How to Choose a Payment Processor for Your Business
What payment processors do and how to compare them
A payment processor moves money from your customer's card or bank account into your business account. They don't decide which one is "best"—the right choice depends on what you sell, how you sell it, and what you're willing to pay in fees. A processor that works well for a coffee shop taking cards at the register won't work the same way for an online store or a service business invoicing clients.
When you compare processors, you're really comparing three things: the fee structure (how much they take per transaction), the features they offer (invoicing, reporting, recurring billing), and the support you get when something breaks. A processor with low fees but no phone support might cost you more in lost sales and frustration than one charging slightly higher fees with live help available.
The companies listed below are established providers with track records in different business types. This is not a ranking—it's a map of what each one does well and what it costs, so you can match your actual situation to the right fit.
Key Takeaways
- Payment processors charge different fees depending on how customers pay you—swiped cards, keyed-in cards, and bank transfers each have different rates.
- In-person processors (Square, Toast, Clover) work best for retail and restaurants; online processors (Stripe, PayPal) work best for websites and invoicing.
- Monthly fees, per-transaction fees, and equipment costs all add up differently depending on your sales volume and business type.
- Most processors require a merchant account, which is a separate bank account that holds customer payments before they move to your main business account.
- You can switch processors without losing your business—your customer data stays with you, though you may need to update payment links or point-of-sale settings.
In-person payment processors for retail and restaurants
Square and Clover are the most common choices for businesses that take cards at a physical location. Square charges 2.6% plus 10 cents per card transaction (as of this writing, though rates change). Clover charges similar rates but bundles in a point-of-sale system and inventory tracking, which costs more upfront but saves time if you're managing stock.
Toast is built specifically for restaurants and bars. It includes table management, kitchen display systems, and staff scheduling. The fee structure is higher than Square—typically 2.9% plus 30 cents per transaction—but the software handles things like splitting checks and managing tips that Square requires add-ons for.
All three require you to buy or rent a card reader (usually $30 to $300 depending on the model) and a tablet or register. Square's readers are the cheapest to start with. Clover and Toast require more expensive hardware but include more built-in features. If you're just starting out, Square is the lowest-cost entry point. If you're running a restaurant with multiple staff, Toast or Clover will save you money on separate scheduling and inventory software.
Online payment processors for websites and invoicing
Stripe and PayPal are the two largest processors for online businesses. Stripe charges 2.9% plus 30 cents per transaction for card payments and 1% plus 30 cents for bank transfers (ACH). PayPal charges 2.2% plus 30 cents for standard transactions, but rates are lower if you're a nonprofit or if you use PayPal's invoicing feature.
Stripe integrates with almost every website platform (Shopify, WooCommerce, custom sites) and works well if you need recurring billing, subscription management, or complex reporting. PayPal is simpler to set up if you already have a PayPal account and works well for small businesses that invoice occasionally or sell through social media.
Square Online is a hybrid: it's a website builder plus payment processor in one. You pay a monthly fee for the website ($12 to $99 depending on features) plus transaction fees. This works well if you don't have a website yet and want everything in one place, but it's more expensive than building a site separately and using Stripe.
Subscription and invoicing processors
Stripe Billing and Recurly are built for businesses that charge customers on a schedule—gyms, software subscriptions, membership sites. They handle recurring charges, failed payment retries, and dunning (reminding customers their card declined). Stripe Billing charges the same per-transaction fee as regular Stripe (2.9% plus 30 cents) but adds features like proration (charging for partial months) and usage-based billing.
Recurly is more expensive—it charges a monthly fee starting around $99 plus a percentage of revenue—but handles complex billing scenarios like multi-currency charges and tax calculation. If you have fewer than 100 subscribers, Stripe Billing is usually cheaper. If you have thousands of subscribers or need advanced tax handling, Recurly's higher cost pays for itself in time saved.
FreshBooks and Wave are invoicing platforms that include payment processing. FreshBooks charges $15 to $55 per month for the software plus 2.2% plus 30 cents per transaction. Wave is free for invoicing but charges 2.2% plus 30 cents when you accept payments. Both work well for service businesses (plumbers, consultants, freelancers) that invoice clients and need to track time or expenses alongside payments.
What fees actually cost you
A processor's advertised rate tells you only part of the story. Here's what you actually pay:
| Fee Type | What It Is | Typical Range |
|---|---|---|
| Per-transaction fee | Percentage of the sale plus a flat amount | 2.2% to 3.5% plus 10 to 30 cents |
| Monthly fee | Flat charge for access to the platform | $0 to $300 (higher for restaurants and invoicing) |
| ACH (bank transfer) fee | Lower percentage for direct bank payments | 0.8% to 1.5% plus 25 cents |
| Chargeback fee | Charged when a customer disputes a transaction | $15 to $100 per dispute |
| Equipment or gateway fee | One-time or monthly for card readers or payment links | $30 to $500 upfront, or $10 to $50 per month |
To figure out which processor costs you least, calculate your average transaction size and monthly volume. A coffee shop averaging $8 per transaction pays roughly $0.31 per sale with Stripe (2.9% of $8 plus 30 cents). A consulting firm averaging $2,000 per invoice pays $88 per transaction with the same rate. For the coffee shop, a 2% processor saves $0.06 per transaction; for the consultant, it saves $20. The consultant should prioritize finding the lowest percentage. The coffee shop should prioritize ease of use and support, since the fee difference is small.
Settlement and how long money takes to reach your account
When a customer pays you, the processor doesn't send the money to your bank account immediately. Instead, it goes into a merchant account—a separate account the processor controls—and then moves to your business bank account on a schedule called the settlement cycle.
Most processors settle once per day, usually the next business day. Square and PayPal typically settle within one to two business days. Stripe settles within two to five business days depending on your account history. Some processors hold back a percentage of your money (called a reserve) for the first few months as a safeguard against chargebacks. This is normal and the money is released once you've proven you're a low-risk merchant.
If you need money faster, some processors offer instant payouts
When a payment fails or a customer disputes a charge, you need to reach someone who can help. Square and PayPal offer phone support during business hours. Stripe's free tier offers email support only, but Stripe Atlas (a paid tier for businesses) includes phone support. Toast and Clover include phone support as part of their service. Before you choose a processor, test their support. Call their support line or email a test question and time how long it takes to get an answer. If you're processing hundreds of transactions per day, a processor with slow support will cost you money in lost sales and frustrated customers. If you process a few transactions per week, email support is usually fine. Most processors also have online communities or knowledge bases where you can find answers to common problems. Square's community is active and helpful. Stripe's documentation is thorough but technical. PayPal's help center is large but sometimes hard to navigate. You own your customer data and transaction history—the processor doesn't. If you decide to switch, you can take your customer list, invoices, and sales records with you. What changes is where new payments go. If you have a website, you'll need to update your payment links or shopping cart to point to the new processor. If you use a point-of-sale system like Square or Clover, you'll need to set up a new account with the new processor and reprogram your register. This usually takes a few hours. The hardest part is the transition period—you'll have two processors running at the same time for a few weeks while customers finish paying old invoices or while you move your inventory data. Plan the switch for a slow business period if you can. The processor sets up the merchant account for you—you don't apply for it separately. It's a bank account the processor controls, and money flows from there to your regular business bank account. You'll see it as a separate line item on your processor's dashboard, but you don't manage it directly. A processor moves the money; a gateway encrypts the card information and sends it to the processor. For most small businesses, you don't need to think about this distinction—the processor you choose includes a gateway. If you're building a custom website, you might choose a gateway (like Authorize.net) separately from a processor, but that's rare. Yes. Many businesses use one processor for in-person payments (Square) and another for online invoicing (Stripe). Your customer data stays separate in each system, so you'll need to track which customer paid through which processor. This works fine if you're small, but it gets complicated once you have hundreds of customers. The processor notifies you and asks for proof that the transaction was legitimate—usually a copy of the invoice, receipt, or shipping confirmation. You have 7 to 10 days to respond. If the processor sides with you, the money stays in your account. If they side with the customer, the money is refunded and you're charged a chargeback fee (typically $15 to $100). Repeated chargebacks can get your account closed. Yes. Square, Stripe, and PayPal all charge zero monthly fees—you only pay per transaction. Toast, Clover, and FreshBooks charge monthly fees because they include software (point-of-sale, invoicing, inventory) that costs money to maintain. If you only need payment processing and nothing else, a no-fee processor saves you money.Support and what happens when something breaks
Switching processors without losing your business
Frequently Asked Questions
Do I need a separate merchant account, or does the processor handle that?
What's the difference between a processor and a payment gateway?
Can I use multiple processors at the same time?
What happens if a customer disputes a charge?
Is there a processor that doesn't charge monthly fees?