Accepting credit cards is a standard part of business operations. The process involves selecting a processing partner, choosing the right equipment for your sales environment, and preparing your business information for an application. Each decision builds upon the last, guiding you toward a solution that fits your specific needs.
Understand Your Processing Options
Before a business can accept a credit card, it must partner with a financial service. The two primary paths are establishing a dedicated merchant account or using a payment service provider (PSP). A merchant account is a specialized bank account a business opens through a bank for receiving funds from card sales. This option involves a detailed underwriting process where the bank assesses the business’s financial history and stability.
For businesses with a high volume of sales, a merchant account can be more economical over time, as banks may offer lower per-transaction rates. The direct relationship with the bank can also provide more stability and personalized support. However, the application can be lengthy, requiring significant documentation and a review of the business’s operating history.
A different model is offered by payment service providers, such as Square or PayPal. These companies act as aggregators, processing transactions for many small businesses under a single master merchant account. This structure allows for a simpler and faster setup process, making it advantageous for new or smaller businesses due to its accessibility and predictable fee structure.
PSPs bundle various services, including payment processing, a security gateway, and reporting analytics, into one platform. This integrated approach simplifies operations for a business owner. While the convenience is a benefit, the bundled, flat-rate fees may be higher than the custom rates from a dedicated merchant account as a business’s sales volume grows.
Choose the Right Type of Card Reader
Once you have a sense of the processing service you need, the next step is to select the physical hardware that aligns with your daily operations. The device you choose will be the primary tool for accepting in-person payments, so its form and function must match your sales environment. The choice of hardware is distinct from the processing provider, though some providers specialize in certain equipment.
- Mobile card readers are small devices that connect to a smartphone or tablet via Bluetooth. These are designed for businesses that operate on the go, such as food trucks or market vendors. Their portability makes them a low-cost and flexible entry point for accepting card payments anywhere with a cellular or Wi-Fi signal.
- Countertop terminals are traditional, all-in-one devices designed to sit at a checkout counter. These are common in retail stores and restaurants where transactions occur in a fixed location. Modern versions handle various payment types, including chip cards, magnetic stripes, and contactless payments, and often feature a keypad and built-in receipt printer.
- All-in-one Point of Sale (POS) systems are the most comprehensive hardware option, integrating payment processing with broader business management software. Beyond accepting payments, a POS system can manage inventory, track sales data, and oversee employee time clocks. This setup is best for established businesses that require a centralized system to manage complex operations.
- A virtual terminal is software that allows a business to process payments manually by entering a customer’s credit card information into a secure web page. This solution is designed for businesses that take orders over the phone or by mail (MOTO transactions), eliminating the need for a physical card to be present.
Gather Necessary Business Information
Before you apply for a payment processing service, you will need to collect specific documents and information about your business. Providers require these details to verify your business’s identity, assess financial risk, and comply with federal regulations. Having these items prepared in advance will streamline the application process.
You will need your Employer Identification Number (EIN), which is the federal tax ID for your business. If you are a sole proprietor, your Social Security Number may be used instead. A copy of your business license is also standard, as it proves you are registered and permitted to operate in your city or state.
Providers will also require your business bank account information, specifically the routing and account numbers, so they know where to deposit funds from your sales. You should also be prepared to provide personal identification for the business owner, such as a driver’s license, to verify their identity. You may be asked for financial documents like recent bank statements or a business plan, especially if you are a new business applying for a merchant account.
Compare Providers and Associated Fees
A significant part of choosing a processor is understanding and comparing the costs involved. Fees can vary widely between providers and pricing models, so a careful analysis is needed. These costs fall into several categories: transaction fees, monthly charges, and hardware expenses.
The most common cost is the per-transaction fee. This fee is structured in one of two ways: flat-rate or interchange-plus. Flat-rate pricing, common with PSPs, charges a single, predictable percentage plus a small fixed amount for every transaction, such as 2.9% + $0.30. This model is simple to understand but can be more expensive as businesses grow.
Interchange-plus pricing consists of two parts: the “interchange” fee, a non-negotiable wholesale rate set by card networks like Visa and Mastercard, and the “plus,” which is the processor’s markup. This model often results in lower overall costs for businesses with higher sales volumes. However, the statements can be more complex because interchange rates vary depending on the type of card used.
Beyond transaction fees, look for other potential charges. Some providers have monthly account fees, which can range from $10 to over $30, while others have none. You should also clarify the cost of the card reader itself—some are provided for free, while others must be purchased or leased. Be mindful of other potential costs, such as fees for PCI compliance (data security standards) or chargeback fees if a customer disputes a transaction.
Apply and Set Up Your System
After you have chosen a provider and hardware, the final stage is to complete the application. The application is an online form where you will submit the business and personal information you previously gathered. Approval for a PSP can be nearly instantaneous, while a traditional merchant account application may take several days for underwriting.
Once your application is approved, the provider will ship your card reader or terminal. Setting up the hardware is straightforward. For mobile readers, this involves downloading the provider’s app to your smartphone or tablet and connecting the reader via Bluetooth. Countertop terminals need to be connected to your Wi-Fi network or plugged into an internet source.
The final setup step is to link the system to your business bank account through the provider’s online portal or app. This connection ensures that the money from your sales is deposited correctly. Before you start processing customer payments, run a small test transaction to confirm that the entire system is working properly.