How to accept credit card payments

While cash is king when running or starting a business, credit cards are queen when it comes to fast, convenient ways to accept payments from your customers. After all, 82% of American adults had a credit card in 2023, according to the Federal Reserve. 

Plus, a QuickBooks study found that 85% of small business owners use credit cards for their business, underscoring just how essential they are to cash flow and operations.

If your business isn’t set up to accept credit card payments, you could be missing out on potential sales. Whether you’re running a service business, a brick-and-mortar store, or you have an online shop that needs to accept digital payments, we’ll help you understand how credit cards are processed, what equipment you need to process them, and what payment software does for your company. 

If you’re looking for a way to get paid quickly and manage your business finances, QuickBooks Money makes it easy. Queue up your card readers!

How credit card processing works

3 common ways to take credit card payments (and what you need for each)

Differences between a merchant account vs. a payment service provider

Debit card payments vs credit card payments

Security best practices for accepting credit cards online

How much do credit card processing fees cost?

Factors to consider before choosing a credit card processor

Alternatives to credit card payments

Choose the best payment setup for your business

How credit card processing works

The process seems pretty simple on the surface: a customer swipes their card and then you get your money. But there’s actually quite a bit of complexity involved in credit card transactions. 

Let’s break it down into three main parts: authorization, authentication, settlement, and clearing.

1. Authorization

When a customer pays with a credit card (by inserting, swiping, or tapping on a terminal or using it online on a website or through a digital wallet like PayPal), the merchant’s payment processor reaches out to the issuing bank through a credit card network. Then, the credit card network sends an authorization request to the bank that issued the card. 

Those authorization requests include:

• The credit card number
• The card’s expiration date
• The CVV (Card Verification Value) security code (the 3-digit code on the back of the card
• The payment amount
• Optional: The billing address (as a part of the fraud-prevention Address Verification System (AVS))   

Next comes the authentication process.

2. Authentication

Once the authorization request arrives at the issuing bank, they verify that the card number, billing address, and CVV match. Then the bank approves or declines the request. Denials can be based on a lack of funds, if a card is expired, if the card has been reported stolen, or if there is fraud suspected. 

That response is bounced back through the same channels and reaches the merchant. 

If the transaction is approved, the customer will see a hold on the purchase amount on their account, and at this stage, the transaction will be pending. At the end of the day, the merchant will start the settlement and clearing process to complete the transaction.

3. Settlement and clearing

At this point in the transaction, the customer’s part in the process is over. Batches of authorizations are sent to the processor at the end of the day or another preset time, though there are some processors that offer real-time processing that don’t need to be batched. 

This may require manual processing or it may happen automatically depending on which processor you use. The processor will then request each issuing bank to transfer the funds to the merchant account. 

This process usually takes a day or two. Once payments are processed, the merchant will receive their funds. The payment received will be what the seller has charged their customer for the goods or services they provided, minus any fees associated with processing the payment.

3 common ways to take credit card payments (and what you need for each)

Now that we’ve covered how processing a credit card payment works, let’s look at how to take credit card payments using one or more of the following methods.

No matter how and where you take credit card payments, you'll need a few things including:

• A merchant account
• A payment service provider (PSP)
• Card reader hardware and/or software

Luckily, it can be pretty easy to get all of these set up and working together. 

Choosing the most affordable payment option

The cheapest way to accept credit cards depends on the type of business you run and where you take payments. A mobile food truck will likely have different needs than an e-commerce store. 

Compare multiple payment service providers to see what they offer in terms of fees, hardware, and support. If possible, work with one provider that can handle mobile, in-store, and online payments.This can reduce setup complexity and make reconciliation easier.

In-store credit card payments

If your business is only a physical location, shop around to see which payment service providers offer the best rates. Before you commit to a payment provider, compare transaction fees, monthly service fees, and hardware costs across several options. Sometimes the “best” provider for you won’t be the one with the lowest per-transaction fee. It may be the one with the right combination of pricing, features, and customer support.

If your business is mobile and online, too, you can choose from a wider range of payment processing options, including electronic payments. E-commerce platforms sometimes offer payment processing online and in-person using their hardware (though those options can be limited compared to other systems).

To take credit card payments using credit cards at a brick-and-mortar location, you’ll need one of the following:

• POS system with integrated credit card terminal
• Stand-alone credit card terminal 

You should choose your hardware based on the type of business you run. For example, if you operate a convenience store, you’ll probably want terminals that let customers use their cards and enter their PINs. If you own a fine-dining restaurant, you probably need something simpler because your staff will be running customer cards.

Point-of-Sale systems can help you manage sales and inventory and are an important tool for many businesses to have but they aren’t required to take credit cards. 

It’s a good idea to take account of the fees you’re responsible for and offer customers other ways to pay. Cash doesn’t have any processing fees. Use a credit card processing fee calculator to determine how much it could cost your business before choosing a provider.

Benefits

• People can make bigger purchases: Accepting credit cards may to larger transactions since customers aren’t limited by their on-hand cash.
• Increase the chance of a purchase: In-person payments still account for 78% of all payments, and many of those are made with credit or debit cards
• Widely available: Credit cards are a dominant payment method, with over 60% of all payments being made by either credit (32%) or debit (30%).

Drawbacks

• Transaction fees add up: Every credit card transaction comes with a fee, and those can add up over time.
• Hardware can be expensive: Buying or renting credit card readers or terminals can be pricey, so it’s an expense you’ll want to factor in.
• May require a phone line: Some systems require a dedicated phone line for processing payments, which could add an extra cost to your operations.

Accept credit card payments online

Your online store might have built-in payment processing or allow you to integrate processing from traditional companies or digital processors. You can also check with other payment service providers.

If your online business has physical locations, you can choose from a wider range of payment processing options. Some e-commerce platforms offer payment processing both online and in-person. You may be limited to using their hardware for in-store or mobile purchases.

Benefits

• Accept payments from international customers: Considering that more than half of online shoppers buy from international sites, you can easily reach customers worldwide and grow your market with online payments.
• Keep up with competitors: According to Forbes, 23% of all retail purchases are expected to happen online by 2027, so offering online payment options is key for staying competitive and meeting customer expectations.
• Quick payments: Online credit card transactions process instantly, which means faster payments and smoother cash flow.

Drawbacks

• Transaction fees add up: Just like in-store payments, online credit card transactions come with processing fees. These fees can build up, especially with high volumes or international payments.
• Higher potential fraud: According to Juniper Research, merchant losses from online payment fraud are expected to exceed $343 billion globally between 2023 and 2027, so make sure you implement strong security measures to protect your business and customers from this growing threat.

Mobile credit card payments

If your business is strictly mobile commerce, you can choose from several payment processing companies. You can choose a traditional processor with mobile hardware or a digital processor that also provides hardware. If you are mobile and online, check if your online processor offers mobile services.

To accept mobile payments, you’ll need to have a mobile credit card terminal. Because you’ll be dealing with customers in different locations, you may need hardware that lets them enter their PIN.

Benefits

• Sell everywhere or accept payment at the location of a job: You can take payments anywhere your business operates, whether you're at a customer’s home or on the go.
• Safer than carrying cash: Mobile payments mean you don’t have to carry large amounts of cash, so it’s safer for you and your customers.
• Customers like the convenience: Whether customers tap, swipe, or insert their card, mobile payments make the process quick and easy for them.

Drawbacks

• Transaction fees add up: Just like other credit card payments, mobile transactions come with processing fees that can accumulate over time.
• Hardware can be expensive: Mobile credit card readers and terminals can have upfront or recurring costs, depending on the provider.
• Requires internet to work: You need a reliable internet connection for mobile payment systems to work, which could be a challenge in areas with spotty or no service.

Balancing benefits and drawbacks

Accepting credit cards has clear upsides where customers enjoy the speed and convenience, and they’re more likely to spend more than they would with cash. Your business also avoids the risk and hassle of offering in-house financing, since customers handle that through their credit card issuer.

The main drawback is the cost. Processing fees can add up quickly, even if they’re just a small percentage of each transaction. Cash, by comparison, doesn’t carry transaction costs. Weigh these pros and cons against your sales volume and customer expectations when deciding your payment setup.

Differences between a merchant account vs. a payment service provider

Before you start accepting credit card payments, it helps to understand the two main options for handling transactions: merchant accounts and payment service providers. Both allow you to get paid, but they work in different ways and come with different costs and flexibility.

Merchant account

A merchant account is a bank account that lets your business accept credit card payments. Here’s how it works: when a customer pays with a credit or debit card, the money first goes into your merchant account. During this time, a third-party processor handles the transaction. They typically become available 1-2 days later once the process is complete. After that, the money moves into your business checking account.

Payment service provider (PSP)

A payment service provider (PSP)—like PayPal, Square, Stripe, or QuickBooks Payments—handles the entire payment process for you. You don’t need to open a separate merchant account. Instead, the PSP collects your payments and deposits the funds directly into your bank account. 

PSPs are fast and easy to set up, but they may charge higher fees and offer less flexibility if your business processes a large volume of transactions.

Debit card payments vs credit card payments

While customers don’t see a lot of differences between using credit and debit cards, as a business owner, there are a few things that make them distinct. 

Processing networks

Debit card payments are processed through debit card networks like STAR or NYCE, while credit card payments go through credit card networks like Visa or Mastercard.

Fees

Debit card transactions often come with lower fees (0.73% or $0.34 on average, according to the Federal Reserve). On the other hand, credit card transactions tend to have higher fees (1.5% to 3.5%) due to the risks involved and the charges from credit card networks.

Fund availability and authorization process

When customers use a debit card with a PIN, the funds are taken from their account and sent to your merchant account almost immediately. With credit cards or debit cards without a PIN, the funds aren’t transferred until later. It could take a day or two for the money to show up in your account.

Security best practices for accepting credit cards online

Security should be your business's top priority when accepting online credit payments. Consider these best practices so you can protect your business and customers from data breaches, identity theft, and other fraudulent activities.

PCI compliance

Payment Card Industry Data Security Standard (PCI DSS) is a set of rules for businesses that handle credit card transactions. There are 12 requirements you must follow to ensure your business remains PCI-compliant, which include:

• Install and maintain a firewall configuration to protect cardholder data
• Do not use vendor-supplied defaults for systems passwords and other security parameters
• Protect stored cardholder data
• Encrypt transmission of cardholder data across open, public networks
• Protect all systems against malware and regularly update antivirus software or programs
• Develop and maintain secure systems and applications
• Restrict access to cardholder data by business need to know
• Identify and authenticate access to system components
• Restrict physical access to cardholder data
• Track and monitor access to cardholder data
• Regularly test security systems and processes
• Maintain a policy that addresses information security for all personnel

For more detailed information, the PCI DSS Quick Reference Guide is an excellent resource to review.

Data encryption

Data encryption is another important tool. Encryption turns customer data into unreadable code as it travels through the internet, which makes it harder for hackers to steal. You should use SSL (Secure Socket Layer) or TLS (Transport Layer Security) encryption from the moment a customer enters their payment information until the transaction is complete. For example, Quickbooks Online uses 128-bit SSL encryption to help protect sensitive data from reaching the hands of hackers and other intruders.

Fraud prevention strategies

Fraud prevention should be an ongoing effort for any business that accepts credit cards online. Use tools like Address Verification Systems (AVS), which match the billing address your customer provides with what's on file at their card issuer. Also, implement the Card Verification Value (CVV) to ensure the person making the payment has the card in hand.

Educating your team and customers

Security isn’t just about technology—it’s also about people. Your employees and customers play a major role in protecting payment information.

• Train employees on secure payment handling: Make sure your team understands how to process payments securely, spot signs of fraud, and follow your company’s security protocols.
• Teach customers how to avoid scams: Post guidance on how to identify legitimate payment pages and warn customers about common phishing tactics. This builds trust and can reduce disputes.
• Display your policies clearly: Publishing your privacy, security, and refund policies on your website reassures customers that their information is safe and that you take security seriously.

How much do credit card processing fees cost?

Credit card processing fees (also called a merchant discount rate or transaction discount rate) can vary based on your provider but are generally 1.5–3.5%, according to Forbes. This is the fee your business pays to accept credit cards and have your payment processor complete their part of the transaction. 

That fee is split up and divided among several parties. These include:

• Interchange: the nonnegotiable fee that the processor and merchant pay to the issuing bank. You’ll usually see this fee as a percentage and a fixed amount (2.5% + $0.25, for example). The percentage goes to the issuing bank, and the network receives the flat fee. 
• Assessments: the fees that the credit card networks charge to accept transactions on cards branded with their name. This part of the fee also can’t be negotiated.   
• Markups: Markups are a percentage of the overall fee and are charged by your payment processor and bank. These fees help pay for the cost of processing card transactions. It’s possible to negotiate lower markup fees, so check with your PSP and bank.

If you want the best deal, get fee quotes from multiple providers. In addition to comparing transaction fees, look at monthly service charges and any hardware rental costs. The “best” way to accept payments will be different for an online-only store than for a brick-and-mortar or mobile business.

Another fee you may have to pay on credit card transactions is chargebacks. A chargeback begins if a customer disputes a charge on their card due to fraud or because of an issue with the product or service they received from your company. The issuing bank will then charge you a “retrieval request.” If you are looking for protection from chargebacks, QuickBooks offers Payment Dispute Protection to eligible QuickBooks Payments customers. 

If the fee isn’t debited automatically, it’s a good idea to pay these fees quickly because you could get hit with more fees if you don’t respond in the time frame they set in the contract.

You can appeal a chargeback and provide the issuing bank with information to bolster your case. The process can take as long as 4-6 weeks according to Signifyd and it might end with the bank recovering the money originally deposited into your business account. Keeping good records can help the bank rule in your favor.

Other costs to watch for

Processing fees aren’t the only charges you’ll encounter when accepting credit cards. Understanding the full cost picture will help you avoid surprises and budget accurately.

• Setup or account activation fees: Some providers charge a one-time fee to get your account started, which can range from a few dollars to several hundred.
• PCI compliance fees: If you’re accepting credit cards, you must comply with Payment Card Industry (PCI) security standards. Some processors pass along a PCI compliance fee to cover the cost of maintaining those standards.
• Chargeback fees: In addition to the disputed transaction amount, you may be charged a fee each time a customer initiates a chargeback. These costs can add up if disputes are frequent.
• Hardware rental or purchase fees: You may need to buy or lease card readers, terminals, or POS systems. Rentals can spread out the cost but may be more expensive over time than purchasing equipment outright.
• Early termination fees: If you cancel your service before your contract ends, you could face a hefty penalty. Read the fine print before signing up so you know the potential costs.

Factors to consider before choosing a credit card processor

Choosing a credit card processor isn’t just about picking the first name you recognize. The right fit depends on how your business operates, what you sell, and how your customers prefer to pay. Here are a few key factors to weigh before making your decision.

Business type and sales volume

If you process a high volume of transactions each month, even a small difference in per-transaction fees can add up to hundreds or thousands of dollars annually. For some businesses, paying a slightly higher monthly service fee is worth it for lower per-swipe costs.

Hardware needs

Think about how you’ll accept payments. Will you need a countertop terminal, mobile card reader, or POS system that integrates with inventory tracking? The hardware you choose should match your environment and the way your customers pay.

Contract terms

Some providers offer month-to-month plans, while others require multi-year commitments. Long-term contracts may come with better rates, but they can also be expensive to break if your needs change.

Integration with existing tools

If you already use accounting software, inventory management systems, or customer relationship management (CRM) tools, make sure your payment processor integrates smoothly. This can save you hours of manual data entry and reduce errors.

Customer support

When something goes wrong with payment processing, you need help quickly. Look for providers that offer 24/7 customer service through multiple channels, such as phone, email, and chat.

Alternatives to credit card payments

While credit cards are one of the most popular payment methods, they’re not the only option. Offering a mix of payment types can give customers more flexibility and help your business save on processing fees.

ACH transfers and bank payments

Automated Clearing House (ACH) transfers move money directly from a customer’s bank account to yours. They often cost less to process than credit card payments and can be ideal for recurring bills.

Mobile payment apps

Apps like Venmo, Zelle, and Apple Pay are growing in popularity. They offer fast, contactless transactions and are especially appealing to younger customers.

Buy now, pay later (BNPL) solutions

BNPL providers such as Affirm, Afterpay, or Klarna let customers split payments into installments. This can encourage larger purchases without adding risk to your business, since the provider handles the financing.

Cash and checks

While they may seem old-fashioned, cash and checks don’t carry processing fees. They can still be useful for in-person transactions, especially in areas with limited internet connectivity.

Choose the best payment setup for your business

There’s a lot that goes into accepting credit cards, but it’s a worthwhile step if you want to boost your sales, improve your customer experience, and manage healthy cash flow.

Fortunately, QuickBooks makes accepting credit card payments straightforward and painless—whether you want to accept them online, by phone, on the go, or even through recurring payments. In addition to credit and debit cards, there are other small business payment methods to consider. Some could save you time and money and help you receive funds faster. Ready to get started? Sign up for QuickBooks Payments here.

Disclaimers:

This content is for information purposes only and information provided should not be considered legal, accounting or tax advice or a substitute for obtaining such advice specific to your business. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Intuit Inc. does it have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. Intuit Inc. does not warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Readers should verify statements before relying on them.

QuickBooks Payments: QuickBooks Payments account subject to eligibility criteria, credit, and application approval. Subscription to QuickBooks Online required. Money movement services are provided by Intuit Payments Inc., licensed as a Money Transmitter by the New York State Department of Financial Services. For more information about Intuit Payments' money transmission licenses, please visit https://www.intuit.com/legal/licenses/payment-licenses/.

QuickBooks Card Reader: Data access subject to cellular/internet provider network availability and occasional downtime due to system and server maintenance. Separate card and product registration and QuickBooks Payments account required. Terms, conditions, and features subject to change.

Payments Dispute Protection: Payments Dispute Protection (“PDP”) is a service that covers you for any type of payment dispute that your customer initiates through its card issuer, commonly referred to as a chargeback, associated with a credit or debit card transaction on the American Express, Discover, Mastercard or Visa networks and that was processed by QuickBooks Payments while you were enrolled in PDP (“Covered Dispute”). This includes transactions processed through any payment channel that uses Intuit’s payment rails, including those outside of QuickBooks Online (for example, Merchant Service Center, GoPayments and partner applications that use Intuit’s payment rails).