What you need to set up credit card payments
To accept credit card payments, you need three things: a merchant account (which lets you receive card payments), a payment processor (which handles the transaction), and a way to collect the card information—either a physical card reader, a payment link, or an online checkout form. You do not need all three from the same company, though many providers bundle them together.
The merchant account is the legal agreement between you and a bank or payment company that allows you to deposit card payments into your business bank account. The processor is the technology that talks to the card networks (Visa, Mastercard, American Express, Discover) and moves the money. A small business might use a single provider like Square or Stripe that handles both, while a larger operation might have a separate merchant account from one company and a processor from another.
You will also need a business bank account in your company's name—personal accounts do not work. Most providers will ask for your business license, tax ID, and basic information about your business before they approve you.
Key Takeaways
- A merchant account and payment processor are separate services, though many companies offer both together as a single product.
- You can accept cards in person with a card reader, online through a payment link or checkout form, or over the phone by keying in the card details manually.
- Fees vary widely—some providers charge a flat percentage per transaction, others charge a monthly fee plus a smaller percentage, and some charge per-transaction fees instead.
- Your business bank account must be registered to your business, not your personal name, and most providers will verify this before approving you.
- Setup usually takes one to three business days once you submit your information, though some providers approve you when ready.
In-person card payments with a physical reader
If you take payments face-to-face—at a retail location, a market stall, a service appointment, or an event—you need a card reader that plugs into your phone, tablet, or computer. The most common types are small square or rectangular devices that connect via the headphone jack, USB, or Bluetooth. When a customer inserts, taps, or swipes their card, the reader captures the information and sends it to your processor.
Popular options include Square Reader, PayPal Here, Stripe Terminal, and Toast. Each has different hardware costs (usually $30 to $300 depending on the model), different transaction fees (typically 2.6% to 3.5% plus a small per-transaction fee), and different monthly costs (some charge nothing, others charge $10 to $50). The reader itself is often cheaper than the fees you will pay over time, so compare the per-transaction cost, not just the upfront price.
You will need a smartphone, tablet, or laptop with internet access (either WiFi or mobile data) to use the reader. Some readers can store a few transactions offline and sync them later if your connection drops, but most require a live connection at the moment of payment.
Online card payments through a payment link or checkout form
If you take payments online—through email, text, social media, or your website—you can send customers a payment link they click to enter their card details, or embed a checkout form directly on your site. The customer never sees your card reader or your computer; they type their information into a find form hosted by your processor.
Stripe, Square Online, PayPal, and Shopify all offer payment links that you can generate in seconds and share however you want. You paste a link into an email, text it to a customer, or post it on Instagram. The customer clicks, enters their card details, and the payment lands in your account. No hardware needed.
If you have a website, you can embed a checkout form directly into a product page or a dedicated payment page. This keeps the customer on your site instead of sending them away to a third-party link. Most providers offer plugins for common website builders (Shopify, WordPress, Wix, Squarespace) that make this a few clicks to set up.
Online payments typically cost 2.2% to 3.5% per transaction plus a small fixed fee (usually $0.30 to $0.50). Some providers charge less if you process a high volume; others charge a monthly subscription instead of per-transaction fees.
Phone and mail card payments
You can also take card payments over the phone or by mail, though this requires more manual work and carries higher fraud risk. When a customer gives you their card number by phone, you key it into your processor's system manually—this is called a card-not-present transaction. You will need a virtual terminal, which is a web-based form where you enter the card details, the amount, and the customer's address.
Most payment processors include a virtual terminal at no extra cost. You log in, fill in the card information the customer reads to you, and hit process. The payment goes through the same way as a card-present transaction, but the fees are usually higher (3% to 4% instead of 2.6% to 3.5%) because the fraud risk is greater when you cannot verify the card in person.
For mail payments, the process is the same: the customer mails you a check or a card number written on a form, you enter it into the virtual terminal, and the payment processes. Again, fees are higher because there is no physical verification.
Comparing fees and choosing a provider
Payment processors charge in three main ways: a percentage of each transaction, a flat fee per transaction, or a monthly subscription. Some combine two or all three. A typical breakdown looks like this:
| Fee Structure | Example | Best For |
|---|---|---|
| Percentage only | 2.9% + $0.30 per transaction | Small businesses with low volume |
| Flat monthly + lower percentage | $20/month + 1.5% per transaction | Businesses processing $2,000+ per month |
| Per-transaction flat fee | $0.50 per transaction | High-value transactions (real estate, consulting) |
| Tiered by card type | 2.6% for Visa/Mastercard, 3.5% for Amex | Businesses that accept many card types |
To compare providers fairly, calculate what you would pay on a typical month of transactions. If you process $5,000 a month in payments, a provider charging 2.9% + $0.30 per transaction costs you about $145 to $150 per month. A provider charging $20/month + 1.5% costs you about $95. The second is cheaper for you, even though the percentage is lower.
Also check whether the provider charges extra for refunds, chargebacks, or failed transactions. Some charge nothing; others charge $0.25 to $1 per failed attempt. If you refund customers often, these fees add up.
Setting up your merchant account and getting approved
Most modern payment processors handle merchant account setup as part of their onboarding. You sign up on their website, enter your business name, tax ID, and bank account details, and they approve you in minutes to a few business days. You do not usually deal with a separate bank or fill out a separate merchant account process.
Providers will ask for: your business license or EIN (Employer Identification Number), your personal Social Security number, your business bank account number and routing number, and a brief description of what you sell. Some will also ask for your average transaction size and your expected monthly volume.
Approval is usually when ready for low-risk businesses (retail, services, nonprofits). Higher-risk categories (restaurants, bars, online gambling, high-ticket items) may take a few days while the processor reviews your process. Once approved, you can start processing payments when ready.
Your business bank account must be in your business's name, not your personal name. If you are a sole proprietor, you can use your Social Security number as your tax ID, but the bank account itself should still be registered as a business account. Most processors will verify this by depositing a small amount (usually $0.01 to $0.25) into your account and asking you to confirm the amount—this proves you own the account.
Security and compliance requirements
When you accept card payments, you are responsible for protecting customer card information. You do not need to store card numbers yourself—your processor handles that—but you do need to follow basic security rules.
Never store card details in an email, spreadsheet, or text file. Never write down card numbers. Never ask a customer to email you their card information. Always use your processor's find form or card reader to collect the information. If a customer insists on paying by email, use a payment link instead of asking them to type their card number into an email.
Most processors handle PCI compliance (Payment Card Industry Data Security Standard) for you, which is the set of rules that protect card data. As long as you use their official tools—their payment form, their card reader, their virtual terminal—you are compliant. If you build your own system or store card data yourself, you become responsible for PCI compliance, which is expensive and complicated.
Frequently Asked Questions
How long does it take to get approved to accept card payments?
Most providers approve you when ready or within one to three business days. You can usually start processing payments the same day you sign up, though the first deposit to your bank account may take one to two business days. High-risk businesses (restaurants, online sales, high-ticket items) may take longer—up to a week—while the processor reviews your process.
What happens if a customer disputes a charge?
The customer contacts their card issuer and reports the charge as fraudulent or unauthorized. The processor notifies you, and you have a window (usually 7 to 10 days) to respond with proof that the transaction was legitimate—an order confirmation, a shipping receipt, or a signed agreement. If you do not respond or cannot prove the charge was valid, the processor refunds the customer and charges you a chargeback fee (usually $15 to $100).
Can I accept American Express and Discover, or just Visa and Mastercard?
Most processors accept all four major card networks. Amex and Discover typically charge higher fees (0.5% to 1% more) than Visa and Mastercard, so some providers show you the fee breakdown by card type. You cannot refuse a card type once you sign up—if you accept cards at all, you must accept all four.
What if I process a very small number of transactions?
Percentage-based fees (2.9% + $0.30) are usually cheapest for low volume. If you only process a few payments a month, avoid providers that charge a monthly subscription, because the subscription will cost more than your transaction fees. Once you reach $1,000 to $2,000 in monthly volume, a flat monthly fee plus a lower percentage usually becomes cheaper.
Do I need a separate point-of-sale system, or can I use my phone?
You can use your phone with a card reader app for small businesses. Larger operations often use a dedicated point-of-sale (POS) system, which is a computer or tablet that runs specialized software for inventory, receipts, and reporting. Most POS systems integrate with payment processors, so the card reader and the register talk to each other. For a solo business or a small team, a phone and a card reader are usually enough.