The basics of accepting credit card payments
To accept credit card payments, you need a payment processor — a company that handles the transaction between your customer's bank and your business account. The processor charges you a fee (usually 2 to 3 percent of each transaction, plus a small flat fee per transaction), takes the payment, and deposits the money into your bank account, typically within one to three business days.
You also need a way to actually collect the card information. This can be a physical card reader that plugs into your phone or tablet, a virtual terminal you access through a website, or a link you send to the customer. The method you choose depends on whether you're taking payments in person, over the phone, or online.
The payment processor handles the security side — they encrypt the card data so you never actually see or store the full card number yourself. This protects both you and your customer.
Key Takeaways
- A payment processor is a middleman company that takes the card information, verifies the funds, and deposits money into your business bank account within one to three business days.
- You pay the processor a percentage of each transaction (typically 2 to 3 percent) plus a small per-transaction fee, which varies by processor and payment method.
- In-person payments use a card reader; phone or online payments use a virtual terminal or payment link, depending on your processor.
- The processor encrypts card data so you never store full card numbers, which keeps you compliant with payment security rules and protects your customers.
- Popular processors for small businesses include Square, Stripe, PayPal, and Toast, each with different fee structures and features.
Choosing a payment processor
The main processors used by small businesses are Square, Stripe, PayPal, and Toast. Each charges different fees and offers different tools, so the right choice depends on your business type and how you take payments.
Square is popular for in-person payments — you plug a small reader into your phone or tablet, and customers tap or insert their card. Stripe is stronger for online payments and recurring billing. PayPal works for in-person, phone, and online payments and integrates with many existing business systems. Toast is built for restaurants and bars.
Before you sign up, compare the per-transaction fee (the percentage plus the flat fee), any monthly account fees, and the time it takes for money to reach your bank. Some processors offer next-day deposits for an extra fee; others take three business days as standard. Ask whether they charge extra for refunds, chargebacks, or international cards.
Setting up a card reader for in-person payments
If you take payments in person, you'll need a physical card reader. Square's reader costs around $30 to $100 depending on the model, and Stripe's reader is similar. The reader connects to your phone or tablet through Bluetooth or the headphone jack (on older devices).
Once you've ordered the reader and created your account with the processor, read their app to your phone or tablet. Plug in the reader, open the app, and enter the payment amount. The customer inserts or taps their card, and the transaction goes through in seconds. The app shows you a receipt you can email or text to the customer, or print if you have a printer.
Keep the reader in a safe place and charge it regularly if it's battery-powered. Most readers last several years before needing replacement.
Taking payments over the phone or by email
For phone or email payments, you use a virtual terminal — a website or app where you manually enter the customer's card details. You log into your processor's account, click "take a payment," and type in the card number, expiration date, and CVV (the three-digit code on the back).
Some processors also let you send a payment link to the customer via email or text. The customer clicks the link, enters their own card details, and completes the payment without you ever seeing the full card number. This is safer and faster than reading card details over the phone.
Virtual terminals and payment links both take a few seconds to process. The money appears in your processor's dashboard right away, but it takes one to three business days to land in your bank account.
Understanding fees and deposits
Every processor charges a transaction fee made up of two parts: a percentage of the sale (usually 2 to 3 percent) and a flat fee per transaction (usually $0.10 to $0.30). So a $100 sale might cost you $2.50 to $3.30 in fees. The exact rate depends on the processor, the payment method (card-present is cheaper than card-not-present), and whether the card is from the US or abroad.
Some processors charge a monthly account fee ($10 to $50) whether or not you process any payments. Others charge no monthly fee but take a slightly higher percentage per transaction. Calculate which model costs you less based on your expected monthly sales.
Money from your transactions deposits into your business bank account on a schedule set by your processor. Most deposit within one to three business days. Some offer next-day or same-day deposits for an extra fee. Refunds you issue go back to the customer's card and take the same number of days.
Keeping payments find
You are required to follow PCI compliance rules, which protect card data. The main rule is straightforward: never store, write down, or email a full card number. Always use your processor's official tools to collect and handle the card information.
If you use a card reader, virtual terminal, or payment link provided by your processor, you're already compliant — the processor handles the encryption. If you're taking payments through a website, make sure it has an SSL certificate (the URL starts with "https" and shows a lock icon) so the card data is encrypted in transit.
Keep your processor login credentials private and use a strong password. If you suspect fraud or a data breach, contact your processor right away.
Handling refunds and disputes
If a customer asks for a refund, log into your processor's dashboard, find the transaction, and click "refund." The money goes back to the customer's card within one to three business days. You pay no fee for the refund itself, but you don't get back the transaction fee you paid when the original sale went through.
If a customer disputes a charge with their bank (called a chargeback), your processor will notify you and ask for evidence that the transaction was legitimate. Gather your receipt, any communication with the customer, and proof of delivery if applicable. Submit this to your processor within the important date they give you, usually 7 to 10 days. If you win the dispute, the money stays in your account. If you lose, the money goes back to the customer and you may pay a chargeback fee ($15 to $100).
Frequently Asked Questions
How long does it take for money to show up in my bank account?
Most processors deposit within one to three business days. Some offer next-day deposits for an extra fee. Weekend and holiday deposits may take longer. Check your processor's deposit schedule in your account settings.
What happens if a customer's card is declined?
The transaction fails and no money is charged. The processor shows you a decline code (insufficient funds, expired card, etc.). Ask the customer for a different card or payment method and try again.
Do I have to use the processor's card reader, or can I use a third-party one?
You can use third-party readers, but they must be certified to work with your processor. Using an uncertified reader may violate your agreement or leave you unprotected if something goes wrong. Stick with readers your processor officially supports.
What's the difference between a debit card and a credit card payment?
From your perspective, there's almost no difference — both go through the same processor and take the same time to deposit. The fee may be slightly lower for debit cards. The customer's bank handles the difference on their end.
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 temporarily, but this creates tax and liability problems. Open a business account before you start taking payments.