Photograph of a small business owner demonstrating how to accept credit card payments from a customer.
payments

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 2022, according to the Federal Reserve


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

Illustration showing credit card swiping, bank, business, and customer account icons that explain 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.


Accept payments anytime, anywhere

No matter how your customers choose to settle up, track payments in one place and make managing your business finances easier than ever.

3 common ways to accept 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 accept credit cards, 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. 


In-store credit card payments

Illustration showing how to accept credit card payments in-store with information about payment processors, hardware, POS systems, and a section with benefits and drawbacks of accepting cards.

If your business is only a physical location, shop around to see which payment service providers offer the best rates.


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 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.


Online credit card payments

Illustration showing how to accept credit card payments online with information about payment processors, POS systems, and a section with benefits and drawbacks of accepting cards.

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. 


Mobile credit card payments

Illustration showing how to accept mobile credit card payments with information about payment processors, mobile hardware, POS systems, and a section with benefits and drawbacks of accepting cards.

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. 


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.


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. 


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.

Accept credit card payments FAQ

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).


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