A credit card reader is a device which reads the magnetic strip found on the back of a credit card. It is one of the chief components which usually comprise a credit card terminal. Credit card readers are critically important for processing credit card transactions, because by reading the magnetic strip the terminal can then transmit information which will allow the payment to be completed.
Collecting and Submitting the Credit Card Information
To complete a payment, the customer will first run their card through the swiper. When the card is swiped, the reader within the terminal will be able to analyze the data. However, if the magnetic strip has been damaged, the card reader won’t be able to read it. The magnetic strip contains unique data related to the credit card that must be transmitted.
Once this is done, the transaction can be processed. In cases where the magnetic strip is damaged or the reader doesn’t work properly, the merchant can manually write down the card’s information and send it to the bank or key it into an online system.
After this is done, the payment will need to be authorized. The data which was interpreted by the card reader will be sent electronically to a processor who will confirm that the credit card number is authentic and that there are enough funds on the card to finish the transaction.
Once the processor has confirmed that everything is in order, they will then charge the card. A processing specialist will always be available who will facilitate the flow of credit. They will work with a system that allows for the information gathered by the card reader to be processed.
Placing the Funds into a Merchant Account
After a credit card has been successfully charged, the seller must receive their money. The processor will not place the funds directly into the seller’s checking account, at least not immediately. Instead, the funds will be temporarily held in a merchant account. These accounts are used to protect sellers against fraud and other problems. After two business days, the money will be moved from the merchant account into the seller’s checking account. No matter what device is used for swiping a credit card, it will always use a card reader in one form or another.
Card readers can be found in the credit card terminals used in stores, as well as those used with portable devices such as smart phones or computers. The card reader can be thought of as the heart of the terminal, because without it, there is no way to interpret the data that is found on a credit card’s magnetic strip.
Credit card terminals may come in different models, designs, and prices, but the card readers which they contain are very similar because they are based on the same technology. The two work in tandem, with the reader analyzing and interpreting the data while the terminal takes this data and transmits it to those who can process it and finish the transaction.