The simplest way to accept credit cards is through a payment processor
A payment processor is a company that handles the transaction between your customer's card and your bank account. You don't accept the card directly — the processor does the work, takes a small fee, and deposits the money into your account a day or two later.
The processor needs three things from you: a way for customers to enter their card information (usually a card reader, a website form, or a link you send them), your bank account details so they know where to send the money, and a business tax ID or Social Security number so they can report the transaction to the IRS.
Most processors charge a percentage of each transaction — typically 2.2% to 3.5% — plus a small flat fee per transaction, usually 30 cents. Some charge a monthly subscription instead of or in addition to per-transaction fees. The exact cost depends on which processor you choose and how you accept the card.
Key Takeaways
- A payment processor is a middleman company that takes the card information, verifies the funds, and deposits money into your bank account within one to three business days.
- You need a processor account, a way for customers to enter card details (a reader, website form, or payment link), and a bank account in your business name.
- Fees range from 2.2% to 3.5% per transaction plus about 30 cents, though some processors charge a monthly fee instead.
- Square, Stripe, PayPal, and Clover are common processors for small businesses, each with different tools depending on whether you have a physical location or sell online.
Three ways to accept cards based on how you do business
The method you choose depends on whether customers are in front of you, ordering online, or paying remotely.
In person (card reader): A small device plugs into your phone or tablet and reads the card when the customer inserts or taps it. Square Reader, Clover, and PayPal Here are common options. You swipe or insert the card, the processor verifies the funds, and the money goes to your account. This works for retail shops, service providers, farmers markets, and any business where the customer is physically present.
Online (website form): If you have a website, you can add a checkout page where customers enter their card details. Stripe and Shopify are built for this. The customer enters their information, the processor verifies it, and the transaction completes without you ever seeing the card number. This is the standard for online stores.
Remote (payment link): You send the customer a link via text, email, or invoice. They click it, enter their card details, and pay. Square, PayPal, and Stripe all offer this. It works for invoices, donations, service payments, and any situation where the customer isn't in front of you and doesn't have a website to visit.
What you need before you can set up a processor account
Payment processors are regulated by banks and the government, so they need to verify who you are and that your business is real. Have these items ready when you sign up:
- A valid government-issued ID (driver's license or passport)
- Your Social Security number or Employer Identification Number (EIN) — most small businesses use their Social Security number
- Your business name and address
- A bank account in your business name (or your personal account if you're a sole proprietor)
- Basic information about what you sell or the service you provide
Some processors also ask for your average monthly sales, how long you've been in business, and your website URL if you have one. This information helps them assess the risk of working with you — they're checking that you're not running a scam or selling illegal goods.
The approval process usually takes a few minutes to a few hours. Some processors approve you when ready; others review your information and email you within a day. Once approved, you can start accepting cards when ready.
How the money gets to your bank account
When a customer swipes or enters their card, the processor holds the money briefly while it verifies the card is real and the account has funds. This verification usually takes a few seconds. If the card is declined, the transaction stops and the customer is notified.
If the card is approved, the processor deposits the money into your bank account on a set schedule — usually the next business day, though some processors wait two to three days. The deposit shows up as a single lump sum from the processor, not as individual transactions. Your processor account shows you a detailed list of each transaction, but your bank statement shows only the total deposit.
The processor automatically subtracts their fee before depositing the money. If a customer pays $100 and the fee is 2.9% plus 30 cents, you receive $96.71 and the processor keeps $3.29.
Comparing common processors for different business types
| Processor | Best for | How you accept cards | Typical fees |
|---|---|---|---|
| Square | Retail, services, invoicing | Card reader, online, payment links | 2.6% + 30¢ in-person; 2.9% + 30¢ online |
| Stripe | Online stores, subscriptions | Website form, payment links | 2.9% + 30¢ online |
| PayPal | Invoicing, online, in-person | Card reader, website, payment links | 2.2% + 30¢ in-person; 3.49% + 49¢ online |
| Clover | Retail with inventory tracking | Card reader, online | 2.6% + 10¢ in-person; 2.9% + 30¢ online |
Fees vary based on your location, transaction type, and account volume. The table above shows typical rates, but check the processor's current pricing before signing up — rates change and some offer discounts for high volume.
Security and what you need to know about card data
You should never store, type, or see a customer's full card number. The processor handles all card data, which means it's encrypted and protected by law. Your job is to use the processor's tools — the card reader, the website form, or the payment link — and let them handle the sensitive information.
If you use a card reader or website form provided by your processor, you're already protected. If you're thinking about manually entering card numbers into an invoice or spreadsheet, don't — that creates a security risk and violates payment industry rules. Always use the processor's official tools.
Your processor will send you a contract that explains their security standards and your responsibilities. Read the section on data protection so you understand what you're required to do to keep customer information safe.
What happens if a customer disputes a charge
Sometimes a customer claims they didn't authorize a charge or didn't receive what they paid for. This is called a chargeback. The customer's bank investigates, and if they side with the customer, the money is returned to them and deducted from your account.
You can dispute a chargeback by providing evidence — a signed receipt, an email confirming the order, a delivery confirmation, or a message from the customer acknowledging the purchase. Your processor walks you through this process if it happens.
To reduce chargebacks, send a receipt or confirmation email when ready after payment, clearly describe what the customer is buying, and respond quickly if they contact you with a problem. Most chargebacks happen when customers feel confused or forgotten, not when they're trying to commit fraud.
Frequently Asked Questions
Do I need a business license to accept credit cards?
No, but you do need a valid ID and a bank account. Most processors ask for your Social Security number or business tax ID so they can report your income to the IRS. If you're operating a business, you should have a business license in your state or county, but that's a separate requirement from the processor.
Can I accept credit cards with just my phone?
Yes. A card reader that plugs into your phone's headphone jack or charging port works with Square, PayPal, or Clover. You can also send payment links via text or email. You don't need a physical store or a website.
What if a customer's card is declined?
The processor tells you when ready that the card was declined. The transaction doesn't go through, no money changes hands, and you're not charged a fee. Ask the customer for a different card or payment method.
How long does it take to get paid after a customer pays?
Most processors deposit money within one to three business days. Some deposit the next day; others wait two to three days. Check your processor's deposit schedule when you sign up, and confirm it in your account settings.
Can I use the same processor for in-person and online payments?
Yes. Square, PayPal, and Clover all let you accept cards in person with a reader and online through a website or payment link. You use the same account for both, though the fees may differ slightly depending on the method.