What is a Credit Card Reader? How a Credit Card Reader Works and More
Do you know what a credit card reader is? How does this card reader work? Nowadays, our society has turned into a cashless society. This means that a lot of people will not use cash to pay for what they want to buy. A recent study even shows that 80% of people prefer to pay using a debit or credit card to cash.
As a retail store owner, you need to make sure that your customers can pay you using a secure cashless way. You can do this by obtaining your customer’s debit or credit card information, process it safely, and let your customer pay for what they want to buy. That is where credit card readers come in.
Because many customers prefer to pay using a credit or debit card, getting a square credit card reader can be a very great investment for your retail store. And you might even already be using one right now. But do you know how it works? Well, you do not have to worry. We are going to tell you what a card reader is aside from how it works and the different types of credit card readers that you can find out there.
What is a Credit Card Reader?
A credit card reader is a small electronic device that allows your customer to pay without having to use cash. All they need to do is to swipe their credit or debit card on the machine and the payment will be processed in a matter of seconds.
Using a credit or debit card reader, information will be sent to the payment processor. The same information will go to the customer’s bank. After that, the information will be sent back to the card reader that you have in your store. And that all happens digitally in just a few seconds, which is pretty impressive.
How Does a Credit or Debit Card Reader Work?
Now that you know what they are, let’s talk about how credit card readers work. Of course, you can find a credit card reader for iPhone out there. However, we are going to talk about credit card readers that you can commonly find in retail stores.
So, credit card readers work by taking information from someone’s debit or credit card. That information will then go to the payment processor. After that, the reader will collect information from that person’s bank. If there are available funds on the credit or debit card, the transaction will then be approved.
To simplify, a credit card reader will take a customer’s payment information. Once it does that, the reader will communicate the transaction data securely. You will find that this data will go from the card to the bank. The data will then flow back to the card reader to finish the transaction. And that is essentially how a card reader works.
Credit Card Processing Journey
To be able to complete the transaction using a card reader, the credit card will go through a series of processes. This processing journey makes sure that the transaction is completed safely and securely. And that is exactly what we are going to talk about in this section.
When a customer is purchasing something using a credit card or a smartphone, there is a series of processes that happen. The first step of the processing journey is the payment authorization. This process happens when the customer dips, scans, or swipes as their payment method. In this step, the data from the card goes to the payment gateway. This gateway will pass the data from the retail store owner’s bank to the customer’s bank. The customer’s bank will then check if there is available money on the account. If there is enough money, the bank will hold the funds and mark the transaction as pending.
The second process is the capture process. In this process, the credit card company will move the fund to the retail store owner’s bank account. You will usually find multiple payments sent at the same time during this process. And those multiple payments are known as batching.
The last process in this journey is the settlement. In this process, the fund will be processed completely. After that, it will be deposited into the retail store owner’s bank account. The settlement can take a couple of days. It depends on your bank and the type of payment gateway that you choose. And that is essentially what happens if a customer pays through a mobile credit card reader.
Different Types of Credit Card Readers
Now that you know how a credit card reader works, let’s talk about the different types of credit card readers that you can find out there. What you might not know is that you will be able to find many different types of credit card readers out there. Each reader will also have their mechanism of work. And you need to find the best reader that suits the needs of your retail store.
First of all, you have the magstripe card reader. This is a kind of reader that can read the magnetic stripe that you can find on your credit card. Unfortunately, this kind of card is currently being replaced since it is more prone to credit card fraud.
- EMV or Chip Readers
Next, you can find the EMV or chip credit card readers. This kind of reader allows customers to use EMV chip cards without worrying about security at all. A credit card reader for Android will also help you read this kind of credit card.
EMV is a technology that can help secure payments in both remote and face-to-face environments. With this kind of card, you can insert or dip the card into the reader instead of swiping it. EMV cards are considered safer than traditional magnetic stripe cards.
- Contactless Readers
The last type of credit card reader is the contactless card reader. This card reader allows your customers to make contactless payments. They can do this by simply waving the card near the reader. The card reader can do this by reading the RFID chips that you can find on some credit cards.
You will be able to find so many different technologies that support this kind of card reader. Some of those technologies include NFC, RFID, tokenization, and digital wallets. Using this kind of card reader, the customer will not need to insert, dip, or swipe their card to complete any transaction.
The Benefits of Using Credit Card Readers
Before deciding to get a PayPal credit card reader, you need to know the benefits that you will get from having credit card readers in your retail store. First of all, credit card readers do not require a Wi-Fi connection. This device only needs a mobile network or a wired internet connection.
The second benefit that you will get from credit card readers is payment security. Because many people prefer using cashless payments, you will need a card reader at your store. You will also end up storing less cash in your store. This means that your money will be safer from thieves or robbers. And these are only a few of the many benefits that you will get from using a credit card reader.
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