How to Accept Credit Card Payments

Demystifying Credit Card Payment Options

Your sales can increase by 40 percent.

For in-store businesses, companies generally see an increase by that much when they offer credit card payment options.

On top of that, if you have any online sales or accept payments over the phone, it’s a no-brainer. Shopping online is more popular than ever, so take advantage of that by being able to process credit card payments!

Unfortunately, accepting credit card payments isn’t a simple, two-step process. There are a variety of fees, vendors, and options to choose from, and you’ll need to understand the set up. We’ll walk you through all the details!

The Transaction

First, let’s make sure we understand the process, which will help us better understand the options out there.

When you accept a credit card payment, it works like this:

  • You input the credit card information into a card reader in-person, online, or over the phone.
  • The data is transmitted to your merchant account, the account where all the credit card funds will go after completing the purchase. If it is an online sale, the funds first pass through a payment gateway that connects your website checkout page (think PayPal) before it connects to your merchant account.
  • Your account then issues a request to the buyer’s credit card bank
  • Once the buyer’s bank offers authorization, the approval code is sent back to the point of sale -whether the online payment gateway or the in-person physical equipment.
  • Payment is approved

The above happens in a few seconds, usually.

To receive the payment may actually take a few days, though, because after authorization, a similar process happens before the funds are directly transferred. An authorization code and draft of sale is sent to your merchant account bank first, and then to the buyer’s credit card bank. Most banks batch moving funds daily or weekly, so it may take a couple of days for this to happen. You generally wait one to three business days before the money is deposited into your merchant account.

The Process

Now that you understand what happens, you’ll need to decide on how to make it happen. There are two main options: The merchant account + hardware system, or the payment service provider.

Traditional Account and Hardware

A merchant account is a type of bank account with the sole purpose to accept payments from credit cards (you can then have the funds transferred into your other bank accounts). A traditional vendor will negotiate a contract with you, and they likely provide countertop credit card terminals. Some may even offer other equipment such as a mobile phone card reader or an ecommerce payment set up. You’ll also need to connect your merchant account to a payment gateway for online sales.

These systems tend to come with many layers of fees, such as set up fees, software or equipment fees, monthly maintenance fees, cancellation fees, and processing fees. You’ll have to read the fine print closely, as they may not all be fully disclosed during the conversation.

There are some pros and cons to this approach: It tends to be better for businesses processing a high volume of payments or a high amount of dollars in monthly credit card transactions ($20,000 or more). While there are many fees, they are often easier to predict as they are set amounts, instead of a percentage of each sale. However, your tech support options may not be as great, as the merchant probably contracts with a third party for the equipment use.

Payment Service Provider

Instead of a merchant account vendor with a contract, a payment service provider provides all-in-one payment processing, and even has the option of month-to-month instead of a long-term contract. You don’t have to open a separate merchant account, because the account is part of the hardware system itself.

The fees of a payment service provider are often much simpler to understand with a flat fee per transaction.

These systems also tend to come with more all-encompassing capabilities, such as tracking inventory, managing employees, and working even without internet access.

The extra bells and whistles of these systems makes running your business easier, by tracking customers, making gift cards super easy, and coming with all the hardware you need built into the price. You’ll also get great customer support for technical needs. However, for those with a high volume of sales, it can get pricier, since the flat fees are a percentage of the sale.

The Equipment

Many folks ask us whether they should buy or lease a credit card machine or other physical processing equipment. With technology getting more and more affordable all the time, we advise that it’s best to buy; lease costs can add up quickly. A countertop terminal can be between $150 and $300 to buy if it’s hardwired in to the internet. Wireless terminals need a cellular signal and start around $350, and may need a data plan as well (not transportable).

A point-of-sale system that comes with a payment service provider such as Square will be the hardware you need with that kind of vendor.

You can also purchase a virtual terminal – software that runs on your computer and turns it into a credit card terminal, so you can manually input your customer’s credit card information if you’re taking it over the phone.

If you don’t have a brick-and-mortar location and need to be transportable, you can invest in a mobile card reader that plugs into a smartphone or tablet. They are inexpensive and often come free with an accompanying app.

The Fees

Fees can be incredibly varied depending on the equipment and vendor you go with.

There are two main fees you’ll be charged: The interchange rate, charged directly by the credit card company. This goes up and down depending on several contributing factors – such as the type of transaction, because in-person is considered less risky for the card company than online for fraud reasons. Some credit cards also consider certain industry or business types more risky than others.

The second main fee is the markup fee – paid to the payment processor. It may be a tiered plan, with different fee levels depending on the type of transaction. This can vary depending on the credit card type (rewards card, miles card, or business card, for example), or how the payment is going through – online or in-person.

Some vendors offer what they term an “Interchange Plus” fee, which is the interchange and markup fees rolled together.

Flat-rate plans charge a flat rate instead of a variable rate – most payment service providers offer this instead of a variable fee. Square, for example, charges 2.75 percent for each in-person transaction, or 2.9 percent plus 30 cents for online payments.

The Tracking

Many credit card processed payments can be auto-fed into your accounting software. It’s always a good idea to keep paper copies of the receipts to review and verify accuracy, too.

The Recommendations

We’re rounding up some of our best recommendations, coming from Business News Daily and our own experience:

Best for small businesses: Helcim, a full-service processor (traditional merchant account vendor). They are known for their transparency, as they publish all their interchange plus rates, and you can easily compare their pricing. Their in-person fees are lower than average, and they even promise to keep your rate margins the same for the lifetime of your account. You can also use their point-of-sale app for online mobile shopping and host an online store with their software (for a fee).

Best for retail: First Data, a traditional merchant account vendor, is recommended for those processing high volumes of credit card transactions. This company has millions of clients in 100 countries and is well-known for its processing and customer service – you can negotiate month-to-month contract terms, no cancellation fee, and rates that fit your business. It comes with tiered processing, so may not be the best for small businesses. First Data accepts every payment method and uses the well-known Clover line point-of-sale hardware and software – providing customers with a familiar interface device and allowing them to use more payment approaches, such as Google Pay, for example.

Best for low-volume credit card sales: PayPal, an online payment service provider system, is built for those without too many credit card payment processes each month. PayPal offers pay-as-you-go terms and no monthly processing minimums, as well as low and transparent pricing. The service doesn’t charge any application, set up, monthly, or compliance fees. PayPal is known for its ease of use and flexibility.

Best for mobile credit card processing: Square, a payment service provider known for its simple rates and no additional fees. If your business is something such as craft sales or a traveling food truck, having a quick swiping option on your phone is incredibly easy to use, and with the same, set rate, you’ll never be surprised by the amount you’re paying. There are no long-term contracts; you pay as you go, and there are no monthly, set up, or cancellation fees. You can even have your funds deposited more quickly if you need them to be for a small increase in rate. The software has many well-built-out and easy-to-use features, including automatically setting discounts, processing transactions online, emailing receipts, and tracking inventory in real time.

Best online processor: Stripe, which easily connects with websites, ecommerce platforms, and apps, is an online payment processing company. It works with hundreds of other business software, including ecommerce sites and invoicing tools. Stripe also comes with a checkout form you can use on your website, and its known for being very easy to use.


Now that you’re well equipped with everything you need to know to start accepting credit card payments, you can find what option is the best fit for you. Processing credit cards can be a big boost to your business, whether you use merchant accounts or a payment processing system. For help getting the details set up and your payments integrated with your accounting software, schedule an appointment with us today!

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