24 Jan 2015

A device that can decode the information contained in a credit or debit card’s magnetic strip or microchip. Card readers allow customers to access their bank accounts through ATM machines and allow consumers to make purchases using credit and debit cards. The card’s magnetic strip or microchip contains information including the cardholder’s name, account number, card expiration date and card validation code. The card reader decodes this information, and it is transmitted to a payment processor. The payment processor then verifies that sufficient funds are available to complete the transaction, and the merchant completes the sale.

Before there were card readers, merchants used manual devices at the point of sale to take a physical imprint of the embossed customer name and account number from the front of the credit card. These devices, colloquially called “knuckle busters” because users would often scrape their knuckles on the device while using them, became widespread in the 1950s when credit card use became more common. These manual devices cannot read or transmit data stored on credit cards; merchants have to transmit the information from the carbon copies to the payment processor long after the transaction is complete. Today, some merchants keep manual imprinters on hand as a back-up option for accepting credit cards when electronic payment systems are down.

,p>Traditionally, electronic card readers have been integrated with stationary payment systems — the point-of-sale terminals we envision when we think of using a credit card to pay at the store. Thanks to modern technology, credit card readers are now small and portable. They are also easily and inexpensively available to almost anyone who wants to accept credit card payments. All it takes is a small device that plugs in to a smartphone or tablet. The card reader itself is sometimes free, and the payment processor that issues the reader makes money by collecting a small percentage of each credit card transaction, such as 2.75%.

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