Editor’s Note: A version of this post was originally published in June 2012. It has been edited and revised for completeness and accurateness. 

For many business owners, one of the first obstacles they’ll need to sort out and overcome is figuring out how they’ll accept payments from customers. This tends to prompt questions like:

  • “What type of payments should I accept?”
  • “What are the pros and cons of these payment types?”
  • “What are the costs of accepting payments?”

These are important questions that are difficult to answer when learning about payment processing for the first time. Credit cards are one of the most popular forms of payment among consumers and certainly an option you should consider for your business. In this article, we will cover the basics steps to getting started with credit card processing including how to get started and an overview of how costs and fees work.

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Step 1: Set up a Merchant Account

A merchant account is an account with a credit card merchant processor who agrees to underwrite and settle your transactions. The payment processor is the company that facilitates transaction authorization and data transfer for the transactions you process.

Step 2: Understanding the Fees

When it comes to credit card processing, it’s often confusing as to what rate you will be paying. You may be given a lower teaser rate, but this rate may not be available for the types of transactions you wish to process.

Step 3: Types of Transactions

Credit card rates are typically broken into two categories:

  1. Card Present (or Swipe at POS) are transactions in which the credit card is physically swiped through a credit card terminal
  2. Card Not Present (or MOTO, Mail Order/Telephone Order) are transactions in which the card is not physically present and includes online payments, phone transactions or even credit cards typed in manually to a terminal.

Because the rates will differ for each category, it’s important to know which type of transactions your business will be using most often so you can find a merchant processor that offers low rates for that particular transaction type.

Step 4: Getting the Tools

Getting started with credit card processing isn’t just about the setup, it’s also about the management of payments once the account is established and customers are paying. Your needs will differ depending on your business type. You may need user-friendly software for online payment processing and order fulfillment. Or, you may want to find the best combination of receivables and payment processing software to manage recurring payments and phone order entry. Or, you may need an easy-to-use, secure terminal for Point of Sale card reader processing—perhaps even an attachment for your phone to read cards. For many merchants, a suite offering all of these features is the best solution. Just be sure that the tools you choose are compatible with your merchant processing account.

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