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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Our expert team of writers and researchers worked to identify the best payment processing and merchant account providers by focusing on the factors small businesses care about most – value for money, including fees and hidden extras; security protocols and fraud protection; customer support, and ease of access across platforms including mobile.
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Getting up and running with taking card payments from your customers can be a relatively simple matter. There are some decisions to make on the way, and costs, including hardware such as a card reader, and credit card processing fees.

But, with clarity around how and where you need to process payments, things can be refreshingly simple.

The four main steps to taking card payments are:

  1. Decide how you need to take card payments (online-only, in-person, or both)
  2. Set up a merchant account in which your business can receive the payments
  3. Choose a POS system and payment gateway that are compatible
  4. Set up your card reader, payment gateway, and/or virtual terminal

The most important thing is to understand the exact rates you’ll be dealing with for your own business. To help with this, you can use our 🔍free card comparison tool to compare quotes from brands like Zettle, Square and more. Simply answer a few questions to get started…

How do you need to take payments?

Compare Costs

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.

Why take card payments?

Mobile recently overtook cash as the most popular way to pay in the UK, which proves that embracing card payments isn’t just a convenience—it’s a strategic imperative that can reshape your success trajectory. Here’s why:

  • You can cater to all customers: In a world where wallets are lighter on cash, accepting card payments ensures you don’t miss out on sales from customers who’ve left their notes and coins at home.
  • Quicker money transfers: say goodbye to queuing at the bank. Card payments often land in your bank account faster, maintaining a healthy cash flow and saving you those extra trips.
  • No more check-chasing: with card payments, you won’t be at the mercy of customers sending checks; instead, transactions become seamless and timely.
  • Enhanced security: by sidestepping the need to hold substantial amounts of cash on-site, you can help safeguard your business against crime and potential security breaches.

And that’s just the beginning. During the harsh conditions of the cost-of-living crisis and the current consumer price inflation, consumers have less disposable income to spend with businesses so any minor inconvenience could be a dealbreaker. The ability to take card payments may be the thing that keeps your business afloat – so if you’re ready to future-proof your business, read on for a quick and easy rundown of how it all works.

Taking card payments: step-by-step

Today’s customers expect the ease and security of being able to pay by card, which means small business owners need to know how to take card payments. Broken down, the four steps to be able to take card payments are:

Step 1: Decide how you want to take card payments

Step 2: Set up a merchant account

You don’t necessarily need one, but it is much easier to accept payments with a small business merchant account. A merchant account is a type of bank account that enables businesses to accept and process various forms of electronic payments such as credit and debit card transactions, providing a way to securely receive funds from customers.

Doing so won’t just help to improve the customer experience. It’s also guaranteed to improve cash flow, as money can be digitally transferred, instantly.

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.

During your research, make sure you compare fees, as these differ depending on the platform (our 🔍free expert quote finder tool can take care of this step for you).

Step 3: Choose a POS system and payment gateway that are compatible

Your card machine needs to be compatible with your point of sale (POS) system, and your payment gateway needs to be able to integrate with your ecommerce website, in order to successfully take payments – so check compatibility before choosing providers as this is crucial for seamless payment processing. (the Zettle card reader does not integrate with Square POS, as an example).

This is usually very simple and can be done from the POS terminal.

Step 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.

Voila! Once the above steps have been completed, you should be able to start taking card payments for your small business.

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

Once set up correctly, it is a completely automated backend system with your customer’s convenience and seamless user experience in mind.

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).

  1. Card machines are mainly used for face-to-face payments in physical stores. However, some card machines take card-not-present payments, too.
  2. Payment gateways are built into ecommerce websites, which is why you’ll need to check which payment gateways your ecommerce site is compatible with.
  3. Virtual terminal platforms allow customers to pay over the phone. Just key in the card number, expiry date, CSC (card security code) number, and the digits from the customer’s billing address postcode.

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

How to take card payments with a card machine

To take card payments with a card reader, you’ll first need to decide on whether you want to use a traditional card machine, or a mobile one. The table below outlines the main differences:

Traditional card readerMobile card reader
Usually supplied by banks and larger payment facilitators, including WorldPayUsually supplied by payment facilitators, including SumUp, Square, and Zettle by PayPal
Accepts contactless, chip and pin, mobile, and virtual paymentsAccepts contactless and chip and pin payments
Can only be used with an internet connection (ethernet cable or WiFi-enabled)Can be used with a WiFi connection, mobile bluetooth 3G or 4G connection, or a SIM card

The best card readers for small businesses can be easily configured alongside your POS software. Once setup is completed, all payments will then 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 £100. After £100, customers will need to input their pin number.

How to take credit card payments

To take credit card payments, you need to decide how you want to take payment, which merchant account provider you will use, and then set up your point of sale system.

These payments largely involve the same processes as other cards, except credit card processing fees tend to be greater (typically 1-3% per transaction). Companies like American Express (Amex) charge around 4-5% per transaction.

Due to this, credit card payment providers require a bit more research to understand the fees involved before purchase, as they can take a lot off the top when it comes to sales.

How to take card payments with a virtual terminal

Virtual terminals are essentially a secure webpage which offers the same function as a card machine. You still type in your customer’s card credentials but into an online platform, rather than a physical device.

This is enormously helpful for those based remotely that want to sell over the phone – or even if you have a physical location but want to be able to charge for things like bookings.

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

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

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.

  • Card machines 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 machines for small businesses.
  • Payment gateways are ideal for online stores. There is no need to purchase a card reader or hardware if you’re an e-commerce business and this can greatly reduce costs (although you will need to factor in the cost of running a website).
  • Businesses with contact centres or no face-to-face customer interaction will find taking payments via virtual terminals a good option – although some card machines do also have this function available.

Next steps

Taking card payments will dramatically simplify the payment experience for your customers. But to ensure you don’t give yourself more trouble down the line, take the time to do thorough research into the right merchant provider as early as possible.

There are lots of card payment processing companies out there all offering different services at different rates. For a quick solution to find out which card processing company is right for your business, you can use our expert 🔍free online quote tool.

Card payments FAQs
  • How can I start taking card payments?
    To start taking card payments: you'll need to decide how you want to take card payment, research merchant account providers, link them with your point of sale system and website hosting platform as needed, then set up your card reader, payment gateway, or virtual terminal.
  • How can I take card payments without a card machine?
    If you don't want a card machine you can use a virtual terminal, that allows you to take payments over the phone. You type in your customer’s card credentials into the online platform, rather than a physical device.
  • What app can I use to take card payments?
    There are a range of payment apps you can use, including Zettle, Paypal and Square to name just a few.
  • What are the benefits of accepting card payments?
    Card is preferred by customers as an easier, more secure payment method - particularly as cash continues to be phased out. Businesses that take card payments will also save on the security costs of looking after cash deposits, and get instant access to payments.
  • Do I need a business bank account accept card payments?
    No, but we recommend it. You can use something called a payment facilitator to process and clear card payments, but you’ll be relying on another company to look after your revenue. It’s much safer to set up a business bank account.
  • What is the cheapest way to take card payments?
    Our top-rated card processing provider is Square. Its hardware starts from an affordable £16 flat fee. With no other monthly fees, the only thing you’ll pay is a transaction charge of 1.75% per sale. 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 reviews for our readers. It has no additional cost to you, and never affects the editorial independence of our reviews.

Written by:
Stephanie Lennox is the resident funding & finance expert at Startups: A successful startup founder in her own right, 2x bestselling author and business strategist, she covers everything from business grants and loans to venture capital and angel investing. With over 14 years of hands-on experience in the startup industry, Stephanie is passionate about how business owners can not only survive but thrive in the face of turbulent financial times and economic crises. With a background in media, publishing, finance and sales psychology, and an education at Oxford University, Stephanie has been featured on all things 'entrepreneur' in such prominent media outlets as The Bookseller, The Guardian, TimeOut, The Southbank Centre and ITV News, as well as several other national publications.
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