As you start your small business, you put a lot of thought into what to charge for your products or services. But you might not spend as much time considering how you’ll get paid. With studies showing an increase in the use of credit cards for payment, it’s wise to accept credit, debit and prepaid cards. If you stick to cash and checks only, it might be cheaper in the short term, but you’ll be overlooked by customers seeking the convenience of paying with cards.

Although it’s key to get set up with an electronic payment system, there are so many options — from stand-alone mobile credit card processing to full-service offline and online solutions — that you might be unsure what you need.


The good news: A variety of electronic payment systems are available with a wide range of features. The bad news: It might take some time to figure out which solution is best for your small business.

Some services offer card processing only, which is useful if you’re an in-person service provider such as a massage therapist or a small retail operation such as a coffee shop that wants a convenient way to accept plastic. Solutions include traditional point-of-sale terminals, which are usually leased and require contracts and monthly or annual payments. There are also newer mobile credit card processing technologies with card readers that plug into your smartphone or tablet and require no commitment. All types of credit card processing charge a percentage-based processing fee on every transaction, and sometimes a small flat fee too.

Other electronic payment systems offer full-service products that handle every aspect of how you get paid, which is helpful if you have a larger bricks-and-mortar operation or a business that sells both offline and online. In addition to offering credit card terminals, these providers have online payment gateways and shopping carts for your website, electronic check processing and even merchant gift card products. Some of these solutions can also help you manage inventory, and some allow you to accept ACH payments (bank transfers) as payment.

There are also services that fall somewhere in between. One example is PayPal; it can integrate with your website for online card payments, and you can use it to send and receive client invoices, but its capabilities are more limited than those of a full-service merchant services company.

As an increasing number of customers make payments with credit or debit cards, it’s smart to have some sort of electronic payment system set up, especially if you plan to sell products or services online.

There’s also Square Stand (made by the same company as Square Reader), which turns an iPad into a point of sale for your storefront. It has a small upfront fee and comes with software for inventory management, accepting online orders, making customizable loyalty programs and more. There’s a similar product from the company Shopify; its online solution also helps users set up a customizable e-commerce website with a payment gateway. These systems are more robust than the smartphone card readers and ideal as a point of sale for a storefront.

Many electronic payment systems integrate with accounting systems such as QuickBooks. It’s wise to have a system that connects to streamline your cash flow.

Pros and cons of electronic payment systems

Using an electronic payment system has many benefits, but such systems aren’t without drawbacks.


  • It’s easier for customers to buy your products or services. That’s important in e-commerce, where it’s easy to abandon a transaction if payment isn’t convenient.
  • You can add custom loyalty programs, gift cards and customized e-commerce websites.
  • You can integrate it with accounting software, making it easier to manage money.
  • You don’t have to waste as much time depositing paper checks and cash at the bank.


  • You have to pay a processing fee to accept plastic and some other electronic payments.
  • If you use a traditional physical credit card terminal, monthly or annual fees might apply.
  • Some payment processing services lock you into contracts that are costly to terminate early. This is most common with traditional credit card terminals.
  • To accept credit cards you usually need a merchant account, which is a bank account where payments are deposited. Many electronic payment systems include one as a built-in feature. Note that you don’t need a merchant account if you use a third-party processor such as PayPal.

How to choose an electronic payment system

When you start evaluating the systems available, first aim to understand what type of technology you need, since options vary significantly and you don’t want to pay for more than necessary. For example:

  • If you run a very small business providing in-person products or services, such as giving chair massages at businesses or selling baked goods at farmers markets, you might need only a mobile credit card solution.
  • If you have a large operation with multiple storefronts and an online shop, you might require a full-service electronic payment system that handles all forms of payment from start to finish.
  • If you have a storefront but are a small business, such as bake shop or hair salon, you might do well with a midlevel solution such as Square Stand. Such products aren’t as robust, but they process payments effectively and offer other helpful features.
  • If you have an online-only business, you need an e-commerce solution such as a virtual shopping cart with a payment gateway, but no physical point-of-sale technology.

Some electronic payment systems allow you to sign up online instantly, while others require you to complete a form and speak with a sales representative. Before you sign up, though, it’s wise to ask these questions (if they apply) to ensure you choose the option that’s best for your business:

  • Will I have the ability to manually process credit card orders taken by phone or mail?
  • What are the rates for accepting credit and debit cards?
  • Can I accept ACH (bank) transfers and electronic checks?
  • Does the system integrate with my accounting software?
  • Can I send client/customer invoices with your system, or do I need a separate system for that?
  • Can I set up recurring credit card payments if needed?
  • Are there any beneficial features, such as inventory tracking, customer loyalty programs or business reporting?

This is a key decision for your business, so don’t rush it. Carefully research your options, compare all costs and consider asking other businesses of your size or in your industry what works best for them before you commit.