How to take card payments

Whichever way your small business needs to process card transactions – whether in person, online, via email, or over the phone – our dedicated guide will show you how.

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The four main steps to taking card payments are:

  1. Decide how you want to take card payment and which payment methods you require – face-to-face with a card reader, online with a payment gateway, and/or over the phone with a virtual terminal, etc.
  2. Research merchant account providers – look into what providers are out there and which will offer you the payment services you require for the best transaction fee. Our merchant services cost comparison tool can make this daunting, time-consuming part of the process quick and easy.
  3. Link with your point of sale system and website hosting platform as needed – make sure the devices and services you choose are compatible.
  4. Set up your card reader, payment gateway, and/or virtual terminal – start taking payments face to face, on your website, over the phone, and through payment links.

Taking card payments for your small business really is that simple – however, if you want to learn more about how card payments actually work and the different types of card payments available, then read on.

Start taking card payments today Do you currently accept card payments?

What happens when you take a card payment?

The diagram below follows the journey a transaction takes once a customer enters their card information.

taking a card payment

Let’s put this in a scenario to make things 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 company is alerted of an attempted purchase and contacts his bank to make sure there’s enough money in his account
  5. Amit’s bank tells the card company that he can afford to purchase the cappuccino
  6. The card company approves the transaction and the transaction remains in the Coast Roast merchant account while it’s being cleared
  7. Amit heads down to the beach to enjoy his coffee

Taking card payments and merchant accounts

Card payments and merchant accounts go hand in hand, as merchant accounts are where transactions go to be processed once a card transaction has taken place.

Merchant accounts can be:

  1. Supplied by a bank
  2. Supplied by a payment facilitator

Merchant accounts supplied by banks incur fees that are dependent on the volume of card transactions you take per month. They usually involve contracts, and set monthly fees to cover costs like PCI (Payment Card Industry) security standards.

Merchant accounts supplied by payment facilitators incur a set fee per transaction that’s only cost-effective up to a certain volume of transactions per month. Arrangements with payment facilitators are usually contract-free, and fees are inclusive of all charges.

For more information on merchant accounts, head on over to our what is a merchant account page.

Merchant accounts can also be:

  1. Low risk
  2. High risk

Both banks and payment facilitators supply low risk merchant accounts. They’re offered to businesses that deal with low risk transactions – ones that aren’t classed as high value or don’t usually run the risk of expensive refunds. Most retailers and service providers use a low risk merchant account.

Businesses that are at risk from frequent high value refunds (e.g travel companies) or sell high value products (e.g car dealerships) must apply for a high risk merchant account. High risk merchant accounts fees are higher and deposits take longer to process. If you require more information, read our guide on high risk merchant accounts.

Different ways to take card payments

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

Merchant account providers usually charge less to process card-present payments over card-not-present payments.

For example, Zettle and Square are two popular merchant account providers.

They charge businesses 1.75% for card-present transactions and 2.5% for card-not-present transactions.

So, how and when are the different types of card payment used?

Types of transactionFace-to-faceWebsiteOver the phonePayment links (e.g. e-invoice)
Card machine
Payment gateway
Virtual terminal
  1. Card machines are mainly used for face-to-face payments. However, some card machines take card-not-present payments, too. For example, a customer can ring and pay by giving you their card number, expiry date, CSC (card security code) number, and the digits from their billing address postcode. You key these details into your card machine.
  2. Payment gateways are built into ecommerce websites. To have all payment methods provided by a single provider, you’ll need to check which payment gateways your ecommerce site is compatible with – or indeed, check compatibility before you choose your ecommerce provider.
  3. Virtual terminal platforms are used by you if a customer phones up to pay. Virtual terminals work in exactly the same way as if you were keying a payment into your card machine. You’ll require a card number, expiry date, CSC (card security code) number, and the digits from the customer’s billing address postcode.

Payment gateways vs virtual terminals

Traditionally, payment gateways are used by the customer to purchase items via an ecommerce store.

However, more recently, they’re now used in conjunction with payment links to enable customers to pay remotely.

Some merchant account providers offer payment gateways that integrate into third party ecommerce web-hosting platforms, while others only support their own hosting platform.

For example, WorldPay integrates with Shopify Ecommerce, while the Square payment gateway only integrates with Square Online.

Virtual terminals, on the other hand, are solely used by a supplier to enter in customer card details when a customer chooses to pay over the phone.

How to take card payments with a card reader

To take card payments with a card reader, you’ll first need to decide on whether you want to use a bank or a payment facilitator. They’ll be able to offer you card readers that are compatible with their payment system. The table below outlines the main differences:

Traditional card readerMobile card reader
Key points:

1. Usually supplied by banks and larger payment facilitators, including WorldPay

2. Accepts contactless, chip and pin, mobile, and virtual payments

3. Wired and wifi-enabled
Key points:

1. Usually supplied by payment facilitators, including SumUp, Square, and Zettle by PayPal

2. Accepts contactless and chip and pin payments

3. Wifi-enabled, mobile bluetooth 3G connection, SIM card 3G connection

To take card payments using a card reader, you’ll need to make sure you have wifi or mobile internet connection. Just make sure you check with your provider as to which method of connectivity you need before you commit.

Instructions for configuring your card reader with your payment software are usually fairly simple. Once it’s configured, all payments will be processed through the software, meaning you’ll have access to data on all of your payments.

The majority of payments taken with a card reader will be taken using contactless payment methods – the transaction limit of contactless payments is currently £45. After £45, customers will need to input their pin number.

If you need more information on card readers in general, head on over to our guide to chip and pin machines.  We explain the differences between traditional and mobile card readers in more detail and clue you in to how they work.

If you’re ready to start comparing card readers, take a look at our pick of the best card readers for small businesses. You can read about card readers from a range of providers and discover the best way to find the right one for your needs.

Start taking card payments today Do you currently accept card payments?

How to take card payments with a payment gateway

To take card payments via your website, you’ll need a payment gateway. If your website is hosted by a website builder like Wix or Squarespace, you’ll need to check which payment gateway providers are compatible with your chosen platform.

You can also set up a website through your payment processing provider. These websites are typically very simple and use your payment provider’s payment gateway to take card payments.

So what do you need to consider when taking card payments online?

Choosing the right payment gateway service

Your payment gateway provider doesn’t have to be the same as your card reader provider.

For example, you could choose SumUp for your card reader payments, but use Stripe as your payment gateway provider for your hosted website.

Using one platform to host all payment processing

Starting an online store through your payment processor is usually free. Instead, charges occur on a per transaction basis. For example, SumUp charges 2.5% per transaction made through its online platform, which is more cost-effective than Stripe, which charges 1.6% + 20p to process a transaction on a hosted website platform.

SumUp vs Stripe payment gateway case study

SumUp online store creator

On its own, SumUp’s payment gateway is not integratable with third party ecommerce platforms. Instead, SumUp provides its own online store service which merchants can access and set up via the SumUp app.

SumUp enables merchants to set up an attractive (albeit simple) online store that offers shipping and click and collect services. SumUp doesn’t charge merchants to set up an online store, but it does charge a fee of 2.5% per card payment.

While SumUp stores are easy to set up, merchants don’t benefit from having their own personalised web address. This means merchants are limited to linking to their website from social media pages or through customer emails.

You’ll also find that instead of accepting card payments in multiple currencies, a SumUp payment gateway only accepts one currency, and additional services like payment analytics just aren’t as sophisticated as those offered by dedicated payment gateway providers.

Stripe, on the other hand, is a dedicated payment gateway provider. While charging slightly more per transaction (1.6% + 20p), it embeds into a multitude of ecommerce platforms and enables you to take card payments in a number of different currencies.

Dedicated payment gateway providers like Stripe also enable merchants to benefit from a search engine optimised website with a personalised web address, in-depth analytics, and higher levels of security.

In essence, to take card payments online, think about your return on investment potential.

Do you want to take card payments with a simple, cost-effective set up? Or, do you want to take card payments online with a sophisticated, more costly website and payment gateway provider that could generate more revenue in the long run?

Are you a hospitality business looking to take payments online for takeaway and delivery orders?

Then, take a look at our dedicated page to the best online ordering systems for takeaway and delivery in the UK.

How to take card payments with a virtual terminal

A virtual terminal offers the same function as a card reader – you just type your customer card credentials into an online platform, rather than a physical device.

Because virtual terminal card payments are classed as card-not-present payments, payment processing companies charge more to process these transactions.

Most payment processors offer virtual terminals alongside their card reader and payment gateway services, meaning you can keep all of your payment processing with one provider.

Our payments expert, Robert Binns, goes into great depth about how to take card payments with a virtual terminal in his guide to taking payments over the phone.

How to take card payments over the phone

Here’s a step-by-step guide to taking a card payment over the phone, as instructed in our virtual terminals guide:

  1. Open the virtual terminal interface from your web browser, and log in.
  2. Enter the price of the sale, and hit ‘manual card entry’ (or your terminal’s variation of this).
  3. Have the customer read out their card details, and enter them straight into the portal.
  4. Key in the address associated with the card (this is also crucial, as virtual terminals use AVS (Address Verification Service) to verify transactions).
  5. Hit ‘confirm’ to finalise the sale.

How to take credit card payments

Taking credit card payments largely involves the same processes as with other cards.

You will still need to decide how you want to take payment, which merchant account provider you will use, and set up your point of sale system.

One of the main differences however is the processing costs.

Credit card processing fees differ depending on the provider. For the majority of merchant account providers transaction fees cost on average 1-3% per transaction.

However with companies like American Express (Amex) you would be charged more like 4-5% per transaction.

Always do your research when it comes to card processing fees.

Start taking card payments today Do you currently accept card payments?

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

Out of the three methods for taking card payments, the cheapest will depend entirely on the type of business you are running.

  • Payment gateways are ideal for ecommerce businesses with online stores. There is no need to purchase a card reader or hardware if your business is based entirely online and this can greatly reduce costs. Although keep in mind the costs of running a website.
  • Card readers are perfect if you are operating a face-to-face, physical business. In particular hospitality or retail businesses. To find out more check out our review of the best card readers for small businesses.
  • Businesses with contact centres or no face-to-face customer interaction might find taking payments via virtual terminals a good option.

Some providers are more tailored to a particular method than others. For example, Zettle is ideal for card reader payments, as it offers affordable hardware and free point of sale software.

Taking card payments: key takeaways

  1. There are three ways to take card payments – by card reader, by payment gateway, and by virtual terminal
  2. Card payment services can be supplied by banks or payment facilitators
  3. Typically, you can mix and match card payment service providers or use the same one for all three methods
  4. The card payment taking process involves several parties, including your merchant account provider, and the customer’s card association and bank
  5. There are so many different card payment processing companies out there all offering different services at different rates
  6. A quick way to find out which card processing company is right for your business is to compare providers through our online tool is reader-supported. If you make a purchase through the links on our site, we may earn a commission from the retailers of the products we have reviewed. This helps to provide free advice and reviews for our readers. It has no additional cost to you, and never affects the editorial independence of our reviews.

Ross has been writing for Startups since 2021, specialising in telephone systems, digital marketing, payroll, and sustainable business. He also runs the successful entrepreneur section of the website.

Having graduated with a Masters in Journalism, Ross went on to write for Conde Nast Traveller and the NME, before moving in to the world of business journalism.

Ross has been involved in startups from a young age, and has a keen eye for exciting, innovative new businesses. Follow him on his Twitter - @startupsross for helpful business tips.

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