4 Most Cost-Efficient Ways to Accept Payments

Accepting cash payments in person is the simplest and cheapest way to get paid. However, due to the widespread use of credit cards and the popularity of e-commerce, credit card processing has become essential for most businesses. In addition, psychological studies show that paying via credit card stimulates shoppers to spend more, compared to their cash-paying counterparts, making it even more crucial that businesses accept credit card payments.

Unfortunately, there is simply no way to accept a credit card payment that won’t incur a cost to you. There are always transaction fees involved. This is because the four primary credit card companies (Visa, MasterCard, Discover, and American Express) all charge a fee called the interchange rate. Then, the payment processor adds a markup on top of this rate. The total fees can vary wildly due to different monthly fees, transaction fees, startup fees, and hardware costs.

In addition, there may also be different rates for different types of transactions. Swiped-card payments, for example, have a lower fee compared to manually entered payments, because the latter is considered more risky due to the possibility of human error during input. Online payments, meanwhile, have a higher fee than in-store payments because they are more vulnerable to fraud. Lastly, fees also have different processing fee structures, namely flat-rate, interchange-plus, and tiered pricing.

So, what is the best payment processing system? That’s impossible to answer as there is no single right answer. Which one is the best for your business depends on several factors, such as the volume of transactions per month, how much you accept per transaction, and how you receive the payment.

If, for example, your business sells a lot of expensive items, a per-transaction fee can quickly add up, so a fixed monthly payment may be a better option. Meanwhile, a seasonal business may be better off being charged a certain percentage per transaction than paying a fixed monthly rate, regardless of sales.

Now, let’s look at the 4 most cost-efficient ways to accept payments.


PayPal has been around for quite a while and because it is practically synonymous with “online fund transfers,” it is a well-known and trusted brand, even among non-entrepreneurs. Unsurprisingly, it is a popular choice for business owners who want to accept payments in multiple ways.

For small businesses that average below $20 per transaction, PayPal is a smart and popular choice due to its affordable, reasonably priced fees and ease of use, as well as inexpensive card readers.

With PayPal, entrepreneurs can accept in-store payments as well as online, on-the-go, and invoiced payments, even if the buyer does not have a PayPal account. Customers can pay by a variety of methods, such as by credit card, debit card, PayPal, PayPal Credit, Venmo, or Apple Pay.

There are no long-term contracts, no monthly minimums, and no setup and cancellation fees. Mobile and in-store payments have a 2.7% processing fee per swipe (in the United States) and 3.5% + $0.15 fee for keyed transactions. For online payments and invoicing, PayPal charges 2.9% + $0.30 per transaction within the United States.

PayPal offers three payment processing solutions: Standard, Checkout, and Pro; all come with built-in fraud protection.

Standard and Checkout accounts have no monthly fee and the difference between them depends on how the customer completes the checkout process. With PayPal Standard, setup is quick and easy but the buyer is taken to PayPal’s own website to log in or enter his credit card information. It should be noted that, historically, forcing a potential customer to visit another site to complete the transaction could result in annoyance, confusion or even suspicion, and many customers may, as a result, abandon their purchase.

With PayPal Checkout, meanwhile, the process is integrated into the merchant’s website and PayPal just passes the buyer’s contact and shipping information to the site. This keeps the customers on the merchant’s site and enables them to pay without having to fill out forms or log in to PayPal. This improves checkout conversion by up to 82%.

In addition, PayPal Checkout can be integrated with most shopping carts and once integrated, the buyer does not have to do anything else. PayPal will automatically keep it up-to-date.

A PayPal Pro account costs $30/month but allows the merchant to design and host his own checkout pages. This gives him complete control to fully customize the checkout process to match the look and feel of his brand.

It also enables businesses to accept bank transfers and have access to a virtual terminal. A virtual terminal is a piece of software that turns a computer into a credit card terminal where the user can manually input the buyer’s credit card information. With a virtual terminal, a business can accept credit card payments through phone, fax, and mail.

For in-person payments, merchants can use the PayPal Here app and use a card reader that plugs into most smartphones and tablets. The card readers are available through PayPal directly or can be purchased at some specific retail outlets (i.e. Staples, Amazon, etc.); at a one-time cost, they are priced as follows:

PayPal Mobile Card Reader – $19.99

PayPal Chip and Swipe Reader – $24.99

PayPal Chip and Tap Reader – $59.99

PayPal Chip and Tap Bundle – $79.99

PayPal Chip Card Reader – $99.99


Authorize.net is a payment gateway solution that has been around for decades. By using this platform, merchants can accept major credit cards, debit cards, contactless payments, PayPal, and electronic checks. The payments can be accepted at retail establishments, online, on-the-go through mobile devices or by phone through a virtual terminal.

There is a monthly gateway fee of $25 but no setup fee. There are also no contract or early termination fees.

A merchant account is required to connect to the Authorize.net platform. If the user already has such an account and only needs a payment gateway, there is a 10¢ fee per transaction and a 10¢ daily batch fee. The batch fee is for aggregating all transactions from the past 24 hours into a batch that is then sent to the processing networks.

If the user does not have a merchant account, he can get a merchant account+payment gateway package that incurs a 2.9% + 30¢ fee per transaction.

Businesses which annually process more than $500K can get an enterprise solution package which includes tailored pricing, data migration assistance, interchange plus options, and payment processing solutions for non-profit organizations.

At no extra cost, all of the aforementioned plans include fraud prevention, a secure customer information manager that speeds up repeat purchases, recurring payments, invoicing, and a streamlined checkout.

For an additional fee, the plan can also accept e-check payments and include an account updater that automatically keeps customer credit card information current, which reduces the risk of credit card declines and other payment issues.

To accept magstripe and chip card payments, the merchant can also connect a compatible card reader to a computer to create a virtual point of sale (VPOS), or to a mobile phone or tablet to create a mobile POS (mPOS).


Stripe offers customized APIs that can allow various kinds of websites — such as subscription services, on-demand marketplaces, e-commerce stores or crowdfunding platforms — to receive payments.

With Stripe, merchants can do invoicing as well as accept in-person payments on all major debit and credit cards. Customers can also check out faster and more conveniently by using wallet payment methods (e.g. Apple Pay, Google Pay, and Microsoft Pay) that store credit card information, meaning customers don’t need to manually input their card and billing information.

Outside of the United States, Stripe also supports popular local payment methods such as Alipay, Bancontact, and iDEAL. The platform can also accept ACH direct debit, ACH credit or wire transfers.

There are no setup or monthly fees, however, the integrated Stripe solution has a 2.9% + 30¢ transaction fee per successful card charge. Recurring payments are free for the first $1 million, then 0.4% per transaction.

In-person payments are accepted through the Stripe Terminal, a programmable Point of Sale, which costs 2.7% + 5¢ per transaction. The Stripe Terminal is compatible with only two card readers, the BBPOS Chipper™ 2X BT ($59) and Verifone® P400 ($299).

Stripe’s integrated suite includes:

  • Embeddable checkout,
  • Support for dozens of local payment methods,
  • Comprehensive security and rigorous compliance,
  • Financial reporting,
  • 24/7 phone, chat, and email support,
  • Programmatic dispute handling,
  • Third-party integration, and
  • Free fraud protection that uses machine learning to detect and block fraud.

Because Stripe has no monthly fees, it is a more cost-efficient choice than Authorize.net for new e-commerce stores or those that process below $5,000 a month.


Square is another affordable way to accept payments. The platform prides itself on its transparency. There are no long-term contracts or hidden fees such as monthly fees, setup fees, early termination fees, terminal leasing fees for the hardware, monthly minimum fees, statement fees, online reporting fees, PCI compliance, refund fees, or charge-back fees.

Setup is also quick and easy. Users can create an account, verify it, and start accepting payments without having to go to the bank or create a merchant account. In addition, businesses can also receive credit card payments, even when there is no internet connection.

A Square account includes real-time analytics, end-to-end encryption, and active fraud prevention. Every account also includes one free Square card reader for magstripe (though additional card readers can be purchased for $10 each) as well as a free Square Point of Sale app.

Square also takes care of PCI compliance coverage. PCI compliance refers to a set of standards put in place by the credit card community to ensure the security of all credit card transactions. To be compliant, a business has to follow the guidelines when processing credit cards; otherwise, it could be hit with fines or penalties. Ensuring PCI compliance is not difficult, but the legal jargon used in the documentation can be confusing and intimidating for beginners, so having Square take care of that aspect is very convenient.

Square also offers free dispute management. If a payment is disputed, at no cost to the user, Square has a team of experts readily available to assist the user in dealing with the bank.

For a fee, users can get even more features, such as email marketing and loyalty programs. In regard to fees, there is a 2.9% + 30¢ fee for each payment a merchant accepts online using Square Invoices, Square Online Store, eCommerce Integrations, or online payment APIs. The rate drops to 2.6% + 30¢ per transaction with the Square Online Store Premium plan.

For manually entered credit card information in the Square POS app, there is a 3.5% + 15¢ fee. The cost is the same for keyed-in transactions in the Square Virtual Terminal (2.75% when the card is swiped) and for each payment taken using stored payment details.

If you decide to build your own payment solution system using Square’s SDKs or APIs, there is a 2.5% + 10¢ transaction fee for each payment you receive at a custom-made POS, attended kiosk, or other in-person payment solution. Meanwhile, there is a 2.9% + 30¢ fee for each payment you accept using your company’s mobile app or via Square’s eCommerce integrations or online payment APIs.

Unlike payment processors that charge different rates depending on the customer’s card, Square charges the same rate for all kinds of credit cards.

A Well-Kept Secret

One secret to keeping costs down when accepting payments is to learn how to negotiate. This is true for any of the payment methods mentioned above. While there are published transaction rates for all four payment providers, once you have enough sales volume, you will be in a good position to negotiate a better rate, so contact the company and ask. With the competition for your business fierce, there’s a very good chance that they will make a more favorable deal in order to keep you on as a loyal client.

The Bottom Line

Gone are the days when businesses only accepted cash payments from in-store customers. Nowadays, companies need to accept credit cards and other forms of payment, not only to get more people walking in to their brick-and-mortar building (if they have one), but also to serve an increasingly global market that is eager to buy their goods and services online.

It is not always easy to compare payment methods when it comes to cost-effectiveness. Fees can vary quite a bit and, unfortunately, not all payment processors are transparent about their pricing scheme. There are also other factors to consider, such as the sales volume and the useful features that are offered by the different payment methods for free.

Still, finding the best-suited payment processor for your business can save you hundreds or even thousands of dollars in fees each month. Not sure where to start? A good place to begin is with the heavy hitters in the industry, namely PayPal, Authorize.net, Stripe, and Square.

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