A credit card terminal is the physical, point of sale version of a payment gateway. It is the familiar device you use every day to pay at a store with your credit card. The credit card terminal connects the store to their bank. Any retailer, whether they are a bricks and mortar retailer or an online retailer, needs a Credit Card Processing facility and for bricks and mortar retailers a credit card terminal is an essential component.
Originally credit card payments were captured by making a copy of the front of the card, signed by the customer, which the store deposits at their bank. That’s obviously no longer the case. Now, when you visit a store, you’ll insert your card into a credit card terminal, enter your PIN and then wait while the credit card terminal contacts the store’s bank to authorize the transaction. Occasionally you will be asked to sign a receipt but this is increasingly rare.
There are a few common features to all card terminals while some terminals have additional functionality. Essential features include the ability to receive input from the store clerk detailing the transaction amount, the ability to read the chip on your card as well as some sort of communication ability, which lets the credit card terminal contact the store’s bank. All of these steps are essential to a functioning Credit Card Processing facility.
The programming capacity of most point of sale devices is far greater than the feature requirement so nowadays most credit card terminals include the ability to process gift cards, take tips, and perform refunds and award cash back transactions. Larger stores and chain stores usually have the credit card terminal connected directly to the point of sale till. If the customer declares that payment is going to be made using a credit or debit card, the till operator will tell the till to activate the credit card terminal. The credit card terminal will then automatically read the amount to be paid from the point of sale till so that the credit card terminal is ready to read the card, and prompts the customer to type in their PIN number. Once the card transaction has been completed the credit card, the till will then print a confirmation slip in addition to the receipt.
The way credit card machines communicate with banks has also evolved. The first card machines used a normal phone line, dialing a number every time a transaction needs to be authorized, using technology similar to a dial-up computer modem. Authorization proceeds, the credit card terminal returns the result and then disconnects. Once that’s done the credit card terminal displays the result on its screen, or prints it out, and if the result is approval the retailer will accept the payment.
Newer machines connect to the store’s bank via the mobile phone network using either GSM dial-up or GPRS data. The advantage is that the credit card terminal has no connecting wires, so the retailer can bring the card terminal to where you are in the store which is useful in a restaurant, for example.