The basic steps to accept credit card payments

To accept credit card payments, you need three things: a merchant account (which lets you receive card payments), a payment processor (the company that handles the transaction), and a way for customers to submit their card details—either in person, online, or by phone. You open a merchant account with a bank or payment processor, connect it to your business bank account, then choose how you want to receive payments: a physical card reader, a payment link, an online form, or software that integrates with your existing system.

The processor charges you a fee for each transaction, usually between 2% and 3.5% of the payment amount, plus a small flat fee per transaction (often $0.30). These rates vary depending on whether the cardholder is present when you process the payment, what type of card they use, and which processor you choose. You do not need to be a large business—sole proprietors and small landlords can open merchant accounts, though some processors have minimum monthly volume requirements.

Key Takeaways

  • You need a merchant account and a payment processor to accept credit cards; these are separate services, though many companies offer both.
  • Transaction fees typically range from 2% to 3.5% of the payment amount plus a per-transaction fee, and these costs vary by processor and payment method.
  • Payment methods include card readers (for in-person payments), payment links (for online or phone payments), and integrated software (for recurring or automated payments).
  • Your payment processor deposits funds into your business bank account, usually within one to three business days, though some offer faster settlement for an additional fee.

Choosing between payment processors

The main payment processors used by small businesses and landlords are Square, PayPal, Stripe, Toast, and traditional banks like Chase Paymentech. Each has different fee structures, setup times, and features. Square and PayPal are fastest to set up (often same day) and work well if you process payments occasionally or in person. Stripe and Toast are better if you want to embed payments into your own website or software. Traditional bank processors usually have higher fees but may offer better support if you already have a business account with that bank.

Compare processors on three things: transaction fees (the percentage plus per-transaction charge), setup fees (some charge nothing, others charge $50 to $300), and settlement time (how long before money reaches your account). Ask each processor whether they charge monthly minimums, whether they charge extra for refunds, and what happens if a customer disputes a charge. Some processors also charge chargeback fees if a customer claims they did not authorize the payment or did not receive what they paid for.

Setting up a merchant account

To open a merchant account, you will need your Social Security number or Employer Identification Number (EIN), your business bank account details, and basic information about your business (what you do, how long you have been operating, your expected monthly payment volume). The processor runs a background check and verifies your bank account, which usually takes one to five business days. Some processors ask for additional documents if your business is new, if you have had payment disputes in the past, or if you process a high volume of payments.

Once your account is approved, the processor gives you access to a dashboard where you can view transactions, issue refunds, and download reports. They also provide you with the tools you need to accept payments—a card reader, payment links, or code to add to your website. If you are accepting payments in person, the processor ships you a card reader (usually free or $10 to $50) that connects to your phone or tablet via Bluetooth or headphone jack.

Payment methods: in-person, online, and phone

In-person payments use a physical card reader that connects to your phone or tablet. You swipe, insert, or tap the customer's card, and the payment processes immediately. Fees for in-person payments are usually lower (around 2.6% plus $0.10) because the card is physically present and the risk of fraud is lower. Square Reader, PayPal Here, and Stripe Terminal are common options.

Online payments use a payment link or form that you send to the customer via email or text, or that you embed on your website. The customer enters their card details into a secure form, and the payment processes automatically. Online payments have higher fees (often 2.9% to 3.5% plus $0.30) because the card is not physically present. This method works well for rent collection, invoices, or one-time payments.

Phone payments let you take card details over the phone and enter them into your processor's system. Fees are the same as online payments (2.9% to 3.5% plus $0.30) because the card is not present. This method requires you to be PCI compliant, which means you follow security rules to protect card data. Most processors handle PCI compliance for you if you use their phone payment system rather than storing card details yourself.

Recurring and automated payments

If you collect the same payment from the same customer regularly—such as monthly rent—you can set up recurring payments. The customer authorizes one payment, and the processor automatically charges their card on a schedule you set (weekly, monthly, quarterly). Recurring payments have the same fees as regular online payments, but they save you time because you do not have to send an invoice or payment link each month.

To set up recurring payments, you need the customer's written authorization (usually a form they sign or an email they reply to). Keep this authorization on file in case the customer disputes the charge. Most processors let you pause, change the amount, or cancel recurring payments from your dashboard. If a recurring payment fails (for example, the card expires or is declined), the processor usually retries it one or two times before notifying you.

Fees, deposits, and disputes

Your processor charges you a transaction fee each time a payment goes through. The fee is calculated as a percentage of the payment amount plus a flat fee per transaction. For example, if your processor charges 2.9% plus $0.30, a $500 payment costs you $14.80 in fees ($500 × 0.029 = $14.50, plus $0.30). The processor deducts this fee from the payment before depositing the remainder into your business bank account.

Deposits usually arrive within one to three business days, though some processors offer next-day or same-day deposits for an additional fee (typically $0.50 to $2.00 per deposit). If a customer disputes a charge—claiming they did not authorize it, did not receive the service, or received something different than what they paid for—the processor charges you a chargeback fee (usually $15 to $100) while they investigate. If the customer wins the dispute, the processor reverses the payment and you lose both the money and the chargeback fee.

Security and compliance requirements

Payment processors are required by law to follow security standards called PCI DSS (Payment Card Industry Data Security Standard). This means they encrypt card data, use secure servers, and protect customer information. You do not need to be PCI compliant yourself if you use the processor's payment form or card reader—the processor handles compliance for you. However, if you store card details on your own system or take payments through your own software, you must be PCI compliant, which requires security audits and ongoing monitoring.

Never store full card numbers, expiration dates, or security codes in your own files or email. Always use the processor's system to handle card data. If you are unsure whether your setup is secure, ask your processor whether you need PCI compliance certification. Most small businesses and landlords do not, because they use the processor's tools rather than building their own payment system.

Frequently Asked Questions

What if a customer's card is declined?

The processor tells you immediately that the payment failed. You can ask the customer for a different card, or they can contact their bank to find out why it was declined (insufficient funds, fraud alert, expired card). For recurring payments, the processor usually retries the payment one or two times over several days before notifying you of the failure.

Can I accept payments without a business bank account?

Most processors require a business bank account because they deposit funds there. Some allow you to use a personal account if you are a sole proprietor, but this is not recommended because it mixes personal and business money. Open a business account first—it is inexpensive and protects you legally.

Do I have to use the processor's card reader, or can I use a different one?

You can only use card readers that work with your processor. Square readers work with Square, PayPal readers work with PayPal, and so on. The processor controls which hardware is compatible with their system for security reasons.

What happens if I process a refund?

You issue a refund through your processor's dashboard, and the processor sends the money back to the customer's card. The refund usually appears in their account within three to five business days. You are charged a small fee for the refund (sometimes the same transaction fee, sometimes a flat fee of $0.50 to $1.00).

Can I accept credit cards without paying transaction fees?

No. All payment processors charge transaction fees because they handle the risk and infrastructure of processing cards. However, you can pass the fee to the customer by adding it to the payment amount (called surcharging), though some states and card networks restrict this practice. Check your state's laws and your processor's terms before surcharging.