Accepting Credit Card Payments On Your Phone
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Sep 18, 2024
Filed under: Credit Card Processing, Mobile Payments
What Is A Credit Card Reader & How Does It Work?
A mobile credit card reader can be a great business asset. Discover how a credit card reader works and whether or not you need one for your small business.
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WRITTEN & RESEARCHED BY
Editor & Senior Staff Writer
Last updated onUpdated
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REVIEWED BY
Expert Contributor
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Key Takeaways
- Credit card readers let businesses accept in-person card and contactless payments without a full countertop register.
- Payment information travels from the reader through the processor and card network to the customer’s card issuer for approval.
- The right reader depends on where you sell, which payment methods you accept, and its compatibility with your POS system and processor.
Credit card readers let businesses accept card and contactless payments wherever they operate, including locations where a full POS setup may not be practical.
Here’s how credit card readers work and what to consider before choosing from the best credit card readers for your business.
Table of Contents
What Is A Card Reader?
A credit card reader is a device that accepts in-person credit and debit card payments. Depending on the model, it may connect to a smartphone or tablet, integrate with a POS system, or operate as a standalone terminal.
Portable readers are especially useful for businesses that take payments at events, markets, customer locations, or other settings where a full countertop POS system isn’t needed. They can also serve as a backup if your primary payment setup is unavailable.
How Do Credit Card Readers Work?
Credit card readers process payments in a few basic steps:
- The customer inserts, taps, or swipes a card, or uses a digital wallet such as Apple Pay or Google Pay.
- The reader securely sends the payment information through the processor and card network to the customer’s card issuer.
- The issuer approves or declines the transaction based on factors such as available credit, account status, and fraud checks.
- The approval or decline is sent back to the reader or POS system.
Approved transactions are typically submitted for settlement later, after which the funds are deposited into the merchant’s bank account.
Choosing The Right Credit Card Reader
Before choosing a card reader, consider where you’ll accept payments, which payment methods you need to support, and whether the device works with your preferred POS system and processor.
Be sure to compare the total cost, including the hardware, POS software, processing rates, and account fees. The cheapest reader may not be the most affordable option overall if it requires expensive software or processing.
Learn more about the benefits of credit card readers and compare the different types of readers to find the best option for your business.
Erica Seppala
Editor & Senior Staff Writer at Merchant Maverick
Erica has been writing about small business finance and technology since 2008. She joined Merchant Maverick in 2018 and specializes in researching and reviewing business software, financial products, and other topics to help small businesses manage and grow their operations. Her expertise has been cited in MSN, Reader's Digest, Vox, U.S. News & World Report, and Real Simple. She is a Certified ProAdvisor for QuickBooks Online and QuickBooks Payroll, a graduate of Limestone University, and currently resides in Greenville, South Carolina.
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