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- Many card processing providers offer similar services. Finding the best fit comes down to the number of transactions you expect to process and how you plan to accept payments — in person, online or over the phone.
- In-person payments come with lower processing fees, while over-the-phone payments can be more costly due to the risk no-card-present transactions attract.
- When weighing options, don't simply go for the cheapest: think about your business's needs and whether the provider offers tools that can scale with your business as it grows.
The reign of cash as king is coming to an end. Today’s consumers use cash for only 18 percent of all transactions, according to a 2023 Federal Reserve study.
Today’s best credit cards offer enhanced security features, generous spending limits and rewards. Plus, with the rise of online shopping, credit cards are more popular than ever. In fact, credit card transactions account for 31 percent of all transactions, according to the study.
We’ve created this guide to help small-business owners and side hustle entrepreneurs weigh their credit card processing options. Here’s what you need to know.
How to accept business credit card payments
1. Find a credit card processing provider for your small business
There are many payment processing providers that offer similar services.
Consider what portion of credit card transactions you will process in person, online and over the phone. Also, think about what type of credit cards you’ll accept: Visa, Mastercard, Discover, American Express and so on. Processing fees vary among transaction types and card networks. It’s in your best interest to find the provider that offers the most competitive fees for the type of transactions and credit cards that you’ll process most.
You should also consider the volume of transactions your business will be processing, as some providers offer better rates for processing higher numbers of transactions.
If you run an online-only business, make sure the payment processor you choose integrates easily with your website. For brick-and-mortar businesses, research what hardware you’ll need to purchase — like payment terminals — to see if they’ll be compatible with your current point of sale (POS) system.
Starting the research process can be overwhelming. We recommend some of the best and cheapest ways to accept credit cards for small businesses later in this guide to help you get started.
2. Open a merchant account
After choosing your credit card processor, create a merchant services account with them. While you may already use popular providers like PayPal for personal transactions, you’ll need to establish a separate business account to enable your company to accept credit card payments.
Creating a merchant account typically involves providing information about your business and setting up a connection with your business’s bank account where money will be deposited.
3. Set up payment terminals
The final step to accepting credit card payments is setting up payment terminals across your business.
If you have a brick-and-mortar shop, this involves ordering and setting up hardware, like a card reader and a POS, if you don’t have one already. There are many card readers on the market that let you accept payments via a swipe, an inserted chip or a contactless tap.
If you do any sales online, you’ll need to set up online payments. E-commerce platforms like Shopify will come with a payments portal. If you’ve built your own website, you may need technical support from your card processing provider or website developer to add credit card processing for small business on your website.
Don’t forget to look for training resources from the payments processing provider to understand how to make the most of your hardware and software.
Accepting credit cards in person, online and over the phone
There are three main paths to “we accept credit cards!” Businesses can choose to accept credit card payments in person, online and over the phone. These methods come with their own technology needs and incur different fees.
In-person credit card processing is useful for brick-and-mortar retailers, on-site service providers (like plumbers) and mobile business merchants (like food trucks or farmers market vendors).
These transactions involve the customer presenting the card to make a purchase. Because the cardholder and card are present for these types of transactions, they pose a lower risk of fraud, so in-person transactions typically have lower fees than the other types of transactions.
You’ll need a card reader and a POS system to process credit card payments in person.
E-commerce shops, restaurants that accept orders online and companies that provide digital services — all are examples of businesses that rely on online credit card processing.
Online transactions typically have higher processing fees than in-person transactions.
To accept online credit card payments, you’ll need a digital storefront, such as an e-commerce store or website, and a payment gateway.
Card-not-present transactions typically take place over the phone and are commonly used by restaurants to pay for takeout orders. This process involves the customer sharing their credit card number with the merchant, and the merchant manually entering that information into their card reader.
These types of transactions typically incur the highest processing fees because they pose the greatest risk for fraud.
To process credit card payments over the phone, you’ll need a credit card reader and a POS or an online payments gateway.
Credit card processing fees for small business
Credit card processing providers charge fees for the services they provide, like conducting fraud checks and verifying with the cardholder’s bank that funds are available. The payment terminal conducts these critical security measures in just a few seconds as soon as a customer swipes, taps or dips their credit card.
So, what’s the average fee for credit card processing for small businesses? There are usually no monthly fees for credit card processing. Instead, most providers charge fees per transaction. While fees vary based on the type of card (Visa, Mastercard, American Express or others) and processing provider (such as PayPal, Stripe or Square), they typically range from 1.5 percent to 3.5 percent per transaction. American Express tends to charge higher fees than its competitors, which is why some businesses don’t accept Amex cards.
Average credit card network processing fees
|Credit card network||Processing fee range|
|American Express||2.5 percent to 3.5 percent|
|Discover||1.56 percent to 2.3 percent|
|Mastercard||1.55 percent to 2.6 percent|
|Visa||1.43 percent to 2.4 percent|
The best way to accept credit cards for small business
As a savvy merchant, you’re probably looking for the best and cheapest way to accept credit cards. The bad news: There is no one-size-fits-all solution.
But here’s the good news: if you weigh your business’s needs — like the volume of transactions and where these transactions take place — you should be able to narrow your search down to several providers that offer convenient solutions at favorable rates.
To help you get started, we’ve compared five of the most popular credit card processing providers for small businesses. (Note that fees are based on transactions in USD. Rates vary by currency.)
PayPal: Best for in-person retail
- PayPal is a widely trusted name that can help build confidence with your customers.
- Transaction fees are competitive with other providers.
- PayPal offers many different options for processing credit cards, including PayPal Checkout for online payments, a point of sale system and PayPal Invoicing for billing for services.
- PayPal’s extensive offerings can make it difficult to decipher the differences and choose the one that works best for your business.
- Many account services — including chargeback protection, account monitoring and recurring billing — require additional fees.
PayPal charges the following processing fees for credit card payments:
- In-person transactions: 2.99 percent + $0.49 (for example, $25 transaction = $1.24 fee)
- Online transactions: 2.9 percent + $0.49 (for example, $25 transaction = $1.22 fee)
Shopify: Best for e-commerce
Shopify is an e-commerce platform that helps businesses sell products online. With Shopify Payments, they also support in-person and online credit card payments.
- Built to be used with Shopify’s signature e-commerce platform.
- Offers competitive fees for processing credit cards.
- Charges the same fee to process card-not-present transactions as it does online payments.
- You need to have a website through Shopify to access their payment processor.
- You’ll pay a monthly fee for the platform on top of regular credit card transaction fees.
The most basic Shopify Starter plan costs $5 per month and delivers credit card payment processing, invoicing capabilities and the ability to turn your non-Shopify website into an e-commerce platform. If you want more robust e-commerce capabilities, you’ll need to pay $39+ per month for a different Shopify plan.
Shopify charges the following processing fees for credit card payments:
- In-person transactions: up to 2.7 percent (for example, $25 transaction = $0.68 fee)
- Online transactions: up to 2.9 percent + $0.30 (for example, $25 transaction = $1.03 fee)
- Card-not-present transactions: up to 2.9 percent + $0.30 (for example, $25 transaction = $1.03 fee)
Square Payments: Best for mobile businesses
Square is known for its innovative, petite card reader that can be attached to smartphones, turning any device into a payment terminal. Thanks to its compact hardware offerings, Square is great for mobile businesses like food trucks, market vendors or in-home service providers like plumbers.
- Square is a leader in smartphone credit card reader hardware.
- Its mobile card reader is typically offered to its merchants for free.
- The card reader works offline to allow for credit card payments in places without reliable Wi-Fi.
- Contactless payment solutions are also available.
- High fees for in-person transactions.
Square charges the following processing fees for credit card payments:
- In-person transactions: 2.6 percent + $0.10 (for example, $25 transaction = $0.75 fee)
- Online transactions: 2.9 percent + $0.30 (for example, $25 transaction = $1.03 fee)
- Card-not-present transactions: 3.5 percent + $0.15 (for example, $25 transaction = $1.03 fee)
Stripe: Best for online businesses that want to scale
Stripe was built with online businesses in mind and offers sophisticated payment processing solutions that can scale as your company grows. Stripe’s robust API helps you easily integrate its payment platform with other software solutions in your tech stack, like accounting and customer relationship management software.
- Competitive rates for processing online credit card transactions.
- An API with options to customize the software to your needs.
- Financial solutions include invoice processing, designed for businesses with their sights set on growth.
- In-person transaction fees are more expensive than those of other providers, making it a bad choice for brick-and-mortar retail.
- Base solution doesn’t support card-not-present transactions, so you’ll need special permission to set up that capability.
Stripe charges the following processing fees for credit card payments:
- In-person transactions: 2.7 percent + $0.05 (for example, $25 transaction = $0.73 fee)
- Online transactions: 2.9 percent + $0.30 (for example, $25 transaction = $1.03 fee)
Venmo: Best for online-only businesses
Venmo is known for its safe, mobile money transferring service. While Venmo primarily works by transferring money between bank accounts, it’s unrolling credit card processing solutions.
To accept credit card payments via Venmo, you’ll have to link your Venmo for Business account to Braintree, which is owned by PayPal. Then, customers will be able to use the Venmo app to make payments through the credit cards and digital wallets linked to their accounts.
- A familiar and convenient payment method for customers.
- No additional setup fees.
- Free standard transfers from your Venmo account to your bank account (usually takes one to three business days).
- Not yet available for in-person payments (but customers can pay through the app while in-store).
- Fee for instantly transferring money from your Venmo account.
Venmo charges the following processing fees for credit card payments via Braintree:
- Online transactions: 3.49 percent + $0.49 (for example, $25 transaction = $1.36 fee)