Both Square and Paypal have services that allow you to turn your smartphone into a credit card processing machine. Now Groupon has jumped into that market with a new service it's calling Groupon Payments.

Groupon Payments touts itself as the lowest cost option for businesses accepting credit cards. The costs of accepting credit cards can often be problematic for small businesses. On the one hand, customers appreciate the convenience of paying with credit cards, but on the other, businesses have to pay credit card companies and processors extra money for the ability to take credit cards.

In an effort to combat traditional processing fees, some start-ups and other outlets have implemented credit card processing options so that small businesses and individuals have the ability to accept credit cards without charging exorbitant fees. Square is one of the first companies to offer this service, and it works by plugging a card reader into a smartphone or tablet. Square has different payment options: Businesses can pay either 2.75% of the purchase price for every swiped card that is processed or a flat monthly rate of $275.

Paypal is another business concern that's gotten into this type of payment processing. With its reader, it charges businesses 2.7 percent of purchases for swiped cards, undercutting Square slightly. Paypal's Paypal Here program also allows businesses to accept checks and Paypal payments.

Now Groupon is jumping into the field with Groupon Payments, a service that touts the lowest rates on credit card transactions. It tested its service with a pilot program in the San Francisco Bay Area and is now rolling it out nationwide.

Unlike Square and Paypal Here, which allow anyone with a smartphone to get a reader and accept various types of payments, Groupon Payments is only available to businesses that conduct business with Groupon's coupon arm, though the company is conducting a pilot program of the service for businesses that do not currently do business with Groupon. Still, for the businesses that do, this service is an alternative to traditional payment processors.

Touting its low rates for U.S.-based companies, Groupon Payments charges only 1.8 percent plus 15 cents per transaction for MasterCard, Visa and Discover payments, offering a swipe fee rate that is lower than both Square and Paypal Here. For American Express cards, Groupon Payments charges 3 percent plus 15 cents per transaction. The service doesn't have any monthly or other fees, and it will put credit card deposits into the merchant's bank account overnight.

"Our goal is to provide merchants with the most affordable and powerful tools to run and grow their businesses," said Mihir Shah, vice president mobile and merchant products at Groupon, in a statement.

Like Square and Paypal Here, Groupon Payments also works by attaching a reader to a smartphone. The processing software is built into the iPhone and iPod Touch versions of the Groupon Merchants app. Groupon also provides a 7-days-a-week support network that businesses can call or e-mail. The service is secure and offers encryption to protect credit card information.

As part of the payments program, Groupon also provides an analytics service where merchants can look at live transactions, get daily sales reports, track deposits and analyze revenue trends. The app also can scan and redeem Groupons, and it will monitor any additional customer spending over the initial value of the Groupon.

"While the cost savings are obvious, we were really impressed by the level of support provided by Groupon and the speed in which we received our payments," said Nadia McClinton, owner of Body by X in Corte Madrera, Calif., in a statement. "From day one we discovered we could rely on Groupon Payments to effectively, quickly and easily process transactions and deliver a better customer and employee experience. It truly saves us time, money and effort that we can invest in other aspects of our operations."