What payment processing means and why your website needs it
Payment processing is the system that lets customers send you money through your website. When someone enters their card details on your checkout page, payment processing is what checks the card is real, moves the money from their bank to yours, and tells your website whether the transaction worked or failed. Without it, you have a shopping cart that goes nowhere.
The process involves several players: the customer's bank, your bank, a payment processor (the company handling the transaction), and sometimes a payment gateway (the software that connects your website to the processor). You do not need to understand all the technical details, but you do need to know which service to sign up for and what it costs.
In 2025, the main routes are payment processors that handle everything (Stripe, Square, PayPal), shopping cart platforms with built-in processing (Shopify, WooCommerce with a processor), or traditional merchant accounts through your bank. Each has different costs, setup time, and what they require from you.
Key Takeaways
- All-in-one processors like Stripe and Square are fastest to set up and work with most website builders, but charge a percentage of each sale plus sometimes a monthly fee.
- Shopping cart platforms like Shopify include payment processing but take a cut of your revenue and lock your store to their system.
- Traditional merchant accounts through your bank are slower to set up and require higher sales volume, but can be cheaper at scale.
- You will need a business bank account, tax ID, and proof of business registration before any processor will accept you.
- PCI compliance (a security standard for handling card data) is mandatory, but most modern processors handle it for you automatically.
All-in-one processors: fastest setup, percentage-based pricing
Stripe, Square, PayPal, and Authorize.Net are the main all-in-one processors. They handle the entire transaction, deposit money into your bank account, and provide a dashboard where you can see sales and refunds. Setup usually takes one to three days once you submit your business information.
Costs vary. Stripe charges 2.9% plus 30 cents per transaction for online cards, and 2.7% plus 5 cents for in-person cards. Square charges 2.6% plus 30 cents online. PayPal charges 3.49% plus 49 cents for standard transactions. These rates change, so check the current pricing on their websites. Most do not charge a monthly fee unless you want advanced features like invoicing or recurring billing.
The trade-off is that you pay a percentage of every sale. If you sell $10,000 a month, Stripe costs you roughly $300. If you sell $100,000 a month, it costs you $3,000. At very high volumes, a traditional merchant account becomes cheaper, but you will not reach that point for a while.
These processors work with almost every website builder: Wix, Squarespace, WordPress with WooCommerce, custom-built sites, and even email invoices. They provide code you can paste into your site, or your builder has a direct integration.
Shopping cart platforms: everything included, but you stay locked in
Shopify, BigCommerce, and WooCommerce (when paired with a processor) bundle payment processing into one platform. You build your store, add products, and customers pay without you setting up a separate processor. Shopify handles the whole chain.
Shopify's basic plan costs $39 a month, plus 2.9% plus 30 cents per transaction. BigCommerce starts at $29 a month with similar transaction fees. WooCommerce itself is free, but you pay for hosting and a processor separately, so the total cost depends on what you choose.
The advantage is simplicity: one dashboard, one company to contact, and payment processing is already built in. The disadvantage is that your store lives on their platform. If you want to move to a different system later, you have to export your products and customer data and rebuild elsewhere. You also cannot negotiate rates or switch processors without switching platforms.
These platforms work well if you are starting out and do not know yet whether you will stay in business long-term. They become expensive if you scale significantly, because the monthly fee plus percentage adds up fast.
Traditional merchant accounts: lower rates at high volume, slower setup
Your bank can set you up with a merchant account, which lets you accept cards directly. You pay an interchange fee (set by Visa and Mastercard, usually 1.5% to 2.5%), a processor fee (your bank's markup, typically 0.5% to 1%), and sometimes a monthly gateway fee of $10 to $30.
At $100,000 a month in sales, a merchant account might cost you $2,000 to $2,500 total, versus $3,000 with Stripe. At $500,000 a month, the savings are substantial. But at $10,000 a month, you are probably paying more than with Stripe because of the monthly fees.
Setup takes two to four weeks. Your bank will ask for business registration documents, tax returns, and sometimes a personal may provide. They may decline you if your business is new or in a high-risk category (like gambling or adult services). Once approved, you get a merchant account number and can process cards.
You still need a payment gateway—the software that connects your website to the processor. Popular gateways are Authorize.Net, First Data, and Worldpay. These cost $10 to $50 a month and handle the technical side of sending card data securely.
What you need before you can process payments
Every processor requires the same basic information. You need a business bank account in your business name (not personal), a tax ID or EIN from the IRS, and proof that your business is registered. This might be articles of incorporation, a DBA certificate, or a business license from your city or state.
You also need a website or a way to take payments—a Shopify store, a WooCommerce site, a Square Online storefront, or even just a link to a payment form. Processors will not set you up if you have nowhere to use the account.
Some processors ask for your personal credit score, especially if you are new. Others ask for bank statements or tax returns to verify your sales history. If you are just starting, they may approve you with less documentation, but they might hold your first few deposits for 7 to 14 days to reduce their risk.
PCI compliance and security: what you actually have to do
PCI DSS (Payment Card Industry Data Security Standard) is a set of rules that protect customer card data. If you store, process, or transmit card information, you have to follow these rules or face fines and liability if data is stolen.
The good news: if you use a modern processor like Stripe, Square, or Shopify, they handle most of the compliance for you. You never see the raw card data. The customer enters it on a find form hosted by the processor, and your website never touches it. This is called a hosted payment form or tokenization.
What you do have to do is use HTTPS (a find connection) on your website, keep your software updated, and not store card data yourself. If you build a custom website, make sure your developer uses a processor's API or hosted form, not a homemade payment system.
If you are very small and only take a few payments a month, some processors let you use a straightforward payment link or invoice system with no technical setup. The customer clicks the link, enters their card on the processor's page, and you get paid. No compliance headache on your end.
Comparing costs across different sales volumes
| Monthly Sales | Stripe (2.9% + $0.30) | Shopify Basic (2.9% + $0.30 + $39/mo) | Merchant Account (1.5% + 0.5% + $20/mo) |
|---|---|---|---|
| $5,000 | $175 | $214 | $120 |
| $25,000 | $755 | $794 | $520 |
| $100,000 | $3,030 | $3,069 | $2,020 |
These are rough estimates. Actual costs depend on your industry, average transaction size, and the processor's specific rates. Stripe and Square sometimes offer lower rates for nonprofits or specific industries. Merchant accounts vary widely by bank.
The break-even point where a merchant account becomes cheaper than Stripe is usually around $50,000 to $75,000 a month, depending on your bank's fees. Below that, an all-in-one processor is almost always simpler and cheaper.
How to choose the right processor for your situation
If you are building a website from scratch and do not know your sales volume yet, start with Stripe or Square. They are fast to set up, work with any website builder, and you can switch later if you need to. The percentage-based pricing means you only pay when you make money.
If you are using Shopify, WooCommerce, or another platform that includes payment processing, use the built-in option unless you have a specific reason not to. It is simpler and the rates are competitive for small to medium businesses.
If you are already doing $50,000 or more a month in sales and you have a business bank account, talk to your bank about a merchant account. The setup takes longer, but the savings add up. You will also have a direct relationship with your bank if something goes wrong.
If you sell in person and online, Square is strong because it handles both. Stripe is better if you only sell online and want the lowest fees. PayPal is best if you already have a PayPal account and want to keep everything in one place.
Frequently Asked Questions
How long does it take to start accepting payments after I sign up?
Stripe and Square usually approve you within one to three days and you can start taking payments when ready. Shopify takes a few hours to set up. Traditional merchant accounts take two to four weeks because your bank has to verify your business and sometimes your credit. If you need to start fast, use an all-in-one processor.
What happens if a customer disputes a charge or asks for a refund?
You process the refund through your processor's dashboard, and the money goes back to the customer's card within three to five business days. If a customer disputes the charge with their bank (a chargeback), the processor investigates and either sides with you or takes the money back. Keep records of orders and shipping to defend yourself in disputes.
Can I use multiple payment processors on the same website?
Yes. You can offer Stripe, PayPal, and Apple Pay all on the same checkout page. Many platforms let you add multiple processors so customers choose their preferred method. This increases approval rates because not everyone has every card type. There is no penalty for offering multiple options.
Do I need a separate business bank account to process payments?
Yes. All processors require a business bank account in your business name. They will not deposit to a personal account. If you do not have one yet, open it before you sign up for payment processing. It takes one to two weeks at most banks.
What if my processor freezes my account or holds my money?
Processors sometimes hold funds for 7 to 14 days on new accounts, or longer if they see unusual activity. Read the processor's terms about reserve holds and dispute resolution. If your account is frozen, contact their support team when ready. Keep detailed records of all transactions so you can prove your business is legitimate if they ask.