Handbook / Invoicing and getting paid

Accepting credit card payments as a small business: options, fees and safety

Customers increasingly expect to pay by card. Accepting cards can mean faster payment, fewer late invoices and easier impulse purchases. It also costs fees, brings security responsibilities and exposes you to disputes. This guide explains the options and how to set them up sensibly.

Ways to accept cards

Payment links on invoices. Many invoicing and accounting tools add a "pay now" link to each invoice. Ideal for service businesses with remote clients.

Card readers. Small readers connect to a phone or tablet for in-person sales at markets, events or client visits.

Online checkout. For selling products or booking services on your website.

Recurring billing. Saved payment methods for subscriptions or retainers, managed by the processor.

Choose based on how your customers buy. A consultant may only need invoice links; a craft seller may need a reader and online checkout.

Comparing processors

Look at:

• fees: percentage and fixed fee per transaction, and whether in-person, online and keyed-in transactions differ
• monthly or hidden fees: statements, chargebacks, refunds, international cards
• payout timing: how soon funds reach your bank
• holds and reserves: policies for new accounts or large transactions
• integrations: with your invoicing and bookkeeping
• contract terms: cancellation and equipment costs

Calculate the cost on a typical month's sales, not just the headline rate.

Fees and pricing

Processing fees are a cost of doing business. Build them into your prices, or offer a discount for bank transfer where allowed. Surcharges are restricted by some states and by card network rules, so check before adding one.

Card security

Card data is sensitive. The PCI Security Standards Council publishes standards, including the PCI Data Security Standard, intended for organisations involved in payments such as merchants, service providers and financial institutions. For a small business, the practical steps are:

• never store card numbers in email, spreadsheets or notes
• never ask customers to email card details
• use your processor's hosted payment pages, links and readers, which keep card data off your systems
• complete any security questionnaire your processor requires
• keep devices and software updated and use strong passwords

Using a processor's hosted tools greatly reduces your security burden.

Chargebacks and refunds

A chargeback happens when a cardholder disputes a payment with their bank. To reduce them:

• use a clear business name on statements
• describe what the customer is paying for
• keep evidence of delivery or completed work
• respond quickly to complaints
• have a written refund policy

If a dispute arises, respond by the processor's deadline with your evidence.

Invoicing with card links

Add a payment link to every invoice, state your payment terms, and send reminders with the link included. Easy payment often shortens the time to get paid. The guides to how to invoice and payment terms cover the rest of the invoice.

Bookkeeping

Processors often pay out net of fees. Record:

• the gross sale as income
• the processing fee as an expense
• refunds and chargebacks as reductions in income

Download monthly statements from your processor and reconcile them with your bank deposits. The IRS asks businesses to keep supporting documents such as deposit records and receipts.

Tax reporting

The IRS explains that you should receive a Form 1099-K for payment card transactions regardless of the number or amount. The form shows gross payments, so reconciling it with your books matters. The guide to Form 1099-K explains how.

Telling clients how to pay

State accepted payment methods on your proposals, invoices and website. If you prefer bank transfers for large invoices, say so, and include a card link as a backup option. Clear instructions reduce late payments caused by confusion.

Reconciling payouts

Processors usually pay out net of fees, sometimes combining several payments into one deposit. Match each payout to the invoices it covers and record the fees separately, so your income and expenses are both complete.

Refund policy

Write a short refund and cancellation policy and include it in your terms. Clear rules help you handle requests consistently and give you something to show if a payment is disputed.

Pick card tools that match how customers buy, compare total fees and payout terms, never store card data yourself, keep evidence for disputes, record gross sales and fees separately, and reconcile your Form 1099-K.