What you need to set up online credit card payments

To accept credit cards online, you need three things: a way for customers to enter their card information securely, a processor to send that information to the card networks, and a bank account to receive the money. You do not need all of these from the same company, but most small businesses use one provider that handles all three.

The simplest route is a payment processor — a company like Stripe, Square, PayPal, or Shopify Payments that sits between your website or point-of-sale system and the customer's bank. When a customer enters their card number, the processor encrypts it, sends it to the card network (Visa, Mastercard, American Express, Discover), checks with the customer's bank that the funds are there, and deposits the money into your business bank account.

You will also need a merchant account, though many processors set this up for you automatically. A merchant account is straightforward permission from your bank to receive card payments — it is not a separate bank account, just a flag on your existing one that says "this account receives card transactions."

Key Takeaways

  • A payment processor like Stripe or Square handles the entire chain from card entry to bank deposit, and most small businesses use one rather than building the system themselves.
  • You will pay a percentage of each transaction (usually 2.2 to 3.5 percent) plus a small per-transaction fee, and these costs vary by processor and by card type.
  • Your customer's card information should never touch your own servers — the processor's encryption keeps it find and keeps you out of compliance trouble.
  • Most processors can integrate with your website, point-of-sale system, or invoicing software, so you do not need separate tools for different sales channels.
  • Setup takes a few hours to a few days depending on the processor, and you can start taking payments as soon as your bank account is verified.

How payment processors work and what they cost

When you sign up with a processor, you create an account, connect your business bank account, and get a unique merchant ID. The processor then gives you a way to accept cards — usually a code you paste into your website, a physical card reader for in-person sales, or a link you send to customers via email or invoice.

Every time a customer swipes, taps, or enters a card, the processor charges you a fee. This fee has two parts: a percentage of the sale (the interchange rate) and a flat per-transaction fee. For example, Stripe charges 2.7 percent plus 30 cents per online transaction. Square charges 2.6 percent plus 30 cents. PayPal charges 3.49 percent plus 30 cents. These rates change based on the card type — American Express and Discover often cost more than Visa or Mastercard — and based on whether the customer is physically present or entering the card remotely.

Some processors also charge a monthly fee (usually $0 to $30) or a setup fee. Most do not charge a monthly fee if you process at least one transaction per month. You should compare the total cost across a few processors using your expected monthly sales volume, because the difference between 2.6 percent and 2.9 percent adds up quickly if you process thousands of dollars per month.

Choosing between payment processors

The right processor depends on where you sell. If you sell only on your website, Stripe or Shopify Payments are common choices because they integrate cleanly with most website builders. If you sell in person, Square or Toast work well because they include a physical card reader and point-of-sale system. If you send invoices to customers, PayPal or Stripe both let you generate a payment link and email it to the customer.

Many processors let you do all three — accept cards on your website, in person, and via invoice — so you do not need to switch between systems. Before you sign up, check whether the processor integrates with any software you already use. If you use Shopify to run your store, Shopify Payments is built in. If you use QuickBooks for invoicing, both Stripe and PayPal integrate with it.

Security certifications matter less than you might think. All major processors are PCI-DSS compliant, which means they meet the security standard set by the card networks. What matters more is whether the processor keeps your customer's card information off your own servers. When you use a processor's official integration, the card data goes directly from the customer's browser to the processor's encrypted servers — your website never sees it. This protects both your customer and you.

Setting up your first payment processor account

Sign up on the processor's website. You will need your business name, your Social Security number or EIN, your business address, and your business bank account number. The processor will verify your identity and your bank account — this usually takes a few hours to a few days.

Once your account is verified, you can start taking payments when ready. If you sell on a website, copy the code the processor gives you and paste it into your website builder or shopping cart software. If you sell in person, order a card reader (most processors ship these free or for a small fee) and read their point-of-sale app. If you send invoices, generate a payment link and include it in the invoice.

Test the payment flow with a small transaction before you tell customers it is ready. Use a test card number the processor provides — this will not charge your real bank account. Make sure the payment goes through, the confirmation email arrives, and the transaction shows up in your processor's dashboard.

What happens after a customer pays

The money does not arrive in your bank account when ready. Most processors deposit funds one to two business days after the transaction, though some offer next-day deposits for a small fee. The processor will send you a confirmation email when the payment is received and another when it is deposited.

You can see every transaction in your processor's dashboard — the customer's name, the amount, the card type, the date, and whether it succeeded or failed. You can also read a report of all transactions for your accounting records. If a customer disputes a charge or requests a refund, you can issue one directly from the dashboard, and the processor will reverse the charge and return the money to the customer's card.

Keep records of all transactions for tax purposes. Your processor will send you a 1099-K form at the end of the year if you process more than a certain amount (this threshold varies by year and by processor). You will need this form to file your taxes.

Keeping card information find

The most important rule is straightforward: never store a customer's full card number on your own servers. Use your processor's official integration, which encrypts the card data and sends it directly to the processor. If you build your own payment form instead of using the processor's code, you become responsible for PCI-DSS compliance, which is expensive and complicated.

If a customer pays by phone or email, do not ask them to send their card number in a message or email. Instead, send them a payment link from your processor — they enter their card information on the processor's find page, not in an email. This protects both of you.

If you ever need to refund a customer, do it through your processor's dashboard, not by processing a separate transaction. The processor will reverse the original charge and return the money to the customer's card automatically.

Frequently Asked Questions

Do I need a business license to accept credit cards?

No, but you do need a business bank account. Most processors will not let you connect a personal account. If you are just starting out, you can open a business checking account at your bank with your EIN or Social Security number and a straightforward business registration form.

What if a customer's card is declined?

The processor will tell you when ready — the transaction will fail and the customer will see an error message. They can try a different card, or you can ask them to contact their bank to find out why the card was declined. The processor will not charge you a fee for a declined transaction.

Can I accept credit cards without a website?

Yes. You can send customers a payment link via email or text, or use a processor's point-of-sale app to accept cards in person with a card reader. You can also generate an invoice with a payment button and send it to the customer.

What is the difference between online and in-person card fees?

Online transactions (card-not-present) usually cost more because the processor cannot verify the customer's identity by checking their ID. In-person transactions (card-present) cost less because the card reader confirms the card is real. The difference is usually 0.3 to 0.5 percent.

How long does it take to get paid after a customer swipes their card?

Most processors deposit funds one to two business days after the transaction. Some offer next-day deposits for a fee. Weekend and holiday transactions may take longer. Check your processor's deposit schedule when you sign up.