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A Guide to Restaurant Payment Processing
How do you know which payment processor is best for your restaurant? Consider these guidelines and steps to select the right credit card processor.
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While operating a cash-only restaurant is possible, accepting credit cards and digital payments is essential for meeting customer expectations and boosting your bottom line. Choosing the right payment processor ensures affordable rates, powerful security, and the specific features needed for smooth restaurant operations.
Editor’s note: Looking for the right credit card processor for your restaurant? Fill out the below questionnaire to have our vendor partners contact you about your needs.
What is a restaurant payment processor?
A restaurant payment processor is a specialized provider that handles credit card and digital payment methods — including Venmo, PayPal and mobile wallets such as Apple Pay, with tools unique to restaurants.
Unlike standard retail processors, restaurant-specific processors handle critical functions like:
- Tipping and tab splitting
- Tableside and mobile payments
- Online ordering and delivery integration
- POS system integration
Eran Hollander, chief product officer at HungerRush, emphasized that restaurant payment processors support tools unique to eateries.
“It’s designed to handle the unique needs of restaurants, such as tipping, splitting checks among large parties, scheduled orders, online ordering and delivery,” Hollander said.
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
Restaurant payment processors must meet traditional payment requirements while supporting the fast-paced, customer-first nature of the industry.
“Restaurants should look for a processor that offers transparent and competitive fees, fast settlement and seamless integration with their POS system,” said Mazyar Torkpour, co-founder of Paymento. “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.
- Seamless POS system integration: Important for streamlining operations, order management, and reducing errors.
- Flexible tip handling: Support for pre-tip authorizations, post-tip adjustments, and tip pooling/distribution
- Tableside and mobile payment capabilities: Enable NFC payments (Apple Pay and Google Wallet) via mobile POS hardware or iPad-based POS systems
- Online ordering and delivery integration: Tools to manage orders from your website or third-party platforms (Grubhub, Uber Eats or similar platforms
- Payment acceptance methods: Support for both card-present (in-person) and card-not-present (online or phone) transactions
- Restaurant-specific hardware: “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.”
- Fraud protection and PCI compliance: Built-in tools for security and data protection
- Offline mode: Ability to process payments during internet outages
Who is involved in the payment process?
Many entities and services are involved in credit card processing.
- Consumer: Your customer (cardholder)
- Merchant: Your restaurant
- Card network: Credit card brands (Visa, Mastercard, Amex, Discover) setting rules and fees
- Credit card processor: Facilitates communication between all parties and deposits funds into your account
- Payment gateway: Encrypts and securely transmits card data (for online/phone, often build into in-person hardware
- Issuing bank: Customer’s bank, approves or declines transactions
- Acquiring bank: Your bank, where funds are deposited
- Merchant account services provider: Holds funds temporarily before deposit (often provided by processor)
- Credit card facilitator: Processes payments under a shared merchant account with flat fees (e.g., Square, PayPal)
How restaurant payment processing works
Understanding the transaction flow helps in choosing a processor. Here’s a simplified look at how a credit card payment typically works in a restaurant setting:
- Payment initiation: Customer pays with a card (in-person via reader or POS) or online/phone via a payment gateway.
- Data transmission: Payment details are securely sent to the credit card processor.
- Network routing: Processor forwards the request to the card network.
- Authorization request: Card network sends request to the issuing bank.
- Approval or decline: Issuing bank checks funds/credit, performs fraud checks, and sends a decision back.
- Settlement initiation: If approved, the issuing bank initiates moving funds to your merchant account.
- Confirmation: You receive immediate approval/decline confirmation.
- Funding: Processor batches daily transactions, and funds (minus fees) are deposited into your bank account, typically within a few business days.
Payment processing rates and fees
Credit card processing fees vary, but restaurants typically encounter three main types: common pricing models, monthly and recurring fees, and situational fees.
Common pricing models
- Interchange-plus: You pay the direct interchange rate (set by card networks) plus a fixed markup from your processor (e.g., 0.20% + $0.10). This is recommended for transparency and potential long-term savings.
- Flat rate: A single percentage of the transaction amount, regardless of card type or transaction method (e.g., 2.9% + $0.30). This is simple, but can be more expensive for high-volume, low-cost transactions.
- Tiered: Transactions categorized into “qualified,” “mid-qualified,” or “non-qualified” tiers, each with different rates. The terms here are often opaque and can lead to higher unadvertised costs.
Monthly and recurring fees
- Monthly service fee: Covers customer support, statements, account maintenance
- PCI compliance fee: For security measures protecting cardholder data
- Batch fee: Charged for daily grouping of transactions for deposit
- Payment gateway fee: For standalone gateways (often included in monthly service if integrated)
- Merchant account fee: If using a third-party merchant account provider
Situational fees
- Chargeback fee: If a customer disputes a transaction (typically $15 to $25). Some processors refund if you win.
- PCI non-compliance fee: If you fail to meet security standards
- Non-sufficient funds (NSF) fee: If your account lacks funds to cover processor fees
- Currency conversion fees: For international transactions
How to choose the right restaurant payment processor
Selecting the best restaurant credit card processor requires careful consideration. Follow these steps:
- Define your needs: Clearly list required features (POS integration, tip handling, online ordering, tableside payments, hardware compatibility.
- Consult your POS provider: Ask for compatible and recommended processors, especially if you have an existing system. Be aware some POS systems have proprietary payment processing.
- Talk to peers and read reviews: Get recommendations from other restaurant owners and research online reviews for insights on service, fees, and pain points.
- Evaluate your bank and beyond: Your bank might offer processing, but specialized restaurant processors often provide better rates and features.
- Match needs to offerings: Ensure the processor’s services directly align with your restaurant’s operations.
- Compare pricing and terms: Request detailed quotes for both in-person and online/phone transactions, look for month-to-month agreements to avoid early termination fees, prioritize rate-lock guarantees for stable pricing, and confirm no setup or application fees.
- Narrow your list: Create a shortlist of three to five contenders. Call each, discuss details, and request a written quote and full contract before providing sensitive information or signing.
- Make your decision: Choose the best fit for your restaurant. Account setup typically takes one or two days, equipment about a week. Funds are usually deposited within a few business days.
Approval process and pitfalls to avoid
When considering which credit card payment processor to choose, it’s important to think about the other side of the coin, or how processors evaluate merchants. There are also some common pitfalls to be aware of when deciding.
How processors evaluate merchants
- Monthly sales volume: Some require minimums; higher volume often leads to better rates.
- Averages sales-ticket size: Helps determine the most cost-effective pricing model
- Credit rating and history: Strong business credit can unlock better options and rates
- Industry type: High-risk industries such as gambling may face denial or higher rates
Common pitfalls to watch out for
- Long-term contracts: Auto-renewing, multi-year agreements with costly early termination fees
- Hidden fees/clauses: “Additional services” you’re automatically enrolled in, nonstandard fees (e.g., annual account, IRS reporting, quarterly technology fees)
- “Free equipment” programs: Often tied to long contracts with hidden fees or return requirements
- Equipment leasing: Non-cancelable, expensive multiyear contracts that rarely make financial sense
- “Starter rates” and tiered pricing: Advertised low rates may only apply to specific transaction types, with higher rates for others. Ask for full rate schedules.
Top restaurant payment processors to consider
Here are a few highly-rated payment processors suitable for various restaurant types:
- Stripe: Best for smaller restaurants earning less than $3,000 per month, new establishments, or seasonal businesses due to easy approval and flat rate pricing (2.9% + $0.30 in-person, no monthly fee). Learn more in our detailed Stripe review.
- Lightspeed: Robust POS system with built-in processing for restaurants, including menu and floor management and online ordering. Plans start at $109 per month (single register), processing at 2.6% + $0.10. Learn more in our review of Lightspeed.
- Clover: Complete POS system with optional built-in processing, durable hardware (Flex, Mini) for tableside use. Quick-Service plan starts at $105 per month, Full-Service at $179 per month (both include hardware). Rates: 2.3% + $0.10 (in-person), 3.5% + $0.10 (online/phone). Read our Clover review to learn more.
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