Card payments for small businesses

Find out about card payment options for your small business and the advantages and disadvantages of allowing debit and credit card transactions

Kim Jones
Kim Jones
Updated 18 May 2022  | 3 mins read

More people than ever have stopped carrying cash. So, if you’re a small business that doesn't take card payments, then you risk getting left behind.

The UK Payment Markets 2021 report from UK Finance showed that the number of cash payments made in 2020 fell by 35% compared to the previous year.

Payments with notes and coins now account for just 17% of transactions, while debit cards clock up 44% of payments, and contactless payments 27%.

Nearly a third of the population are also registered for mobile payments like Apple Pay and Google Pay.

With cash going out of fashion, small businesses should consider taking card payments to stay competitive.

Key points

  • Accepting card payments as a small business is vital as we move towards a ‘cashless’ society
  • There are three ways to take card payments – in person by card reader, online by payment gateway, or over the phone by virtual terminal
  • You’ll need to set up a merchant account and there are lots to choose from

What payment options are there for small businesses?

If you want to take card payments, there are three main ways to do it:

  • In person, using a card machine or terminal. This could be a countertop terminal, a portable version using Bluetooth (useful for companies like restaurants that offer payment at tables) or a mobile app-based card reader
  • Online using a payment gateway on your website
  • Over the phone with a virtual terminal in an online portal

Advantages of offering card payment options

  • Most customers expect to be able to pay by card these days, so you risk losing customers and sales if you only accept cash
  • You’ll reach a wider customer base. People who can’t come to your place of business in person can order online or over the phone
  • There’ll be less cash on your business premises, so you risk losing less if you’re a victim of theft


  • There are costs, such as processing and merchant fees to pay for accepting cards, but increased sales should more than compensate
  • Customer refunds may incur a chargeback fee
  • Susceptibility to fraud. If you unwittingly accept a stolen card, you could be liable to pay for the cost of the purchase, plus chargeback fees

What do I need in order to accept card payments?

Anyone who accepts card payments must get accepted for a merchant account - a type of account supplied by a bank or payment facilitator that lets your business process card payments.

When a card payment is made to your business, the money goes first into the merchant account where it’s processed, verified and approved by the customer’s bank. Then the payment is transferred into your own business bank account.

There are lots of providers to choose from - including well-known names like PayPal, Worldpay and Barclaycard, plus Zettle and Square, two providers that are popular with small businesses.

You’ll need to do your research to discover which will offer the best value for your needs (some small business specialist websites have cost comparison tools that can help with this).

How much does it cost for a payment machine?

You can either buy a machine or rent it as part of your contract from your merchant account provider.

The cheapest card machines are app-based, connecting to your smartphone or tablet, and can cost as little as £19.

Hiring a terminal can be a good option for more expensive card machines. You’ll sign into a contract (that could last 12 months or more) and usually pay a monthly fee for the length of the contract.

When choosing how you want to process card payments, always consider any fees that you’ll be charged on top of the payment machine cost. This will help you get the full picture of how much you’ll be paying each month and can help you compare options easily.

What fees will I need to pay to accept cards?

Depending on the merchant account and card reader you opt for, fees can include:

  • Set-up fees to install your merchant account facilities
  • Fee per transaction on every credit card or debit card purchase you take
  • Authorisation fees on every transaction
  • Terminal rental or purchase fees
  • Monthly or annual fees if your transactions fall below a certain level
  • Chargeback fees – an administration charge if a customer requests a chargeback
  • Payment Card Industry (PCI) compliance charge. This pays for assistance in helping you be PCI compliant, keeping customer data secure and preventing fraudulent transactions