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How to Accept Credit Card Payments as a Small Business

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Brittney Myers
By: Brittney Myers
Brittney Myers
Brittney Myers
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Brittney started her writing career in the world of science, putting her physics degree to good use. Her journey into finance started with building her personal credit, but soon grew into a borderline obsession with credit cards and travel rewards. For the last 7 years, she has enjoyed the ability to share her expertise with readers, as well as the opportunity to interview companies and individuals making an impact on our financial lives. She wholly believe most problems can be solved with the right research -- and a good spreadsheet -- and she specializes in translating complex financial topics into actionable advice to help educate and empower readers.

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Our Credit Cards Expert

Eric McWhinnie
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Eric McWhinnie
Eric McWhinnie

Eric McWhinnie has been writing and editing digital content since 2010. He specializes in personal finance and investing. He also holds a bachelor’s degree in Finance.

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Love them or hate them, credit cards are a big part of the modern world. As such, having a successful small business these days means figuring out how to accept credit card payments from your customers.

In fact, according to the Atlanta Fed, nearly 80% of U.S. consumers have at least one credit card in their wallet. And nearly a third of purchases in 2022 were made with a credit card.

Still not sold? Here's more on why and how to accept credit card payments as a small business.

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Reasons to accept credit card payments

Although setting up your business to accept credit cards can mean extra hassle and expenses, it can be well worth the trouble. Here are a few reasons to consider it:

  • Increased sales: You could be losing out on customers by insisting on cash payments. Cash is becoming less popular each year, and in its place, credit cards have become the preferred way to pay. 
  • Efficiency: Credit card payments are often quicker and easier to implement than cash. This can speed up transactions and reduce wait times. Card payments can also help streamline accounting as they easily integrate with most software.
  • Security: Having large amounts of cash on hand in your business can be dangerous for your employees. Also, cash is easy to lose, be it through theft or simple human error.

In addition to the above, adopting credit card payments can also help add a layer of credibility to your business. Shops and service providers that don't accept credit cards can seem less professional or of lower quality.

How to accept credit card payments

The first thing you need to do to accept credit card payments for your small business is set up a business bank account. This is where payments will go after they're cleared.

Next, you'll need to establish a merchant account with a credit card processing company. These are third-party services that handle the heavy lifting for credit card transactions.

Regardless of your business type, credit card payments operate in the same basic way:

  1. The customer provides their credit card information. In person, they use a credit card terminal to swipe, insert, or tap their card. For online purchases, they put their credit card information into the payment form.
  2. Transaction information is sent via the credit card processor to the issuing bank for approval.
  3. The bank verifies that the card account has the necessary funds and that the transaction is not fraudulent.
  4. Funds are transmitted back to the merchant through the processor.

The equipment and setup you need depends on how you do business. In-person payments require physical equipment, while online payments may require a bit of web development knowledge.

Accepting in-person credit card payments

If you're old enough to remember the bulky manual credit card machines of yore, this may seem a daunting task. But you don't need medieval machinery to let your clients pay with a credit card.

Small business owners with a brick-and-mortar store will need a point-of-sale (POS) system and a credit card terminal or reader. Many modern POS systems have a built-in credit card reader or come with a detached terminal. Most readers these days accept magnetic stripe cards, EMV® chip cards, and contactless cards.

LEARN MORE: Best POS systems for small businesses

Service providers who want to take in-person payments on the go can use a mobile payment processing app. They typically come with small credit card readers that plug into the headphone or power jack of a tablet or cellphone.

Accepting online credit card payments

Many small businesses now operate entirely online. In that case, you don't need to worry about getting a physical POS or credit card reader. However, you'll still need to work with some sort of payment processing company to handle your credit card transactions.

If you operate your own website, you'll need to connect your payment account to your e-commerce site. Most of the popular processing services used by online retailers make integration simple, often providing a copy-and-pastable bit of code.

LEARN MORE: How to start an online business

Websites that aren't set up for easy payment integration may need to go with an off-site solution. In these cases, consider adding a link or button on your website to take your customers to a third-party payment website like PayPal or Amazon Pay.

E-commerce sites that rely on a paid website builder, like Squarespace or Wix, have a much easier job. Most of these services offer automatic integration or simple widgets that you can add to your website in just a few clicks. Depending on your service, you may also be able to add your own branding to the checkout screens to maintain a consistent customer experience.

There is no shortage of options for payment processing companies, each with its pros and cons. You can shop around to find the company that best suits your credit card processing needs.

Some companies may excel at handling in-person transactions, offering top-notch card readers and POS systems. Other providers may specialize in e-commerce payments and integrate seamlessly into your website.

Here are a few of the more popular providers:

  • Stripe
  • Square
  • Shopify
  • PayPal
  • Helcim
  • Clover

While comparing your options, be sure to explore how -- and how much -- each processor charges for credit card transactions. For example, some processors may rely on a per-transaction fee structure, while others charge a flat monthly fee.

Does your business need a bank? Check out The Ascent's guide to the best banks for small businesses.

Things to consider before accepting credit cards

Although there are definitely many good reasons to accept credit card payments, it's not all cash flow and happy customers. Credit card transactions do have a few downsides to be aware of before getting started.

Fees

Every credit card transaction comes with fees for the merchant. These include the interchange fee, which goes to the credit card issuer, as well as the assessment fee that is charged by the card network. Transaction fees are completely unavoidable -- and usually nonnegotiable.

You'll also be charged various fees by your payment processor that can include transaction, equipment, and service fees. These fees can be minimized by shopping around for the most affordable provider and choosing the right payment structure for your needs.

Wait times

How long it takes credit card payments to reach your bank account can vary. It could be a day or it could be several. Some providers may even hold payments in your merchant account for a period of days before you can move the money to your bank account.

Charge-backs

One reason consumers love credit cards is that they can dispute charges for products or services that didn't meet their expectations. If you refuse a refund but the credit card company approves the customer's dispute, you may have to eat the charges.

Still have questions?

Some other questions we've answered:

FAQs

  • The least expensive way to accept credit card payments depends on your business model. Processors with per-transaction fees may be best for businesses that don't process many card payments each month. Payment processors that charge monthly fees may be better for businesses with a lot of credit card payment volume.

  • You can accept credit card payments without a terminal or scanner if you have an online business or e-commerce site. If you want to accept card payments in person, you'll need a card reader that plugs into your POS or phone (like Square).

  • There is no way to accept credit card payments for free. Card issuers, networks, and processors all charge fees for each credit card transaction.

    You may be able to offset some of the costs by adding a convenience fee or surcharge for credit card payments. This essentially passes the credit card processing fees on to the customer. However, these fees may discourage some customers from shopping with your company or using your services. Alternatively, you can offer discounts on cash transactions.