A Guide to Restaurant Payment Processing

What is a restaurant payment processor?

A restaurant payment processor is a provider that facilitates the acceptance of credit and debit cards and often digital payment methods — including Venmo, PayPal and mobile wallets such as Apple Pay — at a dining establishment. The processors typically support in-person payments, online orders through the restaurant’s website or mobile payments for delivery services. 

Eran Hollander, chief product officer at HungerRush, emphasized that restaurant payment processors support tools unique to eateries. “Restaurant-specific payment processing goes beyond standard credit card transactions,” Hollander said. “It’s designed to handle the unique needs of restaurants, such as tipping, splitting checks among large parties, scheduled orders, online ordering and delivery.”

Restaurant payment processors are frequently integrated with point-of-sale (POS) systems, allowing seamless transaction processing, order management and reporting. “Integrated payment processing within POS systems helps streamline operations and improve the most important thing in the industry — the customer experience — by offering fast, secure and multiple payment options,” Hollander said.

What to look for in a restaurant payment processor

Hollander stressed that restaurant payment processors must meet traditional payment requirements while also supporting the fast-paced, customer-first nature of the industry.

“Restaurants rely on integrated payment processing to allow all orders, including online ordering, in-person, third-party apps and more, to go directly into your point-of-sale system and kitchen operations,” he said. “It should also include fraud protection, PCI compliance, modern hardware and competitive rates across all types of ordering.” 

Mazyar Torkpour, co-founder of Paymento, agreed. “Restaurants should look for a processor that offers transparent and competitive fees, fast settlement and seamless integration with their POS system,” Torkpour said. “Other critical features include reliable hardware and software support, mobile and contactless payment capability, offline mode for processing during internet outages, and good customer support — ideally 24/7.”

Restaurant processor features to consider

Consider the following features and functions when comparing restaurant payment processors.

• POS system integration: Choose a payment processor that seamlessly integrates with your restaurant POS system. A fully integrated processor-POS setup will help streamline operations, reduce errors and speed up transactions. 
• Tip handling: Accurate, flexible tip processing is an essential feature in a restaurant payment processor. The system should easily handle pre-tip authorizations, post-tip adjustments, and tip pooling or distribution. 
• Tableside payment capabilities: Many restaurants want to accept mobile payments to boost customer and server convenience and reduce wait times. Your processor should support mobile payment options — including NFC payments such as Apple Pay and Google Wallet — to enable smooth tableside transactions. Many restaurant-specific processors also provide mobile POS hardware or iPad-based POS systems that let you accept credit card payments directly from a smartphone or tablet.
• Online ordering and delivery integration: Whether you want to list your restaurant on Grubhub, Uber Eats or similar platforms, or handle online ordering and delivery in-house, your processor should offer seamless integration to support the services. Built-in tools for managing online and delivery orders can simplify operations and reduce the need for multiple systems.
• Payment acceptance methods: Processors charge different rates and fees for card-present (in-person) and card-not-present (online or phone) transactions. If you accept credit cards both in your restaurant and online, be sure to request quotes for each method. If most of your sales happen through one channel, choose a processor with the most competitive rate for that type of transaction.
• Processing equipment needs: Torkpour explained that a restaurant’s payment-processing hardware is unique. “Unlike generic retail processors, restaurant-focused solutions must support tab management, tip adjustments and multi-terminal setups across the front and back of house,” Torkpour said. “It should also handle high-volume, fast-paced environments and integrate directly with POS systems, inventory and loyalty programs.”

Restaurant processor terms to consider

No matter which credit card processing company you choose, you’ll want flexible terms that give you the freedom to switch providers if you find better pricing or service elsewhere. You’ll also want to avoid surprise or nonstandard fees. 

The best credit card processing companies offer the following terms:

• Month-to-month processing agreements: The best credit card processors offer flexible terms that let you cancel service or switch providers without paying costly early termination fees. Long-term contracts can be risky. If you’re unhappy with the service, your rates increase or you close your restaurant, you could be stuck paying a hefty fee just to exit the agreement.
• Rate-lock guarantee: Most credit card processing contracts reserve the right to increase your rates at any time. A few, however, offer a rate-lock guarantee that promises to keep your rates the same for the life of your account. If your processor doesn’t provide it, it’s even more important to have a month-to-month agreement so you can easily shop for better rates when needed.
• No setup or application fee: Most processors no longer charge these fees, but some still do. It’s worth asking upfront so you’re not surprised by extra charges on your first bill.
• The ability to buy unlocked processing equipment: Credit card processing companies often offer equipment leases or “free” equipment programs. They may seem less expensive upfront, but they’re usually more costly in the long run. The most cost-effective option is to buy your equipment outright, even if you start with something basic and upgrade later. Be sure the equipment is unlocked, which means you can use it with any processor — not a locked or proprietary terminal that won’t work if you switch providers.

How to choose a restaurant payment processor

Choosing the best restaurant credit card processor is a nuanced process. There are many providers, rates and service terms to compare, and they’re often tough to decipher. If you already have a POS system and don’t plan to upgrade, be sure to choose a processor that’s compatible with your existing setup.

Research at least three to five providers before deciding. That will give you the best chance of finding one with helpful features, reliable service and competitive rates. 

Follow these steps to find the right restaurant payment processor:

1. Talk to fellow restaurant owners. 

Ask your peers about their experiences with payment processors — including rates, service quality and whether they were able to negotiate better pricing or contract terms. Recommendations from trusted colleagues can help you avoid common pitfalls and point you toward providers that truly understand the restaurant industry.

2. Read customer reviews.

Research online reviews of recommended or top-rated restaurant payment processors. Reviews can reveal where a processor shines, common pain points and how the company handles issues. Pay attention to patterns in customer feedback — especially regarding fees, support and ease of use.

3. Evaluate your bank — then look beyond.

Your bank may offer credit card processing services at a reasonable rate, especially if you have a long-standing relationship. Although working with a current provider may be convenient, processors that specialize in the restaurant industry often provide better rates, features and support. It’s worth comparing a few dedicated providers before committing.

4. Consult your POS service provider. 

If you already use a restaurant POS system, ask your vendor which payment processors are compatible and which they recommend. Keep in mind that many POS providers offer their own credit card processing, and some systems may only work with that company’s service. If that’s the case, you may need to wait until you’re ready to upgrade your equipment to switch processors.

5. Match your restaurant’s needs to a provider’s offering. 

Before requesting pricing quotes, make sure you clearly understand which features and services you need from a restaurant credit card processor (e.g., necessary integrations, tableside ordering, etc.). Be prepared to answer questions about your business so the provider’s account representatives can understand your processing requirements and offer an accurate quote.

Yechiel Gartenhaus, CEO and co-founder of Clavaa, recommends looking for a few key features in any restaurant payment processor. “What’s critical in a good payment processor for restaurants is transparent pricing, support for tipping and split payments, offline mode for network issues, integration with POS and loyalty programs, quick deposits, and reliable customer support,” Gartenhaus said.

6. Evaluate pricing and fees.

Get familiar with common pricing models — interchange-plus, flat-rate and tiered — and choose the one that best fits your business. Carefully review the fee structure, including transaction fees, monthly fees, chargeback fees and equipment costs. Don’t hesitate to negotiate rates with potential processors, especially if you’re processing a high volume of transactions. (We discuss more about processing rates and fees below.)

7. Narrow down your list.

Evaluate each promising payment processor to ensure that it meets your needs, fits within your budget and is likely to approve your business. Then create a shortlist of top contenders. Call each provider and spend at least 20 minutes discussing rates, fees and service terms.

If a company seems like a good fit, request a written quote and the full contract — including the application, terms of service and program guide. Don’t provide your Social Security number or bank account information, and don’t sign anything until you’re ready to commit. Some processors treat the application as part of the contract, and submitting it may be interpreted as consent to set up an account.

When speaking with account representatives, pay attention to their thoroughness, patience and product knowledge. You may be working with this company for years, so treat it like choosing a long-term business partner.

8. Decide on a restaurant payment processor.

At this point, a likely winner has emerged. After signing on and completing the necessary paperwork, it usually takes one or two days to set up your account and at least a week to receive, set up and test your equipment. Once you begin using the processor, funds are typically deposited into your account within a few days.

Who is involved in the payment process?

Many entities and services are involved in credit card processing. 

• Consumer: This is the cardholder — usually the purchaser (your customer).
• Merchant: This is the individual or business selling the products or services the consumer is buying. In this case, it’s you — the restaurant owner.
• Card network: This is the credit card brand, such as Visa, Mastercard, American Express or Discover. The brands set interchange and assessment fees and establish the security standards for Payment Card Industry (PCI) compliance.
• Credit card processor: This company handles communication between the merchant, card network and issuing bank, and ultimately deposits the funds into the merchant’s bank account.
• Payment gateway: This technology encrypts credit card data and sends it securely from the merchant to the credit card processor. A payment gateway is typically used for online transactions or other purchases where the card isn’t physically present. For in-person payments, the technology is often built into card readers.
• Issuing bank: This is the bank that issued the credit card to the consumer. It approves or declines the transaction based on the customer’s available credit or funds.
• Acquiring bank: This is the merchant’s (your) bank. Once a transaction is approved, the funds are deposited into your account at the acquiring bank.
• Merchant account services provider: This service gives you a temporary account to hold funds until they’re deposited into your business bank account. Most credit card processors provide it, but you may need to work with a third-party provider if you’re using a stand-alone payment gateway. The best merchant account services offer fast deposits, transparent fees and strong customer support — all crucial factors when managing a busy restaurant.
• Credit card facilitator: These companies process payments under a shared merchant account and gateway rather than giving each merchant a dedicated setup. They charge one flat fee per transaction, regardless of card network. Popular examples include PayPal and Square.

How payment processing works

Here’s what happens during a typical credit card transaction at a restaurant:

1. A customer places an order and pays with a credit card.
2. You accept the card in person using a card reader. If the payment is made online or if you accept credit card payments by phone, a payment gateway captures the card information. The payment details are then sent through your hardware or software to the credit card processor or facilitator.
3. The processor or facilitator forwards the payment request to the card network (e.g., Visa or Mastercard).
4. The card network passes the request to the issuing bank — the bank that issued the card to the customer.
5. The issuing bank checks whether the customer has enough funds or available credit and runs fraud checks. It then approves or declines the transaction and sends the result back through the chain to the processor or facilitator.
6. If approved, the issuing bank initiates settlement — the process of moving funds from the customer’s account to your merchant account.
7. You receive confirmation that the transaction was approved or declined.
8. The settlement is completed, and the money (minus processing fees) is deposited into your account — typically within a few business days. Most processors batch transactions daily and deposit them all at once.

Payment processing rates and fees

Credit card processing fees vary by company and factors such as restaurant transaction volume. Here’s an overview of the standard charges you may see.

Monthly flat fees

Monthly fees are set amounts a processor charges each month to cover various services, including customer support, statements and account maintenance. They may also include the following charges:

• PCI fee: This fee covers the required security measures to protect cardholder data and ensure PCI compliance.
• Batch fee: This fee is charged for gathering your daily transactions in a batch for deposit.
• Merchant account fee: This fee covers the costs of maintaining a merchant account if you use a third-party provider.
• Payment gateway fee: This fee applies if you use a stand-alone payment gateway. If the gateway is built into your processor, the fee is often included in your monthly service charge.

Processing fees

You’re charged processing fees every time you accept a credit card transaction. The fees may include:

• Flat rate: The payment processor sets a certain percentage of the sale amount it charges for each transaction.
• Interchange-plus fee: This fee includes the interchange rate set by the card networks, plus a small markup from your processor.
• Transaction fee: This is an additional fixed fee — typically between 5 and 35 cents — charged per transaction, on top of the flat rate or interchange-plus pricing.

Situational fees

These fees are charged in specific situations:

• PCI noncompliance fee: If you don’t meet required security standards, you may be charged a monthly fee until the issue is resolved.
• Chargeback fee: If a customer disputes a charge and requests a refund, the transaction must be reversed, and you’ll usually pay a fee for that.
• Nonsufficient funds fee: This applies if your bank account doesn’t have enough money to cover the processor’s fees when they’re withdrawn.

Top restaurant payment processing companies to consider

Here are a few excellent payment processors that work well for different types of restaurants. Use these as a starting point as you begin your research.

Stripe

Stripe is a great option for restaurants that process less than $3,000 each month, new establishments that don’t know their monthly processing volume yet, or seasonal restaurants. It’s easy to get approved with Stripe, which makes it a solid pick for startups. The platform charges a flat rate of 2.9 percent plus 30 cents per transaction for in-person payments, and there’s no monthly fee. Learn more in our detailed Stripe review.

Lightspeed

Lightspeed’s POS system is robust, easy to use and includes built-in payment processing. It offers restaurant-specific features such as menu and floor management, online ordering, takeout and delivery, and multilocation support. Plans with integrated payment processing start at $109 per month for a single register. The payment processing rate is 2.6 percent plus 10 cents per transaction, regardless of your POS pricing tier. Learn more in our review of Lightspeed.

Clover

Clover provides a complete POS system designed for restaurants, with optional built-in payment processing. Its durable hardware — including the Clover Flex and Clover Mini — is ideal for tableside orders and payments. Clover’s software supports online ordering and delivery, kitchen order routing, menu creation, and inventory tracking.

Clover’s Quick-Service restaurant plan starts at $105 per month, while its Full-Service Dining starts at $179 (both plans include hardware). Transaction fees are 2.3 percent plus 10 cents per transaction for in-person payments and 3.5 percent plus 10 cents for online or phone orders. Clover is also a great option if you need a combined bar POS system and payment processor. Read our Clover review to learn more.

How payment processors evaluate merchants

Working with a payment processor involves an approval process, as providers take on some risk when partnering with merchants. Higher-risk businesses may be denied or charged higher processing rates. Understanding what processors look for can help you choose the right fit for your restaurant.

Monthly sales volume 

Many processors consider your monthly sales volume when issuing a custom quote. Some require you to process a minimum dollar amount each month to qualify. If you fall below that threshold, the provider may refer you to a different processor or charge a monthly minimum fee to offset the lower volume. Others don’t have strict volume requirements but still use the metric to determine pricing and risk.

Average sales-ticket size 

If a processor offers multiple pricing models, the average size of your sales tickets helps the rep determine which pricing model is the most cost-effective for your business.

Your credit rating and history

As with most business relationships, you’ll have better options if you have strong credit and a proven sales record. If your business credit score isn’t great or you’re just starting out, some processors may refer you elsewhere or charge higher rates until you build credit or establish a processing history.

Common payment processor pitfalls

Selecting the wrong processor can be an expensive mistake. Here are some pitfalls to watch out for.

• Long-term contracts: Some processors require you to sign multiyear agreements — often three years or longer — that automatically renew for additional terms. In many cases, you have just 30 days to cancel without penalty. Otherwise, you may be charged early termination fees and liquidated damages (the amount the processor would have collected if you had completed the full contract).
• Additional services clauses: Some contracts automatically enroll you in a club or sign you up for additional services. You typically have 30 days to opt out, but if you don’t, you may be stuck paying for services you don’t want or need.
• “Free equipment placement” programs: Some processors advertise free equipment if you sign a one- to three-year contract. The equipment may come with hidden monthly fees for insurance or service, however, and you’re usually required to return it at the end of the term. In many cases, you’ll save more in the long run by purchasing your hardware upfront.
• Equipment leasing: Leasing credit card processing equipment is rarely a good idea. Most leases involve noncancelable four-year contracts, and you’ll usually pay far more over time than if you had purchased the equipment upfront. At the end of the term, you’re required to either return the equipment or pay extra to keep it — and in most cases, there’s no way to exit the lease early — even if you shut down your business.
• Starter rates: Some credit card processors advertise low starter rates but don’t disclose their full rate schedules upfront. Those companies often use a tiered pricing model, in which the advertised rate typically applies only to basic debit cards accepted in person. Other payment types — such as rewards and corporate cards or online transactions — are charged at higher rates. Ask how many pricing tiers the processor uses, what each one costs, and which card types or transaction methods apply to each. Tiered pricing can work for restaurants that process mostly in-person debit card payments, but many industry experts recommend interchange-plus pricing for better transparency and long-term savings.
• Nonstandard fees: Most credit card processors charge common fees such as a monthly fee, payment gateway fee and annual PCI compliance fee. Some, however, also include less typical charges — such as application, setup, annual account, customer service, IRS reporting, online reporting, semiannual postage and handling, and quarterly technology fees. If you see a fee you don’t recognize in your contract or on your bill, ask your account representative to explain it — or request that it be removed.

Danielle Bauter contributed to this article.