How startups can quickly begin accepting credit cards

Square, PayPal, Etsy offer fast solutions; check merchant accounts, watch fees

Your Business Credit columnist Elaine Pofeldt
Elaine Pofeldt is a journalist whose articles on entrepreneurship and careers have appeared in Fortune, Working Mother, Money and many other publications. She is a former senior editor at Fortune Small Business magazine and an entrepreneur herself, as co-founder of, a website for independent professionals. She writes "Your Business Credit," a weekly column about small business and credit, for

Ask a question.

Question Dear Your Business Credit,
I am just starting up a business, in the first week. I have a number of clients already who want to pay using a card. My employer, whom I am leaving at the end of the month, has a card processor machine and said if I want, for a fee, I can use it just for a month. Is this OK and what percentage should I give him for this short facility? -- Kerry

Answer Dear Kerry,
Sorry to disappoint you but no, it's not OK. Here's why: Your employer would be violating the contract he signed with his merchant account processor if he let you use his processing machine. That contract did not cover your business. Even if it was OK for him to share his account, it would open a giant can of worms. What would you both do if one of your new customers committed fraud on a purchase you ran through his account?

That said, you're smart to recognize that it's important to offer the payment method your customers prefer. So how do you pull that off quickly? Your best short-term solution is to use a mobile card reader from a provider such as Square or PayPal. They will let you turn an iPad or other mobile device into a terminal. At Square you will pay 2.75 percent for each swipe, online sale or paid invoice. For keyed-in transactions, the fee is 3.15 percent plus 15 cents. At PayPal, the swipe fee is 2.7 percent. Keyed in transactions will run you 3.5 percent plus 15 cents. Even the crafts marketplace Etsy now offers its own card reader, which charges 2.75 percent of every transaction as a swipe fee.

If you are starting a business such as a retail store or restaurant, where you will need to process a lot of cards regularly, I'd recommend you look into getting your own merchant account, soon. Some merchants find they can get better processing rates this way. Our sister site, Merchant Account Guide, enables you to compare various providers. The rules of the merchant processing world are complicated and hard to understand at times, and the language can sound like mumbo jumbo, so it's always helpful to ask other business owners in your community for tips. They will give you candid information on which processors are easy to work with and offer the best deals.

While it's always best to offer whatever payment methods customers prefer, make sure you are not discouraging your customers from paying with plain old cash or checks if those methods are used in your type of business. Accepting credit cards can boost your cash flow and encourage customers to spend more, but when you accept them, fees eat up some of your profits. If, say, you're paying 2.7 percent in fees per transaction, that means that when a customer pays you $1,000, the processor takes $27 off the top. Those fees can add up quickly if you're doing a lot of transactions. Offering some fee-free payment options will help you counterbalance credit card processing fees. Good luck with launching your business!

See related:Should you get a credit card for your new startup?, How can I protect my point-of-sale system against security breaches?

Meet's reader Q&A experts

Does a personal finance problem have you worried? Monday through Saturday,'s Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.

Join the discussion
We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

The editorial content on is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.

Weekly newsletter
Get the latest news, advice, articles and tips delivered to your inbox. It's FREE.

Updated: 03-23-2019