Key takeaways
- Many card processing providers offer similar services. Finding the best fit comes down to the number of transactions you expect to process and how you plan to accept payments — in person, online or over the phone.
- In-person payments come with lower processing fees, while over-the-phone payments can be more costly due to the risk no-card-present transactions attract.
- When weighing options, don’t simply go for the cheapest: Think about your business’s needs and whether the provider offers tools that can scale with your business as it grows.
In a small business, every sale matters. So when you don’t accept credit card payments, you could miss out on customers who prefer swiping their card over cash — which is most people. A 2023 Federal Reserve study found credit card payments accounted for 31 percent of all payments — outpacing debit cards, ACH and cash.
Since today’s best credit cards offer enhanced security features, generous spending limits and rewards, who wouldn’t want to pay with plastic? Whether you’re running an online store, getting a side hustle off the ground, or boosting an already booming storefront, your small business can accept credit card payments with the help of an affordable credit card processor.
Steps to accepting business credit card payments
You might want to do some research on Bankrate’s Small Business Hub before you let your customers swipe to their heart’s content. But once you nail down the right credit card processor with affordable processing fees and the type of payment terminals you need, it’s a breeze. Follow these four steps to start accepting credit card payments at your small business:
1. Find a credit card processing provider for your small business
There’s no shortage of credit card payment processors offering similar services, but to find the right one, you’ll need to consider a few things about how your business currently handles payments. You can start by answering the following questions:
- How will you primarily process credit card transactions? In person, online and over the phone?
- What type of credit cards do you plan to accept? Visa, Mastercard, Discover, American Express or all of them?
- How much of a processing fee are you comfortable with? Processing fees vary among transaction types and card networks. Find the provider that offers the most competitive fees for the type of transactions and credit cards you’ll process most.
- How many transactions do you process on average? Some providers offer better rates for processing higher transaction volumes.
If you run an online-only business, make sure the payment processor you choose integrates easily with your website. For brick-and-mortar businesses, you might need to purchase certain hardware and software — like payment terminals — which then need to be compatible with your current point of sale (POS) system.
Bankrate’s take:
Don’t let the research process overwhelm you. We’ll suggest a few of the best payment processing options that can help simplify your search later on.
2. Compare pricing
Once you narrow down the credit card processing providers you’re thinking of working with, get quotes or an estimate from each so you can compare them side-by-side. You’re not just looking at price — you also need to consider how many transactions they allow you to process, whether you’ll need to buy or rent their preferred equipment, and payment processing times.
3. Open a merchant account
For in-person transactions, you’ll need to have a merchant services account if you don’t already have one. Most banks offer in-house merchant services for business account holders to help them accept multiple forms of payment, keep track of sales and offer loyalty programs. Other providers, like Intuit, Clover and Square, offer merchant services separate from your bank and need to be connected to your business bank account.
Since online companies don’t typically accept in-person payments, this often means less hardware and a lower cost than the requirements for a physical business. Online businesses, like freelancers or online stores, often lean on prevalent payment service providers like Paypal, Stripe or Square to process payments from their customers directly to their business bank accounts. And yes — you do need a business account to enable your company to accept credit card payments.
4. Set up payment terminals
The final step to accepting credit card payments is setting up payment terminals across your business. You’ll probably skip this step if you’re an online business since you’ll accept payments through secure online payment gateways instead.
If you have a brick-and-mortar shop, this involves ordering and setting up hardware, like a card reader and a point-of sale (POS), if you don’t have one already. There are many card readers on the market that let you accept payments via a swipe, an inserted chip or a contactless tap.
If you do any sales online, you’ll need to set up online payments too. E-commerce platforms like Shopify have a built in payments portal. If you’ve built your own website, you may need technical support from your card processing provider or website developer to set up small business credit card acceptance though your website.
Quick tip
Concerned about learning to use a new system? Most credit card processing providers offer training resources to help you (and your staff) make the most of their hardware and software. Check to see what training your card processor offers.
Ways to accept credit cards
There are three main paths to credit card acceptance for small businesses. Businesses can choose to accept credit card payments in person, online and over the phone. These methods come with their own technology needs and incur different fees.
In-person
In-person credit card processing is useful for brick-and-mortar retailers, on-site service providers — think plumbers or HVAC servicing — and mobile business merchants (like food trucks or farmers market vendors). These types of transactions call for a mobile card reader.
With in-person transactions, the customer physically presents the card to make a purchase. Because the cardholder and card are present for these types of transactions, they’re considered a lower risk of fraud, which in turn carries lower fees than other types of transactions.
You’ll need a card reader and a POS system to process credit card payments in person.
Best for in-person retail
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PayPal started as a way to transfer money between friends and family, but the company now offers merchant solutions for processing credit cards both online and in person. Paypal is widely trusted amongst individuals and businesses and has competitive transaction fees.
Retail businesses tend to enjoy their multitude of options which makes PayPal customizable to their needs. But the vast array of options can also be a double edged sword if you suffer from analysis paralysis. Take your time to work through their offerings and determine which option and fee structure best suits your business.
PayPal started as a way to transfer money between friends and family, but the company now offers merchant solutions for processing credit cards both online and in person. Paypal is widely trusted amongst individuals and businesses and has competitive transaction fees.
Retail businesses tend to enjoy their multitude of options which makes PayPal customizable to their needs. But the vast array of options can also be a double edged sword if you suffer from analysis paralysis. Take your time to work through their offerings and determine which option and fee structure best suits your business.
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Pros
- Widely trusted name that helps build confidence with your customers.
- Competitive transaction fees with other providers
- Multiple options for processing credit cards, including PayPal Checkout for online payments, a point of sale system and PayPal Invoicing for billing for services.
Cons
- PayPal’s extensive offerings can make it difficult to decipher differences and choose one that works best for your business.
- Many account services — including chargeback protection, account monitoring and recurring billing — require additional fees.
Pros
- Widely trusted name that helps build confidence with your customers.
- Competitive transaction fees with other providers
- Multiple options for processing credit cards, including PayPal Checkout for online payments, a point of sale system and PayPal Invoicing for billing for services.
Cons
- PayPal’s extensive offerings can make it difficult to decipher differences and choose one that works best for your business.
- Many account services — including chargeback protection, account monitoring and recurring billing — require additional fees.
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As of publishing, PayPal charges the following processing fees for credit card payments:
- In-person transactions: 2.99 percent + $0.49 (for example, $25 transaction = $1.24 fee)
- Online transactions: 2.9 percent + $0.49 (for example, $25 transaction = $1.22 fee)
Best for mobile businesses
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Square is known for its innovative, petite card reader that attaches to smartphones, turning any device into a payment terminal. You’ve likely seen these when ordering tacos from your favorite food truck or when you forget to bring cash to the local farmers market. These compact card readers don’t take much set up or extra hardware.
Square is known for its innovative, petite card reader that attaches to smartphones, turning any device into a payment terminal. You’ve likely seen these when ordering tacos from your favorite food truck or when you forget to bring cash to the local farmers market. These compact card readers don’t take much set up or extra hardware.
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Pros
- Square is a leader in smartphone credit card reader hardware.
- Its mobile card reader is typically offered to its merchants for free.
- The card reader works offline to allow for credit card payments in places without reliable Wi-Fi.
- Contactless payment solutions are also available.
Cons
- High fees for in-person transactions.
Pros
- Square is a leader in smartphone credit card reader hardware.
- Its mobile card reader is typically offered to its merchants for free.
- The card reader works offline to allow for credit card payments in places without reliable Wi-Fi.
- Contactless payment solutions are also available.
Cons
- High fees for in-person transactions.
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As of publishing, Square charges the following processing fees for credit card payments:
- In-person transactions: 2.6 percent + $0.10 (for example, $25 transaction = $0.75 fee)
- Online transactions: 2.9 percent + $0.30 (for example, $25 transaction = $1.03 fee)
- Invoices: 3.3 percent + $0.30 (for example, $25 transaction = $1.13 fee)
- Card-not-present transactions: 3.5 percent + $0.15 (for example, $25 transaction = $1.03 fee)
Online
To accept online credit card payments, you’ll need a digital storefront, such as an e-commerce store or website, and a payment gateway. E-commerce shops, restaurants accepting orders online and companies providing digital services — all are examples of businesses that rely on online credit card processing. Online transactions typically have higher processing fees than in-person transactions since there is a higher potential for fraud.
Best for e-commerce
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Shopify helps businesses sell products online with their top-rated e-commerce platform. Through Shopify Payments, they support in-person and online credit card payments. The biggest plus with Shopify is having your e-commerce platform and payments handled in one place which is perfect for busy online boutique owners. However, if you don’t have your website through them they won’t process payments.
Shopify helps businesses sell products online with their top-rated e-commerce platform. Through Shopify Payments, they support in-person and online credit card payments. The biggest plus with Shopify is having your e-commerce platform and payments handled in one place which is perfect for busy online boutique owners. However, if you don’t have your website through them they won’t process payments.
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Pros
- Built to be used with Shopify’s signature e-commerce platform.
- Offers competitive fees for processing credit cards.
- Charges the same fee to process card-not-present transactions as it does online payments.
Cons
- You need to have a website through Shopify to access their payment processor.
- You’ll pay a monthly fee for the platform plus regular credit card transaction fees.
Pros
- Built to be used with Shopify’s signature e-commerce platform.
- Offers competitive fees for processing credit cards.
- Charges the same fee to process card-not-present transactions as it does online payments.
Cons
- You need to have a website through Shopify to access their payment processor.
- You’ll pay a monthly fee for the platform plus regular credit card transaction fees.
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The most basic Shopify Starter plan costs $5 per month and delivers credit card payment processing, invoicing capabilities and the ability to turn your non-Shopify website into an e-commerce platform. If you want more robust e-commerce capabilities, you’ll need to pay $39+ per month for a different Shopify plan.
As of publishing, Shopify charges the following processing fees for credit card payments:
- In-person transactions: up to 2.6 percent +$0.10 (for example, $25 transaction = $0.75 fee)
- Online transactions: up to 2.9 percent + $0.30 (for example, $25 transaction = $1.03 fee)
- Card-not-present transactions: up to 3.5 percent + $0.10 (for example, $25 transaction = $0.98 fee)
Best for online businesses that want to scale
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Stripe specializes in offering sophisticated payment processing solutions that can grow with your company. For online service providers like freelance graphic artists or copywriters, this platform can grow as quickly as you do. Stripe’s robust interface helps you easily integrate its payment platform with other software solutions in your tech stack, like accounting and customer relationship management software.
Stripe specializes in offering sophisticated payment processing solutions that can grow with your company. For online service providers like freelance graphic artists or copywriters, this platform can grow as quickly as you do. Stripe’s robust interface helps you easily integrate its payment platform with other software solutions in your tech stack, like accounting and customer relationship management software.
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Pros
- Competitive rates for processing online credit card transactions.
- An application programming interface (API) with options to customize the software to your needs.
- Financial solutions include invoice processing, quotes, and designed for businesses with their sights set on growth.
Cons
- In-person transaction fees are more expensive than those of other providers, making it a bad choice for brick-and-mortar retail.
- Manually entered or card-not-present transactions are more expensive.
Pros
- Competitive rates for processing online credit card transactions.
- An application programming interface (API) with options to customize the software to your needs.
- Financial solutions include invoice processing, quotes, and designed for businesses with their sights set on growth.
Cons
- In-person transaction fees are more expensive than those of other providers, making it a bad choice for brick-and-mortar retail.
- Manually entered or card-not-present transactions are more expensive.
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At time of publishing, Stripe charges the following processing fees for credit card payments:
- Online and in-person transactions: 2.9 percent + $0.30 (for example, $25 transaction = $1.03 fee)
- Manually entered transactions: 3.4 percent + $0.30 (for example, $25 transaction = $1.15 fee)
Best for online-only businesses
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Venmo is known for its safe mobile money transferring service. It primarily works by transferring money between bank accounts, but it has released credit card processing solutions for businesses. For fast moving businesses like a barber, nail tech or furniture flipper, giving your clients a QR code to scan for payment or by Tap to Pay could eliminate any payment hassles.
To accept credit card payments via Venmo, you’ll have to link your Venmo for Business account to Braintree, which is owned by PayPal. Then, customers will be able to use the Venmo app to make payments through the credit cards and digital wallets linked to their accounts.
Venmo is known for its safe mobile money transferring service. It primarily works by transferring money between bank accounts, but it has released credit card processing solutions for businesses. For fast moving businesses like a barber, nail tech or furniture flipper, giving your clients a QR code to scan for payment or by Tap to Pay could eliminate any payment hassles.
To accept credit card payments via Venmo, you’ll have to link your Venmo for Business account to Braintree, which is owned by PayPal. Then, customers will be able to use the Venmo app to make payments through the credit cards and digital wallets linked to their accounts.
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Pros
- A familiar and convenient payment method for customers.
- No additional setup fees.
- Free standard transfers from your Venmo account to your bank account (usually takes one to three business days).
Cons
- Not yet available for in-person payments (but customers can pay through the app while in-store).
- Higher cost per transaction to accept online or in-app payments.
- Fee for instantly transferring money from your Venmo account.
Pros
- A familiar and convenient payment method for customers.
- No additional setup fees.
- Free standard transfers from your Venmo account to your bank account (usually takes one to three business days).
Cons
- Not yet available for in-person payments (but customers can pay through the app while in-store).
- Higher cost per transaction to accept online or in-app payments.
- Fee for instantly transferring money from your Venmo account.
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As of publishing, Venmo charges the following processing fees for credit card payments via Braintree:
- Direct payments from another Venmo account: 1.9 percent + $0.10 (for example, $25 transaction = $0.58 fee)
- Contactless payments (Tap to Pay): 2.29 percent + $0.10 (for example, $25 transaction = $0.67 fee)
- On your business’s mobile app or website: 3.49 percent + $0.49 (for example, $25 transaction = $1.36 fee)
Over-the-phone
Accepting a credit card payment over the phone is considered a card-not-present or CNP transaction. Restaurants commonly use this type of transaction to accept payment for take-out orders. This process involves the customer sharing their credit card number with the merchant, and the merchant manually entering that information into their card reader.
These types of transactions typically incur the highest processing fees because they pose the greatest risk for fraud. To process credit card payments over the phone, you’ll need a credit card reader and a POS or an online payments gateway. Most credit card processors aren’t designed to primarily host these types of transactions although some of the previous options offer it as an alternative payment method.
What are the benefits of accepting credit card payments
When you offer your customers a new way to pay for their goods and services, it has the potential to boost your bottom line. In a 2021 study from the Massachusetts Institute of Technology, researchers found that consumers are more likely to make higher priced purchases and more impulse buys with a credit card than with cash.
And the 2023 Federal Reserve study found that consumer preference for paying with credit cards has consistently increased each year since the initial study 2016 — growing from 18 percent to 31 percent within the seven year span of the study. So when customers prefer to swipe, accommodating their payment preferences could pay off.
While the largest benefit might include improved sales, there are other benefits you may have overlooked. Those include:
- The safety of carrying fewer large cash deposits to the bank
- The ability to conveniently deposit payments directly to your business account
- Gaining an edge over cash or debit-only competitors
- Quick settlement and deposit times
- Fraud protection and prevention measures
- The added convenience and speed of payment for customers
Even with the fees for small business credit card acceptance, the benefits often outweigh the costs per transaction.
Credit card processing fees
Credit card processing providers charge fees for the services they provide — like conducting fraud checks and verifying available funds with the cardholder’s bank. The payment terminal conducts these critical security measures in just a few seconds as soon as a customer swipes, taps or dips their credit card.
So, what’s the average fee for credit card processing for small businesses? There typically aren’t any monthly fees for credit card processing. Instead, most providers charge fees per transaction which is based on the type of credit card used (Visa Discover, Mastercard or American Express). American Express tends to charge higher fees than its competitors, which is why some businesses don’t accept Amex cards.
Fees also depend on which card processing provider you choose such as PayPal, Stripe or Square as well as the way you accept payment. Each one has its own pricing which typically ranges from 1.5 percent to 3.5 percent per transaction plus a flat fee.
Average credit card network processing fees
| Credit card network | Processing fee range |
|---|---|
| Source: Stripe. (Note that fees are based on transactions in USD. Rates vary by currency and were current at time of publishing) | |
| American Express | 1.43 percent + $0.10 to 3.30 percent + $0.10 |
| Discover | 1.40 percent + $0.05 to 2.4 percent +$0.10 |
| Mastercard | 1.15 percent +$0.05 to 2.5 percent +$0.10 |
| Visa | 1.15 percent + $0.05 to 2.4 percent + $0.10 |
As a savvy merchant, you’re probably looking for the best and cheapest way to accept credit cards. If you weigh your business needs — like the volume of transactions and where these transactions take place — you should be able to narrow your search down to several providers that offer convenient solutions at favorable rates.
The bottom line
If you’re running a small business in this day and age, taking credit card payments is key for your survival and growth. The number of consumers who prefer the convenience and security of a credit card for purchases is already high and only growing. So if you’re not accepting credit cards, you could be letting potential customers and profits slip away.
By understanding what your business needs out of a credit card processor, you can analyze providers and find one that suits the needs of your business. Although the fees might seem like a cumbersome downside, the benefits of more sales, fraud protection, convenience and competitive advantage could balance the scales.
