What Is A Credit Card Reader & How Does It Work?

In today’s world, consumers are less likely than ever to carry cash. They expect to be able to use credit or debit cards to make purchases, no matter where they happen to be.

In short, credit card readers allow merchants to meet customers where they are and allow them to pay with the modern payment methods they increasingly prefer, even in settings that make a full register setup impractical.

Once you understand the big picture of what a card reader is and how it works, you’ll be ready to choose from the best credit card readers out there and find the one that fits your business needs.

What Is A Card Reader?

A credit card reader is a piece of hardware that is used to accept credit and debit card payments from customers, no matter what the physical setting.

It’s this last part that is important. While all point-of-sale hardware contains card-reading machinery that accepts card payments, “credit card reader,” in this context, refers to a device that can operate independently of a full countertop register setup, allowing you to take in-person payments in settings where such a full register setup is impractical to use, such as conventions or farmers’ markets.

Even if you use a traditional countertop register at a permanent business location, having a separate credit card reader can be a handy tool in your business arsenal in the event that your main POS system goes down and you need a backup means of taking card payments.

How Do Credit Card Readers Work?

Let’s condense how credit card readers work into a series of steps.

1. Customers, dip, tap, or swipe their card (or, if they are paying via a mobile wallet like Apple Pay or Google Pay, their smartphone) on the credit card reader, which then collects the customer’s payment information and transmits it to your payment processor or bank.
2. Your processor then sends a request for payment to the customer’s card network. The card network then confirms whether or not the customer has the funds to cover the transaction. If the answer is yes, the transaction is approved, and this information is sent back to your mobile POS device. If you’re using a small mobile card reader, this mobile POS device is your smartphone or tablet; if you’re using a wireless smart terminal, the mPOS device is the terminal itself.
3. The mPOS device displays a confirmation that the transaction has been successfully completed.

Credit card processing is a complex subject, and it takes some research to understand all the ins and outs. Luckily, we’re here to help you with that!

Getting Started With Card Readers: Next Steps To Take

Now that you know what mobile credit card readers are and how they work, you’re one step closer to finding the device that works for your customers and your bottom line.

Different types of credit card readers fulfill different functions and are sold at different price points, so it’s important to know what you need from a card reader so you don’t a) get a reader that doesn’t satisfy your customers’ preferences or b) overpay for features and options your small business doesn’t need.

Regarding the benefits of credit card readers, they may seem obvious at first and not worth explaining. However, there are some use cases you might not have thought of, so it’s worth exploring how a card reader can improve your overall business efficiency. Restaurants and other eateries are particularly poised to benefit from the features offered by modern mobile card reading devices, as are retail establishments.

Finally, the subject of credit card reader fees is a multi-faceted one. That’s because there’s more to consider than just the cost of the devices themselves. There’s also the cost of point-of-sale software and the various fees and rates associated with payment processing to think about.

If all this information is starting to make your head swim, don’t fret! The processing and point-of-sale industries have long been daunting for businesses (especially small businesses and startups). Thankfully, that has started to change as new players enter these industries and disrupt long-established practices like opaque pricing, equipment leases, and long-term contracts.

In short, choosing the right credit card reader for your business, while still a challenge, isn’t as difficult as it once was. Just remember that we’re here to help as well, so feel free to drop us a note, and we’ll try to help you out as best we can!