Groupon (GRPN) has unveiled a credit card payment service, dubbed Groupon Payments, to compete with the likes of Paypal and Square.  Groupon Payments will work with the iPod touch and iPhone, and users can get a free dongle for swiping credit cards or pay $100 for a smartphone case and credit card slider.

Groupon will only take 1.8% of transactions processed on MasterCard, Discover and Visa.  American Express cards will be charged a 3% transaction fee and all cards will be subject to a 15-cent charge per swipe. Groupon claims that they are offering the lowest rates, comparing PayPal’s 2.7% fee per transaction and Square’s 2.75% per swipe or a flat fee of $275 per year.