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A Complete Guide to Credit Card Readers for Small Businesses

It is crucial for businesses to have a secure method of collecting payments, but nowadays, consumers demand <a href="https://www.podium.com/guides/modern-payment-processing-guide/">convenient</a> payment options as well. With options ranging from card readers to text-to-pay and everything in between, it’s easy for businesses to feel overwhelmed when they think about collecting payments. In this article, we’ll go over everything you need to know about card readers so your business can collect payments with confidence. 
<h2>What Is a Credit Card Reader?</h2>
Most of the general population has used a card reader—a device you swipe or insert your card into (or in recent years, tap your card on) at retail stores. 
A more technical definition of a credit card reader is a device that retailers use to decode credit and debit card information. That information is stored on magnetic strips or microchips. It includes the account number, authorization code, and other cardholder information.  
<h2>Types of Credit Card Readers</h2>
There are a few main types of credit card readers available to local businesses. Knowing the differences between them will help you choose the appropriate reader for your business.
<h3>Magstripe Card Readers</h3>
Magstripe readers are designed to read the magnetic strip on your credit card. You use the credit card reader by swiping the card.
For a long time, magstripes were the most popular type of card reader, but they are becoming less prominent these days. The decrease in usage is due to the fact that they have a higher risk of fraud than other readers.
<h3>Chip Readers (EMV Readers)</h3>
Chip or EMV readers are a more secure method of making payments, as they can’t be easily duplicated. The term EMV refers to a global standard for secure payments used for both online and in-person transactions.
You use chip or EMV readers by inserting or “dipping” your card. These cards give the option of signing or entering a PIN.
<h3>Contactless Card Readers</h3>
Contactless cards also can’t be duplicated as easily as magstripe cards. These cards rely on RFID chips and a few other bits of technology. As the name implies, no contact between the card and the reader is necessary. Customers can wave the card over or tap it onto the reader.
The key concepts that let contactless credit card readers work are NFC (near-field communications), RFID (radio frequency identification), and tokenization. NFC is integrated into the card readers and lets them read information from the nearby card with an RFID chip. That RFID chip transmits data short distances with radio waves, working together with the NFC tech.
Tokenization provides security for these contactless payments. It replaces the sensitive bank account information with a token (non-sensitive information). This ensures that if someone accesses the payment details, they will be unable to read the encrypted data.
<h4>Reading Digital Wallets</h4>
It is also worth noting that contactless credit card readers can accept payments from digital wallets. These include Google Pay, Apple Pay, and Amazon Pay. The digital wallet stores your payment method, and then you can pay using a web portal or card reader.
<img decoding="async" loading="lazy" class="alignnone wp-image-24463 size-large" src="https://cms.podium.com/wp-content/uploads/2022/11/woman-using-a-card-reader-1024x896.png" alt=" woman using a card reader" width="640" height="560" srcset="https://cms.podium.com/wp-content/uploads/2022/11/woman-using-a-card-reader-1024x896.png 1024w, https://cms.podium.com/wp-content/uploads/2022/11/woman-using-a-card-reader-300x263.png 300w, https://cms.podium.com/wp-content/uploads/2022/11/woman-using-a-card-reader-768x672.png 768w, https://cms.podium.com/wp-content/uploads/2022/11/woman-using-a-card-reader-571x500.png 571w, https://cms.podium.com/wp-content/uploads/2022/11/woman-using-a-card-reader-360x315.png 360w, https://cms.podium.com/wp-content/uploads/2022/11/woman-using-a-card-reader-160x140.png 160w, https://cms.podium.com/wp-content/uploads/2022/11/woman-using-a-card-reader-350x306.png 350w, https://cms.podium.com/wp-content/uploads/2022/11/woman-using-a-card-reader-100x88.png 100w, https://cms.podium.com/wp-content/uploads/2022/11/woman-using-a-card-reader-392x343.png 392w, https://cms.podium.com/wp-content/uploads/2022/11/woman-using-a-card-reader.png 1200w" sizes="(max-width: 640px) 100vw, 640px" />
<h4>Want to learn more about modern payment methods? Check out our <a href="https://www.podium.com/guides/modern-payment-processing-guide/">Guide to Modern Payments</a>.</h4>
<h2>Types of Readers Based on Physical Description</h2>
Above, we categorized car readers based on functionality. But you can also categorize card readers based on physical hardware:
<ul>
<li style="font-weight: 400;" aria-level="1">Mobile or portable card readers are remote or wireless, making them highly portable. They are great for tradespeople, taxis, and delivery drivers. Portable card readers are also very common in restaurants, as you can bring them right to the table.</li>
<li style="font-weight: 400;" aria-level="1">Virtual card readers collect payment information online. They are also called virtual terminals and are especially common for online stores but can also be used in physical locations.</li>
<li style="font-weight: 400;" aria-level="1">Countertop or tabletop systems are larger card readers connected to POS systems and usually sit on a table. They tend to be bulkier and are commonly found in retailers.</li>
<li style="font-weight: 400;" aria-level="1">SoftPOS apps are mobile applications and accessories that convert a smartphone or tablet into a card reader.</li>
</ul>

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<h2>How Do Credit Card Readers Work?</h2>
So, now you know about the different card reading systems available to you. But <a href="https://www.shopify.com/retail/how-credit-card-readers-work">how do card readers work</a>? As mentioned, modern credit cards store information in a chip, magnetic strip, or both. That includes:
<ul>
<li style="font-weight: 400;" aria-level="1">The full name of the cardholder</li>
<li style="font-weight: 400;" aria-level="1">The card number</li>
<li style="font-weight: 400;" aria-level="1">The card expiration date</li>
<li style="font-weight: 400;" aria-level="1">The card validation code</li>
</ul>
With a modern credit card reader, you insert, tap, or swipe a card, and the reader “reads” all of this information. That information then goes through the payment processing system connected with the reader.
The system is complex and includes various checks to ensure the validity and security of the payment. When a card reader gets information, it checks that data with the issuing bank or credit card company. The bank will check for fraud or a frozen card. It will also confirm there are enough funds for the transaction in the bank account. Then, the bank lets the point-of-sale system know the transaction is approved or authorized. Only then will the transaction go through. The entire process is completed in a matter of seconds.
Here’s the step-by-step process in more detail:
<ol>
<li style="font-weight: 400;" aria-level="1">A customer swipes, scans, or inserts their card.</li>
<li style="font-weight: 400;" aria-level="1">The data on the card enters the payment gateway.</li>
<li style="font-weight: 400;" aria-level="1">The payment gateway brings the encrypted data to the customer’s bank.</li>
<li style="font-weight: 400;" aria-level="1">The customer’s bank confirms the transaction is legitimate and there are sufficient funds in the bank account.</li>
<li style="font-weight: 400;" aria-level="1">The bank holds the funds and changes the transaction to “pending.”</li>
<li style="font-weight: 400;" aria-level="1">The credit card company shifts funds to the merchant’s account.</li>
<li style="font-weight: 400;" aria-level="1">After the processing is done, the funds settle, meaning they are fully deposited in the merchant’s account. Settlement of the funds can take several days.</li>
</ol>
<h2>Are Credit Card Readers Secure?</h2>
Credit card readers specifically include technology to keep important information hidden. As mentioned, chip, EMV, and contactless readers are considered more secure than traditional swiped cards. That is because they are harder to replicate.
<h2><img decoding="async" loading="lazy" class="alignnone wp-image-24462 size-large" src="https://cms.podium.com/wp-content/uploads/2022/11/paying-with-a-card-reader-1024x896.png" alt=" paying with a card reader" width="640" height="560" srcset="https://cms.podium.com/wp-content/uploads/2022/11/paying-with-a-card-reader-1024x896.png 1024w, https://cms.podium.com/wp-content/uploads/2022/11/paying-with-a-card-reader-300x263.png 300w, https://cms.podium.com/wp-content/uploads/2022/11/paying-with-a-card-reader-768x672.png 768w, https://cms.podium.com/wp-content/uploads/2022/11/paying-with-a-card-reader-571x500.png 571w, https://cms.podium.com/wp-content/uploads/2022/11/paying-with-a-card-reader-360x315.png 360w, https://cms.podium.com/wp-content/uploads/2022/11/paying-with-a-card-reader-160x140.png 160w, https://cms.podium.com/wp-content/uploads/2022/11/paying-with-a-card-reader-350x306.png 350w, https://cms.podium.com/wp-content/uploads/2022/11/paying-with-a-card-reader-100x88.png 100w, https://cms.podium.com/wp-content/uploads/2022/11/paying-with-a-card-reader-392x343.png 392w, https://cms.podium.com/wp-content/uploads/2022/11/paying-with-a-card-reader.png 1200w" sizes="(max-width: 640px) 100vw, 640px" /></h2>
<h2>What Are the Benefits of Using a Card Reader?</h2>
Using a card reader is crucial for modern businesses, as it does more than just let you accept payment via credit and debit cards. Let’s go over a few other benefits. 
<h3>Ability to Accept Card Payments</h3>
To start, you can easily accept payments via debit or credit cards with a credit card reader.
<h3>Convenience for All</h3>
Being able to accept cards makes it convenient for your customers and staff. Your customers will appreciate the ability to pay using their preferred method.
<h3>Eliminate Errors</h3>
Because the credit card reader gets the information directly from the card, there is no risk of human error when entering card information.
<h3>Connection to POS Apps and Systems</h3>
Your credit card reader will easily connect to your point-of-sale system or application, whether a standalone system or on a mobile device.
<h3>Ability to Track Transactions</h3>
Because your credit card readers connect to your POS system, it becomes very easy to track transactions. This helps with record-keeping and gives you data to analyze so you can further improve your payment systems.
<h3>No Wi-Fi Required</h3>
With a card reader, you won’t be dependent on an internet connection to complete a transaction. You can use Wi-Fi, but you can also use a wired connection or a mobile network.
<h3>Need a Card Reader? Consider Podium. </h3>
The best credit card readers are secure and allow for simple payment processing services. With a card reader, you can accept credit cards, giving your customers more convenient ways to make their purchases. 
Looking for a card reader solution for your business? Click <a href="https://www.podium.com/payments-card-readers/">here</a> to learn more about Podium card readers.

A Complete Guide to Credit Card Readers for Small Businesses

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