Taking card payments is a simple four-step process:

  1. Decide what card payments you need to take & how: Determine if you’ll be accepting payments online, in-person, or both.
  2. Choose a Payment Solution: Opt for either a comprehensive service like Square, which doesn’t require a separate merchant account or a traditional payment processor where a merchant account is needed.
  3. Select the right system: Choose a Point-of-Sale (POS) system and payment gateway that work together.
  4. Complete Setup: Install your card reader and configure the payment gateway and/or virtual terminal as required.

However, figuring out those four steps may take a bit more research.

In this article, I will discuss the different ways your business can take card payments, the factors you need to consider when choosing a payment processing solution, and the steps involved in setting up.

I will also cover some of the benefits, such as increased sales, improved cash flow, and reduced fraud risk.

Why Take Card Payments?

The question isn’t so much why, but rather, why not?

Cash accounted for just 10% of in-store purchases in 2022, while debit cards made up 47% of point-of-sale transactions. The UK has one of the lowest cash usage rates globally.

As of 2023, 87% of face-to-face payments are now contactless, and mobile recently overtook cash as the most popular payment method. Accepting card payments is not merely a convenience but a strategic imperative as we move towards a cashless society.

Here’s why taking card payments is a good move for your business:

  1. Broaden Customer Reach: In a society increasingly reliant on digital wallets, accepting card payments ensures you capture the maximum possible customer base, including those who rarely carry cash.
  2. Enhanced Cash Flow: Unlike cheques that require manual deposit and processing time, card payments often settle in your bank account faster, promoting a healthy cash flow.
  3. Operational Efficiency: Eliminate the need for manual record-keeping associated with cash transactions. Card payments integrate seamlessly into most accounting software, automating the record-keeping process.
  4. Security: Handling less cash on-site reduces the risks associated with theft and fraud, offering a more secure way to conduct business.
  5. Customer Convenience: Offering multiple payment options, including card payments, enhances the customer experience and can often be the deciding factor in completing a sale.

» MORE Read our full article on The Best Card Machines for Businesses

How To Accept Credit Card Payments

This section outlines the essential steps you need to follow to start accepting card payments in your small business.

Step One: Decide How You Want to Take Card Payments

The first step in accepting card payments is to decide how you want to take them. There are three main options:

  • In-person: This is the most common option for businesses with a physical storefront. You will need a physical card reader to accept payments from customers who enter your store.
  • Online: This option is for businesses that sell products or services online. You will need a payment gateway integrated with your e-commerce website to accept payments from customers who shop online.
  • Over the phone: This option is for businesses that take orders over the phone. You will need a virtual terminal to manually enter card details from customers who call in to place an order.

Which option is right for you?

The best option for you will depend on your business model and your needs. If you have a physical storefront, then in-person payments are the most likely option for you. If you sell products or services online, then online payments are the most likely option for you. If you take orders over the phone, then over-the-phone payments are the most likely option for you.

Some systems allow for all of these:

There are some payment processing systems that allow you to accept payments in all three ways.

With integrated platforms like Square, PayPal, Stripe, or Clover you can accept payments in-person, online, and over the phone.

Here are some things to consider when deciding how you want to take card payments:

  • Your business model: What kind of business do you have? Where do your customers make payments?
  • Your customer base: What payment methods do your customers prefer?
  • Your budget: How much are you willing to spend on a payment processing system?
  • Your needs: What features are important to you?

Step Two: Set Up a Merchant Account

A merchant account acts as an intermediary between your business bank account and the card payment process. While some payment platforms offer merchant services as part of their package, traditional banks also offer standalone merchant accounts.

You do not necessarily need to set up a separate merchant account to accept credit card payments for your business. Here are the options:

  • You can use your regular business bank account to accept card payments, but this may come with higher transaction fees or other limitations. Many banks do not offer competitive card processing rates.
  • Setting up a merchant account specifically for accepting payments allows you to potentially get lower transaction fees and access features tailored for businesses. Merchant providers partner with banks to provide these accounts.
  • No merchant account: Third-party payment processors like Square and PayPal also allow you to accept card payments directly without a traditional merchant account. They essentially act as the merchant account and deposit funds into your business bank account.
  • Payment facilitators are payment providers that manage the merchant accounts on your behalf. This simplifies the process as you don’t have to set up a merchant account yourself.

If you’re not sure, proceed to step three, choose the right POS system, and then consult with them about whether you need a separate merchant account.

Step Three: Choose a POS System for In-Store Credit Card Payments

Once you have decided how you want to take card payments, you need to choose a POS system and a payment gateway that are compatible with each other.

A Point of Sale (POS) system is a combination of hardware and software that facilitates the business transaction between a customer and a company. In a typical retail setting, a POS system would include a computer or tablet, a cash drawer, a receipt printer, and a card reader for accepting debit or credit card payments.

The simplest form of a Point of Sale (POS) system is often a standalone card reader paired with a mobile app. Notable examples include Square, SumUp, and iZettle.

For larger businesses, you may need something more substantial.

Step Four: Set Up Your Card Reader, Payment Gateway, and/or Virtual Terminal

The final setup involves configuring your hardware and/or software. This may include installing a card reader at your physical location, integrating a payment gateway into your website, or setting up a virtual terminal for phone payments.

What Happens When You Take a Card Payment

What Happens When You Take a Card Payment?

Before diving into the technical setup, it’s important to understand the mechanics of a card payment transaction. Understanding the transaction flow will enable you to better appreciate the elements you need to set up.

  1. Initiation: The customer presents a debit or credit card for payment.
  2. Authorization: Your card reader contacts the customer’s bank via your merchant account to ensure the card is valid and has sufficient funds.
  3. Approval: Upon verification, the customer’s bank reserves the payment amount. The card reader then approves the transaction.
  4. Batching: All approved transactions are stored in a batch file sent to the acquiring bank at the end of the business day.
  5. Settlement: The acquiring bank processes the batch file and transfers the funds to your business bank account, typically within 1-3 business days.

Different Ways to Take Card Payments

Different Ways to Take Card Payments

Understanding the variety of methods available for accepting card payments can help you make an informed decision that suits your business needs. Here are some of the key methods:

Taking Card Payments with a Card Machine

Card machines are essential for in-person transactions, particularly in retail and hospitality settings. They can accept payments via chip and pin, contactless, or mobile wallets like Apple Pay.

Taking Credit Card Payments

Accepting credit card payments involves similar processes to debit cards but often incur higher processing fees. It’s crucial to understand these costs when choosing your merchant account provider.

Taking Card Payments with a Virtual Terminal

Virtual terminals are web-based systems that allow you to enter customer card details manually, ideal for businesses that take payments over the phone or via email. They are classified as “card-not-present” transactions, which may attract higher fees.

o use a virtual terminal, you will need to:

  1. Choose a virtual terminal provider. There are many different providers available, so be sure to compare their fees and features before making a decision.
  2. Set up an account and comply with PCI DSS requirements. PCI DSS is a set of security standards that all businesses that process credit card data must follow. Failure to comply can result in fines and penalties.
  3. Access the virtual terminal. Once your account is set up, you can access the virtual terminal through a web browser.
  4. Enter the customer’s card information. This typically includes the card number, expiration date, and CVV code.
  5. Review the transaction details and confirm the payment. Once you have entered the customer’s card information, you will be able to review the transaction details and confirm the payment.
  6. Receive a confirmation receipt. Once the payment is processed, you will receive a confirmation receipt. This receipt should be kept for your records.

What’s the Best Way to Take Card Payments for Small Businesses?

The “best” method for accepting card payments will vary depending on your business type, the volume of transactions, and customer preferences. Here are some guidelines to help you decide:

  • Retail Businesses: Physical card machines are often the most straightforward and efficient method for high-volume, face-to-face transactions.
  • E-commerce Businesses: A reliable payment gateway integrated with your online platform is essential. Make sure it complies with Payment Card Industry (PCI) standards for security. In fact, most major e-commerce platforms have this well organised. WooCommerce frequently integrates with Stripe and PayPal, while Magento users often opt for Authorize.net due to its robust feature set. Shopify offers a comprehensive solution, Shopify Payments, which covers all aspects of transaction processing, eliminating the need for third-party gateways.
  • Service Providers: If you’re in a business where you send invoices or take payments over the phone, a virtual terminal or a payment gateway that supports invoicing could be your best option.

If you’re looking for a simple all-in-one solution, here are some more useful examples that are affordable for small businesses:

SquareIn-person payments, online payments, over the phone payments, mobile app, no long-term contracts or hidden fees2.75% + £0.30 per swipe, 2.9% + £0.30 per online transaction
PayPalIn-person payments, online payments, over the phone payments, buyer protection, fraud prevention, no long-term contracts or hidden fees2.9% + £0.30 per online transaction
StripeIn-person payments, online payments, over the phone payments2.9% + £0.30 per online transaction, 3.5% + 10p per in-person transaction
Zettle by PayPalMobile card reader specifically designed for small businesses, easy to set up and use, competitive rates, in-app reporting and customer loyalty programs1.75% + £0.20 per swipe, 2.49% + £0.20 per online transaction
SumUpMobile card reader popular with small businesses, easy to set up and use, competitive rates, in-app reporting and customer loyalty programs2.9% + £0.10 per swipe, 2.9% + £0.25 per online transaction

How to Take Card Payments Without a Credit Card Machine?

Accepting card payments without a physical credit card machine is entirely feasible and can be the right move for certain business models. Here are some methods you might consider:

  • Virtual terminals are an online version of a physical credit card terminal. To process a payment, you would log into a secure interface and manually enter the customer’s credit card details. This is particularly useful for phone or mail orders. However, it is vital to comply with Payment Card Industry (PCI) standards to ensure secure handling of sensitive information.
  • Mobile payment apps enable you to accept card payments via a smartphone or tablet. By entering the card details into the app, or by using an additional card reader that connects to the device, you can facilitate transactions. Some popular mobile payment apps in the UK include Square, PayPal, and SumUp.
  • E-commerce platforms like Shopify or WooCommerce provide integrated payment gateways that facilitate card payments. These platforms are generally easy to set up and manage, and they offer the advantage of seamless integration with your online store.
  • Invoice with payment link is a method where you generate invoices that include a clickable payment link. Services like QuickBooks and FreshBooks allow you to send digital invoices where clients can click to pay via credit or debit card instantly.
  • Direct bank transfer is an alternative electronic payment method that does not involve credit cards. By providing your business bank details, you can receive payments directly into your account. Some businesses prefer this method for its lower transaction fees.
  • Payment Service Provider (PSP) API integration allows you to integrate a PSP’s API directly into your existing systems. This will allow you to customize the payment experience while adhering to secure transaction protocols.

How much does it cost to take card payments?

Credit card processing fees in the UK can vary depending on a number of factors, including the type of card, the volume of transactions, and the merchant’s business model. However, some typical fees you might encounter include:

  • Transaction fees: This is the most common type of fee, and it is typically charged as a percentage of the transaction amount. The percentage rate can range from 0.2% to 3.5%, depending on the type of card and the merchant’s contract terms.
  • Monthly fees: Some providers charge a monthly fee for their services, regardless of the number of transactions processed. This fee can range from £10 to £30 per month.
  • Terminal rental fees: If you rent a physical credit card terminal, you will be charged a monthly rental fee. This fee can range from £15 to £30 per month.
  • Setup fees: Some providers charge an initial setup fee when you sign up for their services. This fee can range from £50 to £100.
  • Payment gateway fees: If you accept payments online, you may also be charged a payment gateway fee. This fee is typically charged as a percentage of the transaction amount, and it can range from 0.5% to 2%.
  • Miscellaneous fees: There may be other miscellaneous fees associated with credit card processing, such as chargeback fees, non-compliance fees, and early termination fees.

How secure are card payments?

It is important to shop around and compare different providers before choosing a credit card processing solution. You should also be sure to understand all of the fees involved so that you can choose a plan that is right for your business.

Card payments are generally considered to be a secure form of transaction, thanks to rigorous industry standards and multiple layers of security measures. Here are some key aspects that contribute to the security of card payments:

  • Encryption and tokenization: Modern payment systems encrypt sensitive data at the point of capture and transform it into a unique token, which is then securely transmitted for processing. This technique, known as tokenization, ensures that even if a data breach occurs, the information obtained would be meaningless.
  • PCI DSS compliance: Payment Card Industry Data Security Standards (PCI DSS) is a set of requirements designed to ensure that all companies that process, store, or transmit credit card information maintain a secure environment. Compliance with PCI DSS is mandatory for any business accepting card payments, and non-compliance can result in hefty fines.
  • Two-factor authentication (2FA): Two-factor authentication adds an additional layer of security by requiring two forms of verification before a transaction can be completed. This is becoming increasingly common in online transactions and enhances security significantly. For example, you might be asked to enter your password and then also provide a code sent to your phone.
  • Chip and PIN technology: The widespread adoption of chip and PIN technology in the UK has significantly reduced the incidence of card fraud associated with face-to-face transactions. The embedded chip creates a unique transaction code that cannot be used again, making it far more secure than magnetic stripe cards.
  • Secure Customer Authentication (SCA): New European regulation has introduced Secure Customer Authentication (SCA), a process that requires online shoppers to undergo additional verification steps during the purchase process, thus increasing transaction security. For example, you might be asked to enter your password and then also provide a code sent to your phone, or to authenticate the transaction using a biometric identifier such as your fingerprint.
  • Monitoring and alerts: Many card providers offer real-time monitoring and alerts for suspicious activity. This allows for immediate action in the event of any irregularities, further reducing the risk of fraudulent transactions.

Card Payment FAQs

To start taking card payments, you’ll need a merchant account, a compatible Point of Sale (POS) system or payment gateway, and the relevant hardware such as a card reader or virtual terminal.

While some services bundle merchant services, a standalone merchant account provides greater control and often better rates for accepting card transactions.

You can accept various types of card payments, including debit cards, credit cards, and often mobile payments like Apple Pay or Google Pay, depending on your hardware and software solutions.

Integrated POS systems and payment gateways can manage both online and in-person transactions, consolidating all sales data in one place for easier management.

Integrated POS systems and payment gateways can manage both online and in-person transactions, consolidating all sales data in one place for easier management.

For small businesses with lower volumes, a simple mobile card reader with a flat-rate transaction fee may suffice. For larger operations, negotiating a custom rate with a merchant account provider could be more advantageous.