December 9, 2019

Credit Card Machine

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Credit card machines will keep your business running smoothly. But they aren't created equal. Find the best card machine for your business.

What Is a Credit Card Machine?

A credit card machine is a device that reads swiped, dipped, and tapped credit cards.

You can choose from these types of terminals:

  • Countertop
  • Wireless
  • Integrated POS terminals
  • Virtual

Each type has different abilities and suits different types of businesses. What's the best choice for your business? Read on.

Ask yourself these questions to narrow down your options:

  • What type of cards will you accept?
  • Is there an existing POS or do you need one?
  • Do you need mobility or will the machine sit in one spot?
  • Will you hardwire the phone or internet or do you need Bluetooth/wireless capabilities?

Types of Credit Card Machines

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Each credit card machine needs a connection to transmit data to the processor. Here are your options:

Countertop Terminals
Countertop terminals sit on your desk and are hard-wired to your internet or phone line. You can't move this type of terminal—it remains stationary on your counter. These are great for:

  • Retail stores
  • Restaurants
  • Medical offices

Wireless Terminals
Retail operations that require mobility around the store as well as mobile businesses prefer wireless terminals. It uses a wireless (Wi-Fi or 3G) connection to transmit data to and from the payment processor.

Integrated POS System
Some POS systems have integrated credit card readers. They don't require you to manually enter your information into the system—everything seamlessly connects. Your credit card reader is within the machine, whether countertop register, iPad, or mobile device.

Virtual Terminal
Virtual terminals don't include a reader. Instead, you manually enter the information into a dedicated webpage.

Businesses that take orders and payments over the phone or online enter the credit card information into a virtual terminal. Credit card companies call the transactions "card not present" transactions.

Do credit card machines need internet?
A wireless machine does not need the internet. But every other type of card reader will require a phone/internet connection.

You can go "old school" by choosing a dial-up machine that uses your phone line for connection. This may cause slower speeds, though. IP-based credit card machines offer faster connections, greater customer service, and reduced costs. You don't need a dedicated phone line for the credit card terminal.

Credit Card Machine Costs

You can get simple magstripe readers for as little as $60. More complex systems with integrated POS can be as much as $2,000. Companies like Square offer free readers.

Read on to learn what you can expect for each type of credit card machine.

If you don't want to buy a credit card reader, try these options:
  • Rent or lease the reader from your merchant account provider.
  • Choose a payment aggregator, like Square, that includes the reader with your plan.
  • Use your existing terminal if your provider allows it.

Standard Credit Card Readers
Standard credit card readers sit on the counter and typically connect to your POS. They cost anywhere from $100–$400, depending on the features.

Here are some of your options:

  • Signature capture
  • Pin pad
  • Receipt printer
  • Credit card reader stand that swivel for ease of use
  • Touchscreen

Some of the more popular standard credit card reader brands include Ingenico and VeriFone.

Mobile Credit Card Readers
Some readers with basic capabilities, like Square's, are free. If you want more features or don't use a payment aggregator, expect to pay fees of $100–$400. PayPal Here and Shopify also offer affordable mobile credit card readers for under $100.

A mobile credit card reader is perfect for on-the-go businesses. You connect the mobile reader to your phone or a tablet with an internet connection using Bluetooth or the headphone jack. Many also include a powerful POS that manages your back-end as well as processes credit cards.

Virtual Terminal
You may be able to score a free virtual terminal with companies like Square. Just sign up for an account to start accepting credit cards over the phone immediately. You access your virtual terminal via the mobile app or through your computer.

Not all companies offer free virtual terminals, though. PayPal Pro, for example, charges $30 a month. For that price, you'll get:

  • A merchant account
  • Payment gateway
  • Shopping cart

Some companies also include a credit card reader that you plug into your computer, should you have card-present transactions. You can accept credit card payments online and the virtual terminal is a free add-on.

Shopify offers a virtual terminal with their plans as well. While the virtual terminal itself doesn't cost anything, you have to pay for a monthly plan for your web-hosted shopping cart, which ranges from $29 to $299 per month.

POS Systems
A full POS system with a credit card reader costs more. Prices range from $400 to $2,000. Aside from a credit card terminal and POS, look for features like:

  • Cash drawer
  • Receipt printer
  • Barcode scanner

How Credit Card Machines Work

Credit card readers are attached to an internet line or phone line. Here are the steps involved in the authorization process:

  1. A customer swipes, dips, or taps the credit card.

  2. The transaction transmits to the merchant bank (your merchant account).

  3. Merchant bank sends request to the card issuer (Visa, Mastercard, etc.) for authorization.

  4. Card issuer sends the request to the issuing bank for approval.

  5. Issuing bank checks for adequate funds and approves or denies the transaction.

  6. Issuing bank sends approval to the card issuer and merchant bank to complete the transaction.

All of this happens behind the scenes within a matter of seconds. But the exact time depends on the type of connection.

Types of credit cards
The type of credit card reader you need depends on the type of credit cards you'll accept:
  • Magstripe
  • EMV/Chip
  • Contactless payments (Apple or Google Pay)
  • Debit cards
  • Gift cards

How to Accept Credit Cards

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Before buying a credit card reader, you'll need to know how to accept credit cards. You have two options:

  • Sign up with a payment services provider
  • Apply for a traditional merchant account

Keep reading to learn more about each.

Payment Service Provider

A PSP handles everything for you. These accounts are known as aggregators because you don't have a separate merchant account. Instead, your account is "lumped together" with other small businesses.

Companies like Square offer these all-in-one systems. You get:

The downside is that you don't get to negotiate your credit card processing fees or choose your processor. Look at all aspects of the program, specifically the POS features and credit card processing features/fees, to decide.

The typical POS system offers the following in addition to a point-of-sale app:

  • Inventory tracking
  • Reporting
  • Employee management
  • Track customer information
  • Business marketing
  • Appointment setting
  • Discounts
  • Shipping
  • Tax calculations
  • Loyalty programs

Is it legal to pass credit card fees onto customers?
You can charge customers a fee for using credit cards. You can also require a minimum purchase amount before allowing the use of credit card payments.

Traditional Merchant Account

If your business does more than $20,000 per month in credit card sales, you may be better off with a traditional merchant account.

Unlike most integrated POS systems, such as Square, you must be approved for a merchant account. Providers look at:

  • Monthly sales
  • Credit history
  • Chargeback history
  • Riskiness of the business type

Most merchant account providers have a list of payment gateways to choose from. The payment gateway is how the information transfers from your terminal to the appropriate bank and back to you.

Payment gateways have their own fees, as well, so pay close attention to the total cost of your choices.

Cheapest Way to Accept Credit Cards

Your average transaction and annual sales determine the cheapest way to accept credit cards.

Merchants with small average transactions and low annual sales save the most with payment processors like Square. The pay-as-you-go system means you only pay when you process credit cards.

Merchants with larger average transactions or more than $20,000 in annual sales fare better with a merchant account. But these accounts have monthly fees, plus additional costs like:

  • PCI compliance fees
  • Virtual terminal fees
  • Payment gateway fees
  • Monthly minimum fees

Choose a credit card processing company that is upfront and transparent about their fees. Ask about hidden fees, read reviews, and read your statements carefully.

Can you avoid paying credit card processing fees?
You can't avoid paying credit card processing fees. But you may be able to lower them.

Consider the following to negotiate lower rates:

  • Value: Give the credit card processor a reason to want your business, such as high-volume sales.

  • Lower fraud risk: Avoid card-not-present transactions by using swipe or chip readers as much as possible.

  • Address verification service: Add this layer of fraud protection to get credit card processors to offer lower fees.

Bottom Line

Accepting credit cards is imperative to your business' success. Explore your options to find a credit card reader that is affordable and provides the features you need.

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