How to take card payments

According to the BRC Payments Survey conducted by the British Retail Consortium, credit and debit cards amounted to 75% of transactions in the UK in 2023 – so having the means to take card payments from your customers is crucial if you want to cater to this increasingly card-dependent market. There’ll be a few key decisions to make along the way, but we’ll walk you through everything you need to know about accepting card payments, including choosing the right hardware and software, finding the best card readers and affordable credit card processing fees.

Getting fully set up for taking credit and debit card payments can seem tricky at first, but it’s a simple process if you know the right steps to take. Our dedicated guide will help you to get up and running as quickly as possible.

But first, let’s take a look at the different methods you can use to take card payments from your customers.

Different ways to take card payments

There are three main methods of card payment: via card machine (card present), payment gateway (card not present), and virtual terminal (card not present).

1. Card machines (also called card readers or card terminals) are mainly used for face-to-face payments in brick-and-mortar stores. However, some card machines can take card-not-present payments, too.
2. Payment gateways are built into ecommerce websites to process online card payments, which is why it’s important to check which payment gateways your ecommerce site is compatible with before selecting one.
3. Virtual terminal platforms allow customers to pay over the phone. Just key in the card number, expiry date, CVV (card verification value) number, and the digits from the customer’s billing address postcode.

How to take card payments in person: step by step guide

If you’re running a brick-and-mortar business such as a salon, shop, or cafe, you’ll be selling face-to-face to your customers. That means you’re going to need to take card payments then and there.

Step 1: Choose a merchant account or payment service provider

A merchant account is essentially a holding account that sits between your customer’s bank account and your business bank account (if you don’t already have one, you will need a business bank account to take card payments, too). A merchant account acts as a middleman between you and your buyers, allowing their money to be transferred instantly and safely.

It’s beneficial for all parties involved, as it allows you to process a range of electronic payments, including card payments, and gives your customer peace of mind that their money is secure and can be charged back in case of an error.

What does it cost?

You’ll have to keep in mind that merchant account providers will charge fees for using the service. Generally, these fees are dependent on the volume of card transactions you’ll be taking per month. It’s worth knowing that they usually charge less to process card-present payments over card-not-present payments.

You’ll most likely have to enter into a contract with the bank to agree your rates, as well as additional fees to cover costs like PCI DSS compliance. You’ll need to be PCI compliant in order to take card payments – this is absolutely essential to your operation, and you can find more detailed information about this in our dedicated guide to merchant accounts.

Your first step should be to begin researching and comparing different PSPs or merchant account providers. This might seem intimidating, but we can help make the process a whole lot easier with our thoroughly researched roundup of the best merchant service providers for your business.

Step 2: Set up your merchant account

Once you’ve made a final decision on the best merchant account provider for your operation, you’ll then need to go through the process of applying for one and setting it up.

The first step is to get all the documentation that you’ll need ready to submit your application. There is no uniform process for applying for a merchant account as the specific requirements vary between providers, but it’s a pretty safe bet that you’ll at least need the following:

• Your personal details, such as ID and proof of address
• Your business plan, including what type of business it is and what you sell
• An estimate of your turnover expectations for card payments as well as the average transaction value
• How you’ll be expecting to receive payments
• Any recent trading accounts

Once you have all these details ready and accounted for, you can begin filling out the official application for your merchant account of choice. In the majority of cases, you’ll be able to do this online via the provider’s website, and it should be a fairly brief process.

Once your application has been submitted, you just need to wait patiently for approval. This could take as little as a week, but it could be a longer process if you’re just starting out. This is simply because it’s a higher risk for the provider to do business with you as an untested company, and they may ask for additional information from you prior to approval.

If all goes well and all your documents are correctly accounted for, you should be approved for your merchant account and will be on your way to accepting card payments!

Step 3: Choose a card reader

In order to be able to take these card payments in person, you’ll need to get yourself a card reader, machine, or terminal. This is the device with which you’ll accept card payments in person. Having a card reader also allows you to take alternative payments like Google Pay and Apple Pay from your customers.

What is a POS system?

Most modern card readers for small businesses can be easily integrated with POS (point of sale) systems. These are comprehensive payment systems that include advanced sales features and devices like barcode scanners, cash drawers, and terminals with screens. You just have to make sure your card reader is able to integrate with the specific POS software you choose.

A full POS system isn’t actually necessary for taking card payments though – you can do it with just a card reader on its own. There are also card machines that can function as all-in-one, hand-held POS systems (like the Square Terminal, for example).

How do I choose the best card machine for my needs?

When it comes down to selecting a card machine, there are quite a few different options you can choose from depending on what your business will need. Luckily, we have a dedicated article to help you choose the best card reader for your small business.

Step 4: Set up your card reader

Most modern card readers can be fully charged, set up and ready to start taking payments in under an hour. Once setup is completed, all payments can be processed through the card machine provider’s payment software, and you’ll also have the ability to process refunds, and have access to the sales data on all of your transactions.

The majority of payments taken with a card reader will be using contactless payment methods – the transaction limit for a contactless payment is currently £100. For a payment over £100, customers will need to input their PIN number.

Once your card reader is set up and integrated into your POS system – if you have one – you’re ready to start taking card payments in person!

How to take card payments online

There are two methods of taking online card payments: using a payment gateway or a payment facilitator.

Using a payment gateway to accept online payments

In order to receive online payments through your ecommerce site using this method, you’ll need to sign up for a merchant account, then link this with the best payment gateway for your business.

Helpfully, a merchant account provider can usually provide you with a payment gateway as part of your contract. However, you can go for a third party payment gateway, such as Square, if you find one that’s more suited to your needs.

Using a payment facilitator to accept online payments

Alternatively, you can use an all-inclusive payment facilitator rather than setting up your own payment gateway. Instead of having a contract for your own dedicated merchant account, a payment facilitator ‘bundles’ your card transactions with those of other merchants and processes them all together in one batch.

What are the pros of using a payment facilitator?

The upside of this method is that it tends to be cheaper than paying for your own merchant account and payment gateway. It’s also a more attractive option if you have a less than ideal credit rating. Plus, payment facilitators tend not to charge monthly fees (they take a fixed percentage of each sale you make instead).

What are the cons of using a payment facilitator?

There’s a downside: payment facilitators are infamous for having extremely strict rules and regulations, so your business could be at risk of being suspended and the payment facilitator will hold your funds.

If you need more guidance or have more questions about this process, such as how to take direct debit payments, you can jump over to our dedicated article that explains how to take online payments in detail.

How to take card payments without a card machine or over the phone

Taking card payments over the phone is actually a pretty simple process. You can even potentially use a card reader to do this, depending on the model.

Though if you don’t have a card reader to hand, all you need is:

1. A computer.
2. An internet connection.
3. A merchant account.
4. Most importantly, a virtual terminal.

A virtual terminal is just a web-based software you can use on a computer that allows you to take payments without the need for a physical card machine or POS system.

It works in tandem with your payment gateway and merchant account. Most merchant account platforms will offer a virtual terminal as part of their online payment ecosystem.

Here’s a straightforward step-by-step process of how it works:

1. Log in to your virtual terminal via your web browser and select manual card entry.
2. Request your customer’s relevant details and begin inputting them into your secure virtual terminal system (please note, you need to enter these directly into the portal to be PCI compliant). You will need to enter: their full name, the address associated with their card (virtual terminals use Address Verification Service to verify transactions), their credit/debit card number, their card expiration date, the CVV code on the back of their card, and the total amount they are being charged. Verify the CVV code and then authorise payment to your merchant account.
3. Once the payment has been approved, confirm to your customer that payment has been successful and provide them with a receipt or proof of payment reference number.

As you can see, it’s a relatively simple process, but if you do have any further questions about this you can check out our in-depth guide to taking payments over the phone.

What’s the best way to take card payments as a small business?

Out of the three methods for taking card payments, the most suitable will depend entirely on the type of business you’re running.

• Card machines are perfect if you’re operating a face-to-face, brick and mortar business, in particular hospitality, beauty, or retail.
• Payment gateways are ideal for online stores. There’s no need to purchase a card reader or any physical hardware if you’re solely an ecommerce business, and this can really help to reduce costs (although you will need to factor in the cost of running a website).
• Businesses with little to no face-to-face customer interaction will find taking payments via virtual terminals a solid option – although some card machines do also have this function available.

How the process of taking card payments works

This helpful diagram illustrates the journey a transaction takes once a customer enters their card information:

So, the key players involved in the behind-the-scenes card payment process are:

The merchant: That’s you! Or rather, your business. You’ll be accepting the money from the customer, which will go into your merchant account and finally your business bank account.

The merchant account: As we’ve mentioned, this is a holding account that acts as a go-between for your customer’s account and your business bank account.

The customer: This is the cardholder, who will be sending a payment from their bank account to your account in exchange for your goods or services.

The issuing bank: The bank that provided the credit or debit card being used to pay you to the customer, and will authorise or decline the transaction.

Card machine/POS (point of sale) system: This is the hardware and software your business will use to take payment from your customer’s card.

The acquiring bank: This is the bank acting on your behalf, not the customer’s. It processes the credit and debit card payment received via your POS system or card machine from the customer’s issuing bank. It does this via the credit card networks.

The card networks: Companies such as Visa and Mastercard that provide the communication network infrastructure between you and your customer, depending on the card they’re using. They can sometimes also act as the card issuer, but not always. They will notify your business of whether the customer’s transaction has been approved or not, and they might set the processing fees for each transaction, depending on your merchant account’s pricing model.

Let’s put this into a specific scenario to make things a bit clearer:

1. Amit walks into Coast Roast, a new coffee shop that’s just opened up near his local beach. He orders a cappuccino and gets out his card to pay.
2. The barista makes Amit a deliciously frothy cappuccino, then grabs the card reader for Amit to tap with his card.
3. Amit taps his card and the transaction travels from the card machine to Coast Roast’s merchant account, where it waits for approval.
4. Amit’s card network is alerted of an attempted purchase, and contacts his issuing bank to make sure there’s enough money in his account.
5. Amit’s issuing bank tells the card network that he can afford to purchase the cappuccino.
6. The card network approves the transaction, and the transaction remains in Coast Roast’s merchant account while it’s being cleared.
7. Amit heads down to the beach to enjoy his coffee.

Next steps

Taking card payments efficiently is beneficial to both you and your customers, but to ensure your business succeeds, you’ll need to take the time to do as much research as you can into finding the best merchant account provider for you.