How to Accept Credit Card Payments in Retail: A Complete Guide

If you’re not accepting credit cards in your retail store, you’re missing out on many sales opportunities. Consider the fact that as of 2015 just 32% of consumer transactions were made with cash, compared to 40% in 2012. We can expect this downward trend to continue as more and more people use credit cards and other forms of payment (e.g., mobile).

For this reason, if you’re still operating on a cash only system, you should seriously consider accepting credit cards. Yes, there will be fees, but let me assure you: it is more expensive NOT to accept credit cards. You are losing out on an estimated $73,000 per $2M in revenue you generate. Accepting credit cards may come with a new bill each month, but it also comes with a massive boost in revenue.

Accepting credit cards can be confusing, though. There’s hardware, software, unusual pricing, and lots of new vocabulary. To help you out, we’ve put together this complete guide to accepting credit card payments. When you’re done reading here, you’ll be ready to up your payment game.


Before we get into the weeds on this post, I want to state that every party and object involved in a credit card transaction must be PCI (Payment Card Industry) Compliant. That means your business will need to work with companies that are compliant with the PCI council’s data security standard. The hardware and software you choose to purchase, therefore, has been inspected by one of the PCI-appointed quality security assessors (QSA).

PCI compliance will also mean a few things for your business specifically:

  • You will have to pass a PCI compliance scan. (Read this article for more details.)
  • If you want to store credit card data (for recurring payments, for instance) yourself, you will have to have an audit perform by a QSA.
  • The card networks will leverage a fine to the bank you use of between $5000-$100,000/ month if you are not PCI compliant. The bank, in turn, will pass this fine to you and may also terminate your account or raise your transaction fees.

The Fundamentals

Perhaps the main reason that processing credit cards can get really confusing is that, in the efforts to secure the consumer’s money and data, multiple different players are involved in the single swipe of a card. Where a cash transaction occurs between only two parties (the customer and the business), a credit card transaction involves those two parties, plus your bank, the customer’s bank, a card network, a payment processor, and hardware of some form. For an online sale, instead of hardware, you’ll have a payment gateway.

Let’s talk about those terms:

  • Card networks issue the credit cards. There are four major providers: Mastercard, Visa, Discover, and American Express. These networks may issue their own cards or issue cards for other entities, like banks.
  • The payment processor takes the credit card swipe and asks the card network or issuing bank for approval. Once approved, the processor accepts the payment and deposits it in your merchant account.
  • We’re going to go deeper into the hardware later in this piece, but for the time being, just think of the hardware being the object through which you swipe a card.
  • A payment gateway is a secure page on your website where customers enter their payment information to be processed by your processor. It’s basically a virtual card reader.

Obviously, of the above, your business must choose a processor, hardware, and a payment gateway, so let’s get into that.

How to choose a processor and payment gateway

A payment processing solution will give you the ability to process credit card payments. The company may manufacture its own hardware as well. These payment processing solutions can sometimes be used alone for very, very small retailers, though you will most likely be integrating it into an existing POS system or retail management solution.

Typically, payment processors will be able to act as your payment gateway for online payments, as well. And again, it will integrate into your eCommerce solution.

All about payment processing fees

The businesses involved in processing credit card transactions and keeping them secure for you, so while it can hurt to see them take a cut out of your sales, these fees are warranted. It’s easy to forget the service rendered the because payment processors and card networks work hard to keep their service invisible (as they should), but it’s just a much a service as the service your landlord does by renting you a very visible space.

That said, there are typically multiple areas where fees occur. The first is the per transaction fee and fee can take the form of several styles:

  • Flat fee. The flat fee means that your payment processor will determine a flat rate that you will pay them per transaction, regardless of what card is swiped or how much is transacted. Generally, these fees are the 1-3% range and often include the addition of a $0.10-$0.25. These flat rates can be more pricey on paper than the other methods, but one of the major upsides is that you can easily understand how much was taken out of each sale and give predictions for the coming costs of credit card processing.
  • Interchange plus pricing. For starters here, “interchange” refers to the “interchange rate,” which is the rate that the card networks charge the payment processors to process the card information. This rate will vary quite a lot depending on many factors including card network, card type (debit, credit, business account), and sale type. Interchange plus pricing will charge you the interchange fee plus a small, flat markup from the processing company. Typically the flat markup will resemble the flat fee look: % + ¢.
  • Tiered fee. Tiered pricing is most confusing. You will be charged the interchange fee and then the markup the processing company adds will vary based on much of the same variables that go into the interchange fee. This model has the potential to save money in the long run, but you’ll need to be willing to go through all your sales to be sure that the payment processor doesn’t accidentally overcharge you.

(Please make a note that these per transaction fees will typically be a bit higher for online payments as fraud is far more likely online.)

You should expect some other fees, as well, though. Here are some common ones:

  • Service charge fees. These fees may be charged per-incident or on a flat monthly or annual rate. (Retail management systems will typically include this in their upfront monthly or annual pricing.)
  • Statement fees. These fees are the few dollars they charge you for the time it took them to create your statement.
  • Batch fees. Batches are the total amount of payment a business collects within a day. A batch fee is the fee a payment processor may charge to deposit this money into your account on a daily or semi-daily basis.
  • Chargeback fees. A chargeback is when a customer has their card network or bank return the funds of a sale to their account. Chargebacks can occur legitimately, but they can also be a part of a fraudulent activity known as friendly fraud. Regardless of the legitimacy of the chargeback, though, your payment gateway will typically charge you a fee of between $15-$25/chargeback. That may not seem like a lot of money, but chargebacks add up. In 2015, the industry-wide standard for chargebacks was 1%! That means 1 out of every 100 sales became a chargeback.

Questions to ask your payment processor

Now that we’ve addressed how credit card payments work and what goes into them, let’s talk about the questions you should ask vendors as you look into accepting credit card payments.

1. What type of customer support does the payment processor offer?

The type of customer support offered by any vendor is always crucial. In this case you’ll want to find out if the support is 24/7, what method it’s offered through (phone, chat, etc.), and whether it’s included in your monthly fees or if you pay per incident.

2. Does the processor integrate natively with my current software?

Not every payment processor will integrate with your current software systems. It’s best to find out what type of integration is offered. And if it’s the perfect system in every other respect, can they build an integration for you? Could your POS build a custom integration?

3. What fraud protection services does the processor offer?

Processing credit cards will open you up to whole new types of theft (like the friendly fraud previously mentioned). It’s worth asking the vendors you’re looking at what sort or fraud protection they offer. Is the protection included in the base rate or is it extra? If they don’t offer protection, is there a third-party fraud protection service they recommend or prefer working with that you should look into?

4. How long does it typically take for them to process funds?

It’s important for you to understand ahead of time how long your sales will be tied up with your vendor for so that you can plan ahead.

5. What miscellaneous fees will be charged?

It’s paramount to your budgeting that you get a clear picture of the fees coming your way.

6. Is there a monthly minimum I’m required to meet? Conversely, is there a monthly limit to the amount you will process for me?

Some vendors may charge you a fee if you don’t meet their monthly sales requirements. As a small business, you’ll want to avoid vendors who charge you for not meeting their requirements. And conversely, some vendors may impose a monthly limit on your business. This is something growing businesses and enterprise-level businesses should keep an eye out for.

7. Will I need to purchase hardware through a third party?

Sometimes, payment processors (e.g., Square)  make their own hardware that you can purchase. Other times, you may have to go through a third party vendor for your hardware.

Picking Hardware

The hardware you use will ultimately vary on your processor, but universally, you will need a card reader or payment terminal of some form.

Card readers these days are extraordinarily nifty and mobile friendly. They typically can plug into the headphone jack of a phone or iPad and run through an app. For iPad, you also have the option of purchasing a card reading case. If you’re still working with an older desktop POS, you can purchase a keyboard with a built-in card reader, instead.

Payment terminals on the other hand, connect with your register via WiFi. Others may need to be plugged into the register. Standalone terminals are typically made with a place to swipe the card and a place to insert them. They also have a keypad for the customer to type in a PIN. (You’re definitely familiar with these guys.)

The hardware you choose will ultimately depend on the needs of your store and your budget. Brand new retailers may find that they only have the budget to use a card reader plugged into their phone. Other retailers may find they need 6 iPad registers to cover their floor and their pop-up shops.

All about payment hard costs

Hardware doesn’t come free, unfortunately, so let’s have a look at some prices.

  • Mobile card readers are the cheapest of all the hardware items. Some of Square’s card readers can be got for as cheap as $10, though some of the better quality ones are around $50.
  • iPad cases that can read cards are a bit more expensive, averaging around $180.
  • Keyboard card readers vary drastically in pricing, but on average, they’re between $50-$80.
  • Payment terminals for your existing POS will average around $150, though you can certainly find some for cheaper.
  • A full iPad register will run you a bit more. Vend’s bundle, for instance, is $980.38.  

Questions to ask your hardware provider

1. What’s the durability of the item?

Chances are, your hardware provider will make an upfront general claim about the durability of their items, but you may want to question them further. This is particularly true for retailers who plan to use their hardware on the go. Some specific things you should ask about include:

  • How does the item handle being dropped on the ground? Or if someone spills liquid on it?
  • How does it handle in the event of a power surge?
  • Are the items dust-proof or will they need to be cleaned regularly to maintain function?

2. Can you lease the items instead of buying them?

Some hardware providers do offer the option of leasing hardware and this can be a boon for small businesses. If your hardware budget is very tiny but you need more than just a card reader, ask about the leasing options your hardware provider offers.

Questions to ask yourself when deciding on your payment software and hardware

Now that you know about the software and hardware aspects of taking credit card payments, it’s time to ask yourself a few questions so you can make your final decisions.

1. What’s my check out style?

As mentioned a bit earlier, the hardware you buy will be influenced by both your budget and check out style. If you always check customers out at the same desk, investing in a desktop register may be right for you. If you prefer to allow salespeople to ring customers up anywhere on the floor, you’ll want to get iPad registers.

2. Am I considered a “high risk” merchant?

Many banks are wary of doing business with certain types of businesses, such as legal marijuana dispensaries or gambling websites. If your business falls into this category, you’ll need to look for a payment processor who is willing to work with you.

3. How much do I do in sales per month? How fast am I growing?

When it comes to picking pricing structures, you need to know how much you do in revenue each month and if you’re expecting rapid growth any time soon. This knowledge will also help you navigate whether a processor’s monthly limits work for you.

4. Does the processor integrate with my POS?

Does the payment processor integrate with your existing point of sale (POS) (or the solution you’re considering)? It’s best to choose a provider that works seamlessly with your POS solution. This provides you with several benefits, including faster and more secure checkout, no manual reconciliation, financial savings, and improved visibility into your operations.

Further Reading


Need an in-depth guide to choosing the right payment provider? Check out Vend’s Retail Payments Guide. This resource will you understand the importance of payment processors in retail and will give you the confidence to choose the right one for your business.

In it you’ll learn:

  • How to negotiate the best rates
  • How to beef up payment security using the right provider
  • How to get maximum customer support from your payment processor and POS

Learn More

Final words

Ultimately, taking credit card payments doesn’t have to be scary or even particularly costly. It’s a boon to your business that you can’t afford to miss.

About Francesca Nicasio

Francesca Nicasio is Vend's Retail Expert and Content Strategist. She writes about trends, tips, and other cool things that enable retailers to increase sales, serve customers better, and be more awesome overall. She's also the author of Retail Survival of the Fittest, a free eBook to help retailers future-proof their stores. Connect with her on LinkedIn, Twitter, or Google+.