What is a Credit Card Terminal?

David White

A credit card terminal is a device that business owners who specialize in retail sales find very handy. This small machine comes in a few different forms, but all have the same purpose: to authenticate the credit cards handed over by customers in order to pay for goods and/or services.

When a credit card is swiped through a credit card terminal, its magnetic strip is scanned for relevant user data.
When a credit card is swiped through a credit card terminal, its magnetic strip is scanned for relevant user data.

The primary purpose of a credit card terminal is the protection of the retailer who employs it. If a retailer accepts as payment a credit card that has expired or been stolen or that is otherwise invalid, then that payment will never be made and the retailer will have essentially given those goods or services away. This is an eventuality all retailers want to avoid, so many find it necessary to employ at least one credit card terminal.

Credit cards store data on a magnetic strip.
Credit cards store data on a magnetic strip.

The most commonly viewed credit card terminal these days is one that has a keypad and a sliding slot. The retailer slides the credit card through the slot, in the process recording the data set on the magnetic strip on the back of the credit card. In many cases, the retailer must also use the keypad to type in the last four digits of the credit card number as a secondary form of security.

The data is sent from the credit card terminal to a verification center, which sends a thumbs-up or thumbs-down message back to the retailer. If everything is A-OK, then the retailer can accept the credit card as payment for goods or services rendered. If the card is declined, however, the retailer has the right to refuse the sale.

The typical credit card terminal is connected to a phone line. The credit card terminal acts as a sort of modem, transmitting the data to the verification center. Not every credit card terminal is like this, however. Some are wireless, relying on Wi-Fi or cellular communications for data verification.

Some models of credit card terminal do not require any interaction on the part of the retailer. These automatic models do the data transmission themselves, repeating the message that comes back from the verification center, usually in light emitting diode (LED) form. This kind of credit card terminal is found commonly in stores that allow customers to run their own checkout procedures.

Another kind of credit card terminal does not allow instant verification. This model simply stores the data received from the credit card swipe, prints out a receipt if the customer requires it, and can transmits all data for all credit card transactions in one batch to the verification center. This kind of credit card terminal is found routinely at outdoor or mobile events, where the availability of phone lines is low or nonexistent and the retailer does not have access to a wireless credit card terminal.

Lastly, a rather new kind of credit card terminal is a Web-based service. Credit card verification can be accomplished online. If you buy things online, then you are accessing a Web-based credit card terminal. No swiping takes place except the virtual kind. Verification is nearly instantaneous.

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