debit cards are used in two-thirds of consumer payments, demonstrating a widespread consumer preference for card-based payments over cash. Digital wallet usage continues to expand rapidly as well. Digital wallets accounted for 56 percent of e-commerce payments and 33 percent of point-of-sale payments worldwide in 2025, according to Worldpay’s 2026 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.
Where do you primarily sell — in a physical location, online, on the go or some combination?
What is your estimated monthly credit card processing volume?
What is your average transaction size?
Do you need to accept payments in person, over the phone or both?
Will you need to sell online, and if so, do you already have a website or e-commerce platform?
How many staff members will be processing payments, and will they need individual logins or permissions?
Do you need features beyond payment processing, such as inventory management, sales reporting or loyalty programs?
What hardware do you already own, and does it need to be compatible with a new processor?
Are you in a high-risk industry (e.g., travel, CBD, adult content) that may affect merchant account approval?
How important is same-day or next-day fund access to your cash flow?
What level of customer support do you expect — phone, chat, email or 24/7?
Are you prepared to sign a long-term contract, or do you prefer a month-to-month arrangement?
Bottom Line
Your answers to these questions will help you narrow down whether a simple flat-rate payment service provider (like Square or Stripe) or a traditional merchant account is the right fit for your business.
How credit card processing works
Employing these best practices will make card payments more secure.
Understanding the basic lifecycle of a credit card transaction helps you evaluate processors more confidently and anticipate where fees originate.
Authorization: When a customer swipes, taps or enters their card, the payment terminal sends the transaction data to your payment processor.
Card network routing: The processor routes the request through the card network (Visa, Mastercard, American Express, Discover) to the customer’s issuing bank.
Issuing bank approval: The bank checks the customer’s available credit or funds and sends an approval or decline back through the network.
Capture: Once authorized, the transaction is captured, meaning the funds are earmarked for transfer.
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.
Every step in this process carries a cost. The interchange fee goes 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 Stax 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
Setting up credit card payments involves assessing your needs, comparing processors, applying, configuring your system and testing before going live.
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, general manager of payments and procurement at ModMed.
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, consider whether their rates, service and technology align with your business’s specific 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.
FYI
Various types of payment equipment suit specific businesses and industries. For example, restaurants typically opt for one of the best point-of-sale (POS) systems, while retailers favor payment terminals.
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 including Square, Stripe, PayPal and Clover.
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. PSP approvals are often instant or within 24 hours, while traditional merchant accounts may take two to five business days and require business documentation such as bank statements and a voided check.
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 confirm everything works as expected. Verify that receipts generate correctly, that funds route to the right bank account, and that your staff knows how to handle declined cards or refunds. Most processors offer a sandbox or test mode specifically for this purpose.
FYI
Select an EMV-compliant chip card reader for the most secure option when you sign up with a credit card processor. If you want to accept contactless cards and mobile wallets — such as Apple Pay — choose an NFC-enabled reader. Note that if a customer's card has a chip and you process it with a magnetic stripe swipe instead, liability for fraudulent transactions shifts to you rather than the card issuer. Using EMV-compliant hardware protects your business from that exposure.
Payment method options
Once your account is set up, there are several ways to collect payments from customers, depending on your business model.
In-person credit card payment
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,” Weiss said.
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.”
Did You Know?
Credit card usage has increased by 94 percent since 2016, while cash payments have declined by 55 percent, according to an analysis by WalletHub.
Online credit card payments
To take credit card payments online, businesses need a payment gateway integrated with their e-commerce platform. Most PSPs — including Stripe, Square and PayPal — offer plug-and-play integrations with popular platforms like Shopify, WooCommerce and Wix. Customers enter their card details at checkout, and the gateway securely transmits the data for processing.
“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 and tap-to-pay payments
Mobile payment acceptance has become a standard feature for businesses on the go — from food trucks to freelancers. A mobile card reader plugs into or connects wirelessly to your smartphone or tablet, turning it into a fully functional payment terminal. Square, PayPal Zettle and Clover Go all offer compact readers that accept chip, swipe and tap transactions.
“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.”
Many processors now also support Tap to Pay on iPhone and Android, which allows you to accept contactless payments directly on your phone — no card reader hardware required. This is a convenient and low-cost option for service businesses and solopreneurs looking to minimize equipment costs while maintaining a professional checkout experience.
Credit card payments over the phone
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 and equipment
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.
Bottom Line
Determining the payment methods your customers use most will help you choose the best credit card processing solutions for your business.
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.
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 and fees: Full breakdown of expected fees and pricing models
Most processors charge 1.5 to 4 percent of the transaction value, plus a small per-transaction fee. This rate 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
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.
Additional 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 took effect in 2015, 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 support chip and tap payments out of the box.
Tip
Any business that accepts credit and debit card payments must also comply with PCI-DSS (Payment Card Industry Data Security Standard) requirements. This is true even if your processor handles most of the data security for you. Ask your processor what your compliance responsibilities are and whether they charge a PCI compliance fee.
Modern trends in credit card processing
Digital wallets, BNPL services and AI-powered fraud prevention are reshaping how small businesses handle payments.
Digital wallet adoption
Digital wallets continue to gain momentum 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.
According to Capital One research, 4.5 billion consumers used digital wallets for payment in 2025, and that number is expected to surge to 5.2 billion in 2026.
Buy now, pay later (BNPL) expansion
BNPL options allow customers to split purchases into installments. Many payment processors make these options available on online checkout screens.
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 BNPL services play a role in their holiday spending.
AI-powered fraud detection
Leading processors now use machine learning to flag suspicious transactions in real time, reducing false declines and protecting merchants from fraud losses. According to PYMNTS, 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, Statista reported, said they were currently using or planning to use generative AI in e-commerce fraud management within the next 12 months.
Credit card payment FAQs
Accepting credit card payments makes it more convenient for your customers to buy from you. Cardholders generally spend more than cash buyers do, so accepting credit cards will help you increase sales. Accepting cards is especially crucial for online businesses because the majority of online purchases are made with cards or digital wallets.
Nearly any type of business can accept credit card payments, including:
A brick-and-mortar business
An e-commerce business
A mobile business, like a food truck or farmer’s market vendor
A professional service company, like a legal or accounting firm
A traditional business with employees
Not necessarily. If you use a payment service provider like Square, Stripe or PayPal, you don’t need your own dedicated merchant account — these platforms pool merchants together under shared accounts, simplifying setup. However, if you want a dedicated merchant account with more customizable pricing and potentially lower rates at higher volumes, you can apply for one through a traditional merchant services provider or acquiring bank. High-volume businesses in particular often find that a dedicated merchant account is more cost-effective over time.
You have several options. For online payments, a payment gateway or direct payment link lets customers enter their card details on a secure webpage — no hardware needed. For phone orders, a virtual terminal allows you to manually key in card information through a web browser. Some processors, like Square and Stripe, also support Tap to Pay on iPhone or Android, turning your smartphone into a contactless reader without any additional accessories.
Getting approved for a merchant account is not a guarantee. However, if you have an existing business, you’ll likely be approved. The following factors make it easier to get approved and may lower your costs once you’ve been approved:
A favorable business and personal credit rating
At least three years in business
An open business bank account
A good record with any previous merchant accounts
How long it will take to start accepting credit cards depends on your business’s size and complexity and the equipment you ordered. In some cases, an online-only business can get set up the same day it signs up with a processor. In contrast, the setup for an established company with multiple locations can take up to 48 hours, plus a few days for the POS or card reader equipment to be delivered and set up.
The price of each transaction depends on the transaction method and the pricing plan. You will likely encounter three primary pricing models: flat-rate pricing (ideal for businesses processing less than $3,000 per month), interchange-plus pricing (most transparent, based on universal rates) and tiered pricing (differentiates between qualified, mid-qualified and nonqualified transactions).
The cheapest way to accept credit card payments depends on your volume and business type. For low-volume merchants, a flat-rate processor like Square or Stripe — with no monthly fees and pay-as-you-go pricing — is typically the most affordable starting point. Once you’re processing more than roughly $3,000 per month, a processor offering interchange-plus pricing may save you money, even if it comes with modest monthly fees. For very high-volume businesses, negotiating a custom rate with a traditional merchant services provider is often the most cost-effective route.
A payment gateway is the technology that securely transmits credit card data between a customer (or your terminal) and your payment processor. For online sales, it’s the invisible layer that encrypts and forwards card information so transactions can be authorized and completed. Many processors bundle a payment gateway into their service; others charge a separate monthly fee for gateway access.
You should accept credit card payments on mobile wallets or peer-to-peer applications only when you know and trust the people sending the payments. It is much easier for a customer to dispute transactions and recoup money with these platforms, including Cash App and PayPal.
However, freelancers working with well-known clients can benefit from peer-to-peer payment platforms, such as Venmo for Business. Simply set up an account and link your bank account to begin receiving payments or sending money to other users.
For established businesses that want to accept payments from a customer’s mobile wallet, an NFC-enabled terminal or card reader is the stronger choice. NFC-enabled readers support contactless payments, letting customers tap to pay using apps such as Google Pay or Apple Pay — and some processors now support Tap to Pay on iPhone or Android, eliminating the need for separate hardware. Either way, your business gains better protection from chargebacks and transaction disputes compared to peer-to-peer platforms.
Source interviews were conducted for a previous version of this article.
Adam Uzialko, the accomplished senior editor at Business News Daily, brings a wealth of experience that extends beyond traditional writing and editing roles. With a robust background as co-founder and managing editor of a digital marketing venture, his insights are steeped in the practicalities of small business management.
At business.com, Adam contributes to our digital marketing coverage, providing guidance on everything from measuring campaign ROI to conducting a marketing analysis to using retargeting to boost conversions.
Since 2015, Adam has also meticulously evaluated a myriad of small business solutions, including document management services and email and text message marketing software. His approach is hands-on; he not only tests the products firsthand but also engages in user interviews and direct dialogues with the companies behind them. Adam's expertise spans content strategy, editorial direction and adept team management, ensuring that his work resonates with entrepreneurs navigating the dynamic landscape of online commerce.
