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If you’re wondering what a card reader is, it’s an electronic terminal that allows merchants to accept payments from customers via credit card, debit card, or contactless payments. It’s also known as a POS (point-of-sale) terminal. It’s the device that connects the merchant to the buyer’s bank to authorize and record each transaction.
Understanding how a card terminal works explains why a payment takes just a few seconds. The terminal sends the card details to the issuing bank’s authorization center. The center verifies that the card is active, has sufficient funds or credit, and has no fraud alerts.
If everything is in order, the transaction is authorized, and the merchant receives confirmation. The amount is credited to the merchant’s account through a daily process called settlement, where all sales for the day are settled.
Terminals are classified by their connectivity and use. Each type addresses a different operational need for the business.
Fixed terminals operate via a wired connection or Wi-Fi within the establishment. Mobile terminals include a SIM card and operate outside the store, making them ideal for deliveries, street markets, or home services. Both types accept chip, magnetic stripe, and NFC (contactless) payments.
The virtual POS is a payment system integrated into websites and apps. It does not require a physical device. The customer enters their card information into the payment gateway, and the system processes the authorization online. It is the foundation of e-commerce.
The process follows a standard sequence across all payment methods.
The customer presents their card: Contactless, chip, or manual entry on a virtual POS.
The terminal sends the data. It communicates with the issuing bank’s authorization center.
The bank verifies. It checks the balance, the card’s status, and any alerts.
The transaction is authorized or declined in less than five seconds.
The merchant pays a fee for each processed transaction. The percentage varies depending on the bank, the type of card, and the business’s transaction volume.
A store processes 200 transactions per month with an average transaction amount of 50 EUR. If the bank’s fee is 0.7% per transaction, it pays 70 EUR per month (10,000 × 0.007). This fee is the cost of accepting card payments rather than cash, which incurs no fee but involves the risks of handling and counting.
Many businesses do not optimize their payment terminals. These oversights are common.
Failing to negotiate the commission with the bank regularly.
Choosing a terminal with connectivity that is inadequate for the business.
Failing to enable the contactless payment option.
Having a payment terminal offers concrete advantages.
Accepting all the payment methods customers prefer.
Reducing cash handling and its associated risks.
Automatically record each sale for accounting purposes.
A card terminal is the device that enables card payments in physical and online stores. It processes payments in seconds by connecting the merchant to the customer’s bank. Choosing the right type of terminal and negotiating competitive fees are decisions that directly impact the business’s profitability.