Businesses are increasingly reliant on the ability to accept electronic payments, and selecting a credit card processor is a critical decision impacting long-term success. As of February 2026, a growing number of companies are expanding globally, creating a demand for multi-currency and localized payment options.
A payment processor facilitates electronic transactions, including those made with credit cards, debit cards, and digital wallets, between businesses and their customers. These services enable businesses to securely and quickly accept various forms of payment and transfer funds from the customer’s account to the business’s account, according to industry resources.
When a customer makes a purchase, the payment processor receives transaction details and securely transmits this information to the issuing bank – the customer’s bank – and the acquiring bank – the business’s bank – via the card network, such as Visa or Mastercard. The issuing bank then verifies the customer’s identity and available funds, approving or denying the transaction. The card network relays this decision back to the processor, which then informs the business.
The process doesn’t end there. Once sales are completed, businesses send approved transactions to the processor for settlement. The processor then forwards this information to the card networks, which transfer funds to the business’s merchant account, after deducting processing fees. Finally, the issuing banks add the transaction details to the cardholder’s account.
The cost of working with a credit card processor varies significantly, with several pricing models available. Flat-rate pricing offers a single fixed percentage on every transaction, typically between 2.6% and 2.9% plus a modest per-transaction fee. Interchange-plus pricing separates the wholesale interchange rate – set by card networks – from the processor’s markup, offering greater transparency. Subscription pricing involves a flat monthly fee for access to near-wholesale rates, while tiered pricing categorizes transactions into tiers with varying rates, often considered the least favorable for merchants.
Beyond the pricing model, businesses should anticipate a range of potential fees. These can include setup fees, interchange fees (ranging from 1.5% to 3.5% depending on the card type), payment processing fees, monthly minimum fees, monthly statement fees, early termination fees, and hardware costs. Chargeback fees may also apply if a customer disputes a transaction.
The type of hardware a business needs depends on how it accepts payments. Options include standalone terminals, POS tablet systems, mobile card readers, and virtual terminals. Standalone terminals are dedicated countertop devices, while POS tablet systems combine payment processing with inventory management and reporting. Mobile card readers connect to smartphones or tablets for on-the-head payments, and virtual terminals allow manual entry of card details for phone or mail orders.
Several companies offer credit card processing services, each with different strengths. Clover focuses on POS integration, Worldpay offers interchange-plus pricing, MerchantOne provides flexible pricing, Stax caters to high-revenue businesses, Square is geared towards startups, and Stripe specializes in e-commerce solutions. Each processor offers varying payout times and contract terms.
Accepting credit cards offers numerous benefits, including increased customer reach, higher revenue potential, and streamlined financial management. However, businesses must also be aware of the risks of fraud and the associated costs of processing. Maintaining PCI compliance – adhering to security standards for handling cardholder data – is crucial to mitigate fraud risks.
As of February 2025, credit card transactions accounted for 83% of all transactions, surpassing cash and check payments. The Federal Reserve reported in 2025 that cash accounted for only 14% of all payments, continuing a downward trend. Accepting credit cards is no longer optional for most businesses, but a necessity for remaining competitive.
