How to accept credit card payments from your customers

The right payment processor can help you accept credit cards online and in your store. But which option is best depends on where, and how much, you sell.

Step 1: Get your business in order to start receiving payments

You technically don’t need to do anything specific to start receiving customer payments. However, there are a few steps you can take to make sure your payments go smoothly.

• Apply for a tax ID number.
  If you plan on opening a business bank account, you’ll need a tax ID number from the IRS and the state in which you’re operating your business. You can print out IRS Form SS-4 from the IRS website to start this process.
• Set up a business bank account.
  This helps keep your finances separate and might be necessary for depositing checks if you’ve incorporated your business. Compare business checking accounts to find the best fit if you don’t already have one set up.
• Register your business name if necessary.
  If you’re operating your business under a name different from your own, you’ll need to register your fictitious business name. Some banks will require you to register your business name prior to opening a business bank account, and you’ll often be required to pay a small fee.

Step 2: Choose a payment processing method for your business

Depending on the size of your business, you can either choose to use a payment processor with a dedicated merchant account or a payment service provider (PSP).

Merchant account providers

Merchant account providers tend to be ideal for larger businesses, as they can provide more dedicated resources than third-party processors. They can also provide services to help you manage your business cash flow.

Merchant account providers typically feature top-notch security and dedicated resources for your business but are more expensive than third-party website processing. Many merchant account providers also require your business to reach a certain threshold of income or transactions before they’ll take your business on.

In addition to the setup fees, there are merchant fees each month, as well as transaction fees on each purchase charged by the bank.

PSPs

PSPs have their own merchant account, which serves as the hub for distributing credit card payments for multiple businesses — not just your own. PayPal and Square are two of the more popular third-party processors on the market right now.

Setting up credit card processing through a third-party processor is much simpler than creating your own merchant account and helps you avoid some of the fees associated with merchant accounts.

The downside of third-party processors is a lack of the dedicated support you’d find in a merchant account provider. You’re also ultimately at the mercy of your third-party processor and you might find your account frozen or terminated for reasons outside your control.
How do merchant accounts work?

Compare payment processors

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Name	Product	Monthly fees start at	Processing fees start at	Processing time	High-risk merchants accepted?
Chase Merchant Services		None	2.6% + 10¢ per swiped credit card	Next day when you deposit into a Chase business checking account	No	Go to site More Info	Accept, process and deposit customer payments in your store, online or on-the-go.		loading Fetching your data...
Fattmerchant		$99/month	$0.08 + interchange per transaction	Next day for qualified businesses	No	Go to site More Info	Businesses that process more than $10,000 monthly can save with Fattmerchant's interchange+ pricing.		loading Fetching your data...
Square		None	2.9% + 10¢	Next day	No	Go to site More Info	Square is a one-stop shop with both e-commerce and in-person solutions.		loading Fetching your data...
Helcim		$20/month	1.92% + $0.08 per transaction	Two business days	No	Go to site More Info	Conveniently packaged into three service tiers for in-person and online sales.		loading Fetching your data...
Payline Data		$10/month	0.2% + interchange + $0.10 per transaction	Next day	Yes	Go to site More Info	Accepts high-risk merchants and offers discounted rates for nonprofits.		loading Fetching your data...
Payment Depot		$49/month + interchange	$0.15 per transaction	Next day	No	More Info	Avoid surprises with subscription-based pricing.		loading Fetching your data...
Stripe		None	2.7% + $0.05 per transaction	2 business days	No	More Info	Integrated apps help you manage your business in one place.		loading Fetching your data...

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Step 3: Choose hardware

If you plan to accept customer payments in person, you’ll need the appropriate card processing hardware to complete the job.

Some providers have proprietary hardware that’s required for all businesses that use its service. When you sign up, you’ll be given a choice of available hardware for rent or purchase.

Other providers are happy to accept third-party hardware — so long as it’s compatible. Ask your payment processing provider whether you can use third-party hardware and what machines and systems will integrate with its service.

Do I need to buy a separate POS system?

Many providers bundle POS software with their processing services, so third-party POS providers are often unnecessary.

POS software is typically offered as a simple tablet or phone installation. But if your business has unique billing or inventory needs, you may want to explore your options among dedicated POS providers for more comprehensive service.

Step 4: Set your policies

To avoid problems down the line, set clear policies for your customers before you start accepting payments. Clarify your policy on the return of purchased goods, the steps for customers to take if they wish to return a purchase and any specific costs that are related to returns.

If you ship items to customers, you’ll want to decide on shipping policies, too. This can include shipping costs, whether you pay for return shipping and how you’ll handle items that get lost or damaged on the way to their destination. Don’t forget that some customers may be located overseas with additional shipping, importation and other costs.

Bottom line

Getting started with a business website can be complicated, but its easier than ever to open your business to payments. Review your business needs to determine which method of processing credit card payments works best for you and compare payment processors to find the right fit for your business. You might also compare business credit cards to help finance your online business.

Frequently asked questions

• How much does it cost to accept credit cards?

  The average per-transaction cost of credit card payments is around 2%. However, your total costs for accepting credit cards as payment depends on your payment processing method.

• How do I accept credit card payments on my phone?

  You’ll need a payment processing method that supports phone payments, a card reader for your phone and a cell phone that can support the card reading app to accept card payments on your phone.

• Can you use Square for online sales?

  Yes. Square also provides the systems necessary for online payments in addition to in-person payments.