September 30, 2019 12:00 PM PT

How to Accept Credit Card Payments

Read more about Merchant
This article contains references to products from our partners. We may receive compensation if you apply or shop through links in our content. You help support CreditDonkey by reading our website and using our links. (read more)

Accepting credit card payments can grow your business. Here's everything you need to know to get you started.

© CreditDonkey

Credit card processing has benefits for businesses of all sizes, including:

  • Increased sales
  • Increased purchases by impulse buyers
  • Fosters a feeling of trust in your business when the card network logos are displayed
  • Stay competitive in your industry
  • Increased cash flow
  • Reduce the risk of accepting bad checks

But accepting credit card payments requires a company to process them for you. Keep reading to learn how to get started.

Choosing the Right Credit Card Processing Company

© CreditDonkey

Choosing the right credit card processing company is crucial to your business model. First, you must choose between a merchant account and payment service provider (PSP).

Technically, you can't accept credit cards without a merchant account. But you can get around it with a payment services provider, such as Square or Stripe.

These companies offer a blanket merchant account for all of its merchants along with processing services. Your business will not have its own merchant identification number but it will have the capability to accept credit cards as long as you have an active account.

Read on to decide if a merchant account or PSP is the right choice for your business.


With this method, you'll need a payment processor and payment gateway. Some merchant accounts include these services while others operate a la carte.

What Is a Payment Gateway?
A gateway "talks" to the other parties involved in a credit card transaction. It securely carries the information from your store to the credit card processors, including the credit card association (Visa, MasterCard, etc.) and the issuing bank. The final step is to receive approval or denial for the transaction.


  • Easier to Keep the Account in Good Standing
    Merchant accounts only process your company's transactions. This puts you in control of what goes through the system.

  • Tiered Pricing
    You'll pay lower per transaction prices as your sales increase.

  • Dedicated Customer Service
    With all the moving parts in a credit card transaction, a lot can go wrong. Having dedicated customer service reps, rather than an automated system, can help address these problems.


  • Lengthy Underwriting Process
    Businesses must prove their creditworthiness to get a merchant account. New businesses or businesses in risky industries may have a harder time obtaining approval.

  • Startup Delays
    It can take days or weeks to get your merchant account application approved. Then there's the setup time, which can also take a few weeks.

  • Numerous Fees
    Merchant account providers charge fees on top of those for third-party services like the payment processor and payment gateway.

Not sure which processor is best for your business? Due has a transparent flat rate with no monthly fees.

Payment Service Provider

A payment services provider is an all-in-one solution. They provide all the services from accepting the credit card to depositing the funds in your merchant account.


  • Streamlined Approval Process
    The underwriting process for a PSP is typically shorter than that of a merchant account. Some providers, like Square, offer same-day approval, while others may take a few days.

  • Quick Setup
    After signing up for an account and receiving approval, you can often be up and running in the matter of a few hours.

  • No Monthly Minimums or Monthly Fees
    Small businesses just starting out or those with infrequent credit card transactions often benefit from the PSP pricing structure.


  • Lack of Personalized Support
    PSPs or payment aggregators tend to offer streamlined customer support options like a database to find answers to your problems. If they do offer customer service hours, the hours are typically limited.

  • Account Cancellation is Frequent
    Because of the lack of underwriting, PSPs often cancel accounts or withhold funds from transactions if they deem the transaction as risky.

  • Large Transaction Fees
    Because PSPs provide all-in-one pricing, the per transaction fee is usually higher than the tiered fee structure offered by merchant accounts. This can get pricey if you are a high-volume merchant.

Before deciding between a merchant account and a PSP, you should also consider these questions:

  • What are the fees?
  • What credit cards does the processor accept?
  • How long will it take to start accepting credit cards?
  • What level of fraud protection and security does the processor provide?
  • What level of customer support do they provide?
  • Does the processor accept the type of payments you need (e.g., Apple Pay, chip, or swipe transactions)?

Regardless of the company you choose, you'll need to decide the type of transactions you'll accept. Keep reading to learn more.

Ways to Accept Credit Card Payments

© CreditDonkey

The process for handling credit cards will vary depending how your business operates. Keep reading to learn more.

In Store

In order to accept credit card payments in a brick-and-mortar store, you need a way to read the credit cards. So-called card-present transactions require a credit card reader or POS (point of sale) system.

Depending on the type of equipment purchased, customers will swipe, tap, or dip their credit card into the reader. The payment processor then takes over the transaction, communicating behind the scenes with the card network, issuing bank, and eventually, your merchant account.

Card present transactions are generally the least expensive because they involve less risk—it's harder to fraudulently use a credit card in person.

Over the Phone

Accepting credit card payments over the phone carries a higher level of risk than accepting in-person payment.

If you have a POS for your brick-and-mortar store, you can manually enter the credit card information into the system and process it the same way as an in-person transaction. But the processing fees are typically higher for keyed-in transactions because of the higher risk of fraud.

Online stores that don't have a POS can use their virtual terminal to accept credit card payments over the phone. A virtual terminal turns your computer or tablet into a credit card terminal. Then, just as you would with a POS, you enter the credit card numbers manually, but in the online software program.

On Your Phone or Tablet

If your business is mobile or you don't want to invest in expensive POS software, you can turn your phone or iPad into a credit card reader with the addition of a mobile card reader.

Your customers can swipe, tap, or dip their card just as they would on a standard credit card reader. The only difference is the reader is attached to your phone or tablet, which sends the signal to process the transaction.

In PayPal

PayPal offers two methods to accept credit card payments—one free option and one with a monthly fee:

  • PayPal Payments Standard
    You create a PayPal button (no programming skills required) in approximately 15 minutes and add it to your website. After clicking the button, customers will navigate to the PayPal website, where they can pay with a credit card. You pay a per transaction fee, but no monthly fees.

  • PayPal Pro
    If you'd prefer to keep customers on your website from purchase through final transaction, PayPal Pro allows the integration of PayPal processing on your website. There is a $30 monthly fee, but you pay the same flat-rate processing fees as you would with PayPal Standard.

How to Receive Money From Credit Card Transactions

© CreditDonkey

Once you're ready to accept credit cards, how will you receive the funds? Here's a step-by-step guide to the process:

  1. You send a batch of authorized transactions to the payment processor at the end of each business day.

  2. The payment processor sends the information to the appropriate card network.

  3. The card network sends the information to the issuing bank.

  4. The issuing bank sends the funds electronically to the merchant account, less the third-party fees for processing the transaction.

The entire process typically takes 24–48 business hours from the date that you sent the batch into the payment processor.

How do credit card payments work?
The payment process occurs in several steps:
  1. The credit card information is entered.

  2. The payment processor transmits the information between the customer's bank account and the merchant account.

  3. The payment processor checks for the availability of funds, ensuring that the transaction doesn't exceed the credit limit and checks for any signs of fraudulent activity.

  4. If the card issuer and the customer's bank approve the transaction, the payment processor deposits the funds (minus any fees, see below) into your merchant account.

Understanding Credit Card Fees

Accepting credit card transactions comes with some costs. First, there are the interchange fees, which are non-negotiable fees charged by the card networks.

Visa, Mastercard, Discover, and Amex each charge a percentage of the transaction for their services. The fees vary based on the type of transaction (card present, keyed in, or online).

In addition to the card network fees, there's the fee structure the card processor charges. Typically, you can choose:

Interchange Plus
Most processors charge a flat fee on top of the interchange fee. You'll see it noted as a percentage plus the flat fee, such as 2.9% + $0.30. The $0.30 is the markup fee per transaction for the processor.

Understanding AMEX interchange fees
AMEX interchange rates typically exceed those of Visa, Mastercard, and Discover, which is why many businesses don't accept AMEX. The fees are higher because AMEX doesn't make most of their profits from interest like Visa and Mastercard. Instead, they make it on merchant fees and annual fees charged to customers.

Flat Fees
PSPs typically charge flat-rate fees or one fee per transaction. The rate includes the fees for most services, including PCI compliance, refunds, inactive account fees, chargebacks, and early termination fees.

Tiered Fees
Some companies base the fees on the type of transaction. For example, swiped credit card transactions will typically cost less than keyed-in transactions because of the lower risk of fraud.

Others tier the rates based on the volume of transactions—the more sales you process, the lower your per transaction fee becomes.

Determining the tier and exact costs is more complicated with tiered rates.

The Ins and Outs of Refunds

If your business processes refunds, knowing how it affects your processing fees is important. This only affects businesses on the interchange plus processing model.

If you are on a tiered plan or flat-rate fee plan, you won't see a difference in your processing fees, as these models don't refund your processing fees on returns.

Businesses on the interchange-plus plan can experience any of the following:

  • No Refund
    Some companies just don't refund the interchange fee. Read the fine print regarding refunds before signing an agreement.

  • Refunds Deducted From Monthly Volume
    Some processors run the processing fees monthly, deducting the total refunds for the month from total monthly sales. This reduces the amount of processing fees you owe accordingly.

  • Charges for Refunds
    Some processors charge an authorization fee for processing the refund.

Most credit card processors don't reimburse its markup fee; the refunds typically only apply to the interchange fee paid to the credit card network.

Bottom Line

Accepting credit card payments can help your business grow. Pay close attention to the services offered by your merchant account or payment service provider. Your average transaction price, as well as the monthly volume, will also help you choose the right provider.

Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.

More from CreditDonkey:

Stripe Review

Infographics: The Power of the Extra Dollar

Minimum Payment Trap

Infographics: Gas Debt

Credit Card Usage Statistics

How to Accept Credit Card on Phone

Do you want to take credit card payments on your phone? Find out how to use your Android or iPhone as a mobile credit card reader.
Leave a comment about How to Accept Credit Card Payments?
Email (won't be published)

Credit Card Reader

Looking for the best credit card reader? It'll depend on your needs. Find the top readers for small businesses here.

About CreditDonkey®
CreditDonkey is a credit card processing comparison website. We publish data-driven analysis to help you save money & make savvy decisions.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed on this page are those of the author's alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.

†Advertiser Disclosure: Many of the offers that appear on this site are from companies from which CreditDonkey receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). CreditDonkey does not include all companies or all offers that may be available in the marketplace.

*See the card issuer's online application for details about terms and conditions. Reasonable efforts are made to maintain accurate information. However, all information is presented without warranty. When you click on the "Apply Now" button you can review the terms and conditions on the card issuer's website.

CreditDonkey does not know your individual circumstances and provides information for general educational purposes only. CreditDonkey is not a substitute for, and should not be used as, professional legal, credit or financial advice. You should consult your own professional advisors for such advice.

About Us | Reviews | Deals | Tips | Privacy | Terms | Contact Us
© 2020 CreditDonkey