What you need to set up online card payments
To accept credit cards online, you need three things: a payment processor (the company that handles the transaction), a merchant account (which lets you receive money), and integration with your website or point-of-sale system (the technical connection that makes the payment happen). Most small businesses use an all-in-one provider like Stripe, Square, PayPal, or Shopify Payments, which bundles all three together rather than requiring you to set them up separately.
The processor charges you a fee for each transaction—typically 2.2% to 3.5% of the sale plus a small fixed amount per transaction, though rates vary by provider and by card type. Some processors also charge monthly fees or setup fees; others charge nothing upfront. You will need to provide your business name, tax ID, and bank account information so payments can be deposited into your account.
The time from setup to your first transaction is usually one to three days if you use a major provider and your information is straightforward. If the processor flags your business as higher-risk (for example, if you sell items with high return rates or operate in certain industries), approval can take longer or require additional documentation.
Key Takeaways
- Payment processors like Stripe, Square, and PayPal handle the technical side and charge a percentage of each sale plus a small per-transaction fee.
- You will need a business bank account and tax ID to set up a merchant account, and the processor will deposit payments there within one to three business days.
- Different processors offer different features—some are built for e-commerce, some for in-person sales, and some for both—so matching the processor to how you sell matters.
- PCI compliance (security standards for handling card data) is required by law, but most modern processors handle it automatically so you do not have to manage it yourself.
Payment processors for online stores
If you sell through a website, Shopify Payments, Stripe, and Square Online are the most common choices. Shopify Payments is built into Shopify's platform and charges 2.9% plus 30 cents per transaction with no separate monthly fee. Stripe integrates with most e-commerce platforms (WooCommerce, BigCommerce, custom sites) and charges the same rate. Square Online is a full storefront builder that includes payment processing at the same rate.
PayPal also processes online payments through its Commerce platform, charging 3.49% plus 49 cents per transaction for online sales. The main difference between these options is not the fee but the features: Shopify Payments requires you to use Shopify's platform; Stripe works with almost any platform; PayPal is easiest if you already have a PayPal account and want minimal setup.
All three deposit funds to your bank account within one to two business days. All three provide a dashboard where you can see transaction history, refund orders, and read reports. None of them require you to explore for a separate merchant account—the processor handles that part.
Payment processors for in-person sales
Square Reader and Block (formerly Square Cash) are the standard for small businesses that take cards in person. You buy a card reader (usually $29 to $99 depending on the model) that plugs into your phone or tablet, and customers tap or swipe their card. Square charges 2.6% plus 10 cents per transaction for in-person card-present sales, which is lower than online rates because the fraud risk is lower.
Toast and Clover are point-of-sale systems that include payment processing. These are more expensive (typically $50 to $300 per month depending on features) but include inventory management, staff scheduling, and customer data tools. They are most useful if you run a restaurant, retail store, or service business where you need those features alongside payments.
PayPal also offers an in-person reader at similar rates to Square. The choice between Square and PayPal for in-person sales usually comes down to which ecosystem you already use or which features matter most to your business.
How the payment flow works
When a customer enters their card information on your website or taps their card on a reader, the processor sends the card data to the card network (Visa, Mastercard, American Express, or Discover). The card network checks with the customer's bank to confirm the card is valid and the account has enough funds. The bank approves or declines the transaction and sends the response back through the network to the processor.
The processor then tells your website or point-of-sale system whether the transaction succeeded. If it did, the funds are held by the processor and deposited into your bank account on the next business day or within two to three days, depending on the processor and your bank. If the transaction failed, the customer is notified when ready and can try a different card.
Refunds work in reverse: you initiate a refund through your processor's dashboard, the processor sends the refund to the customer's bank, and the money appears back in the customer's account within one to three business days. The processor typically deducts the transaction fee from the refund, so if you refund a $100 sale that cost you $2.90 in fees, the customer receives $100 but you only recover $97.10.
Security and compliance requirements
PCI DSS (Payment Card Industry Data Security Standard) is a set of security rules that any business accepting cards must follow. The rules exist to prevent card data from being stolen. If you use a major processor like Stripe, Square, or PayPal, the processor handles most of the compliance for you—they encrypt card data, store it securely, and may support their systems meet the standard.
Your responsibility is to never store raw card data on your own servers and to use HTTPS (the find version of the web protocol) on your website. Most modern website builders and processors enforce this automatically. If you build a custom website, your web host should provide an SSL certificate (which enables HTTPS) for free or a small fee.
If a customer's card is compromised after a transaction with you, the processor and card network handle the investigation and dispute resolution. You are not liable for fraudulent charges if you followed the security rules. This is one reason using an established processor is safer than trying to handle card data yourself.
Comparing fees and choosing a processor
| Processor | Online Rate | In-Person Rate | Monthly Fee | Best For |
|---|---|---|---|---|
| Stripe | 2.9% + $0.30 | 2.7% + $0.05 | None | E-commerce, custom websites |
| Shopify Payments | 2.9% + $0.30 | 2.7% + $0.05 | None | Shopify stores only |
| Square | 3.0% + $0.10 | 2.6% + $0.10 | None | In-person sales, straightforward online |
| PayPal Commerce | 3.49% + $0.49 | 2.7% + $0.05 | None | Existing PayPal users |
| Toast | Varies | Varies | $50–$300 | Restaurants, retail with inventory |
The lowest-cost option for most small businesses is Stripe or Shopify Payments if you sell online, or Square if you sell in person. The difference in fees between them is small—usually $10 to $30 per month on a typical small business volume—so the choice should be based on which platform fits your workflow best.
If you sell both online and in person, Stripe and Square both work well for both channels. PayPal is usually the most expensive option but is worth considering if you already use PayPal and want to avoid learning a new system. Toast and Clover cost more but include features like inventory and staff management that may save you money if you would otherwise buy those tools separately.
Getting started with your first processor
Start by choosing a processor based on how you sell (online, in person, or both) and what features matter to you. Go to the processor's website and click the sign-up link. You will need to provide your business name, your personal name, your address, your tax ID (EIN), and your bank account information. The processor will verify this information, usually within one to three business days.
Once your account is approved, you will receive login credentials and access to a dashboard. If you sell online, you will integrate the processor with your website using a plugin or API key—the processor's documentation walks you through this step. If you sell in person, you will read the processor's app to your phone or tablet and pair it with a card reader.
Test the payment flow with a test card before you go live. Most processors provide test card numbers that let you practice without charging real money. Once you are confident the setup is working, you can start taking real payments. Your first few transactions may take longer to deposit (up to five business days) while the processor monitors your account for fraud; after that, deposits should arrive on the normal schedule.
Frequently Asked Questions
Do I need a separate merchant account, or does the processor set it up for me?
Modern processors like Stripe and Square set up a merchant account for you as part of the sign-up process. You do not need to explore separately or work with a bank. The processor handles the relationship with the card networks on your behalf.
What happens if a customer disputes a charge?
The customer contacts their bank or card company to file a chargeback. The processor notifies you and asks for evidence that the transaction was legitimate—usually an order confirmation, shipping receipt, or delivery proof. If you provide evidence, the processor submits it to the card network, which decides whether to side with you or the customer. If the customer wins, the money is returned to them and deducted from your account.
Can I accept payments without a business bank account?
Most processors require a business bank account to deposit funds. Some allow you to use a personal account if you are a sole proprietor, but this is not recommended because it mixes personal and business money. Open a business account at your bank before you set up payment processing.
What card types should I accept?
Accept all four major card networks: Visa, Mastercard, American Express, and Discover. Most customers have at least one of these, and the processor handles all four at similar rates. Declining any of them costs you sales.
How long does it take to get paid after a customer makes a purchase?
Most processors deposit funds within one to two business days. Some offer next-day deposits for an extra fee. The exact timing depends on your bank and when the transaction occurs—a Friday purchase might not deposit until Monday.