How and When to Accept Credit Cards

Share This Article

0 0 0 0

There was a time – 1986, in fact – when you could run a business without accepting credit cards. Those days are gone. Over 75 percent of consumers report preferring credit or debit cards for payment, with over 70 percent of Americans now owning a card.


Americans owe something to the tune of $710 billion to credit card companies, which has allowed them to pay your competition – you know, the ones accepting credit cards – even though they didn’t have the cash on hand.

If you plan on accepting payments on your website and bitcoins aren’t your cup of tea, you’ll need to set up some system of credit card processing sooner or later. Payment by check is simply no longer viable for small-scale operations, and many banks are making moves to phase those paper menaces out entirely.

When should you start accepting credit cards?

Now. There, we’re sorted.

There is almost no meaningful reason not to accept credit cards. Yes, they do take a bite out of your payment and yes, they do require some work to set up. Neither of those things is free and I would never suggest that you jump into anything like this without acquiring the proper resources and having a strong plan in place.

That said, you should absolutely be accepting credit cards. The barrier to entry has dropped like a Macy Gray album. Companies like Square and PayPal have made larger corporations sit up and take note. Any sucker with an iPad and a card reader can now accept credit cards just about anywhere in the US.

You can be that sucker, with just a little bit of work. Accepting credit cards requires a relationship with a credit card processing vendor, some sort of physical scanner, and some processing software. Let’s take a look at each of these requirements.

How to accept credit cards

Before you do anything else, you’ll need to figure out which payment processing company is going to be taking that chunk of cash from you. Big names include, but are not limited to, PayPalSquareStripeFlagship Merchant Services, and

When John comes in to buy a shirt and swipes his card, the data from that card is sent off to Square, for instance. Square then figures out which card has been swiped and sends the information off to that card issuer. The issuer then checks to see if you have the credit required and then either confirms or denies the request.

Payment processors wrap all issuers up together, so that you only have to deal with one point of contact and so that issuers don’t have to manage payment terminals and day-to-day troubleshooting.

After a card is used, there’s still a lot of steps required for everyone to get paid, but most of these happen without your knowledge and don’t affect your interaction with your customers. For instance, at the end of the night, you’ll have to run a batch process to finalize everything. This is you telling the credit card companies that, yes, these transactions that told you about earlier actually went through. The card issuers then tell the banks that money on hold has actually been spent, and everything in the system resets.

While you’ll be charged for batch processing, you’ll typically only run it once at the end of the day, so it will be a relatively minor cost. Speaking of which –

Processing fees

While you’re sorting out who to use for payment processing, the biggest deciding factor can often come down to the costs you’ll be picking up. Let’s take a look at Stripe.

Right now (23 August 2016) Stripe charges 2.9% + $0.30 per transaction. It doesn’t charge fees for failed transactions or international cards – important notes for many businesses and not true of all processors. You can incur extra costs if a client disputes a charge and you’re deemed to be in the wrong.

So if a customer comes in and buys $300 worth of merchandise, you’ll be charged $0.30 + $8.70 (the 2.9% portion) for a total of $9. Stripe then deposits the remaining $291 into your account on a “two-day rolling basis,” which means you’ll get money on Wednesday that you make on Monday.

Finding the right fee structure can be an unending cycle of madness. Everyone has a slightly different system, it seems, with some offering sliding scales, some charging flat rates, and some using a ‘percentage plus fixed fee’ system. Find one you’re comfortable with and start there.

The technical details

Now that you have a payment processor in place, you’re ready for the relatively easy part – physical setup. Most payment providers will give you in-person assistance or at least some written instructions on this part.

There are now huge differences in this step, as readers like those made popular by Square have come out for many different processors, while the classic point-of-sale models still exist for most businesses. These can be integrated with your point of sale software or may come with their own software.

If you’re just accepting credit cards online, you won’t need to bother with a reader, but you will need to get someone to add a payment gateway to your site. This can mean securing your website, which comes with an additional cost, but is fairly straightforward.

Finally, if you’re getting a reader, you’ll need to think about all the ways you want to accept payments. Chip-and-pin technology is already meant to be the standard, though we’re running a bit behind schedule on full implementation.

You’ll want to be ready for the newest cards and may want to have access to touchless payment systems like Google WalletAndroid Pay, and PayPal’s mobile wallet.

You’re all set

Now that you have a processor and a reader or website in place, you’re ready to start accepting payments. While this may seem like a daunting task, you can actually be up and running very quickly. If you’re accepting online payments, you could theoretically be running today.

With all of these systems, it’s important to think about integrating with your existing workflow. Find out how to get the most out of your existing POS, tie your sales directly into your accounting software, and make sure inventory is being managed all at the same time.

For more tips on getting your business in good financial shape, check out the Capterra Finance blog. If you’re retailer looking to make this quarter the best ever, you can swing by our Retail blog for other best practices and tricks.

Looking for Accounting software? Check out Capterra's list of the best Accounting software solutions.

Share This Article

About the Author


Andrew Marder

Andrew Marder is a former Capterra analyst.


No comments yet. Be the first!

Comment on this article:

Comment Guidelines:
All comments are moderated before publication and must meet our guidelines. Comments must be substantive, professional, and avoid self promotion. Moderators use discretion when approving comments.

For example, comments may not:
• Contain personal information like phone numbers or email addresses
• Be self-promotional or link to other websites
• Contain hateful or disparaging language
• Use fake names or spam content

Your privacy is important to us. Check out our Privacy Policy.