What is a Magnetic Stripe Reader?

A magnetic stripe reader is a device that's used to read the information encoded in the magnetic stripe on the back of credit, debit, and other payment cards. The reader makes it possible for vendors to accept the cards for payment and quickly complete the transaction. The device reads and verifies the information with the card issuer in real time, and makes it possible to credit the account of the vendor while also applying the charge or debit to the card holder’s account.

A reader may scan and read both tracks included in the magnetic stripe, or only scan one stripe. All forms will read what is referred to as Track Two. This track contains encoded detail such as the account number and expiration date for the card. Many types of magnetic stripe readers also read what is known as Track One. This track will feature the name of the cardholder.

The value of a magnetic stripe reader to the vendor is obvious. Unlike older methods of accepting credit card payments, such as making an impression of the card and running the payment after the close of the business day, meant a delay in receiving the funds generated by the sale. Since the reader makes it possible to verify immediately both the active status of the card and that the amount of purchase is approved, vendors are credited with the funds quickly. Card issuers generally do not charge the vendor any additional fees for handling the transaction using the magnetic stripe.

In times past, the magnetic stripe reader was known commonly as a credit card reader. However, as the use of debit cards and private branded payment cards became more common, many manufactures began to refer to the device in more general terms. Still, the designation of credit card reader persists to this day, and many vendors will advertise the device using either or both terms.