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Updated Apr 11, 2024

Credit Card Machines: Answers to Frequently Asked Questions

Finding the right fit affects agility and scalability as you prepare to accept credit cards for business. Physical and virtual terminals, differing security features and cost are all factors to consider.

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Jennifer Dublino, Business Strategy Insider and Senior Writer
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This guide was reviewed by a Business News Daily editor to ensure it provides comprehensive and accurate information to aid your buying decision.

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Accepting credit cards doesn’t have to be complicated for your small business. The most common place to start is with a credit card machine. You’ll also have to consider swipe rates, merchant accounts, hardware and security standards but we’ve got you covered. Here are the answers to frequently asked questions about credit card machines for your small business.

How do credit card machines work?

Credit card machines are used to collect payments from customers who wish to pay by credit or debit card. Typically, they are connected to the internet or a phone line to send data to the processor. For most credit card processors, funds are transferred from the customer’s bank to the business’s merchant account. In some cases, the credit card processor uses a merchant account and holds funds on your behalf, then deposits them directly into your checking account at your discretion.

Key TakeawayKey takeaway
Credit card machines charge a business’s customers and transfer the funds to the company’s merchant account.

What are some types of credit card machines?

There are various types of credit card machines and each offers unique benefits. Some of the most common types of credit card terminals are countertop, mobile, virtual and integrated point-of-sale (POS) systems.

Countertop terminal 

These credit card machines are the most common and require a wired connection to your phone line or internet network. The device usually sits on a counter or tabletop. Countertop terminals can process both credit and debit cards and some have a keypad for PIN entry. Many of them support card-not-present transactions, in which a merchant types in the customer’s credit card number. Here are some benefits of using this type of terminal:

  • Secure transactions: Because they are hardwired, countertop credit card machines are not very vulnerable to data theft.
  • Card-not-present transactions: Card-not-present transactions are mostly used for phone or internet orders but can also be used when a credit card’s chip or magnetic strip is defective.

These are some disadvantages of using countertop terminals:

  • Hardwire connection: Since they require a hardwired phone or internet connection, they are not suitable for mobile selling either within or outside your company.
  • Bulky unit: These units are larger and heavier than other options.

Countertop terminals are best for your company’s brick-and-mortar store or office where you check out customers. You can expect to pay $100 to $350 or more, depending on the brand, model and features.

Mobile terminal

Mobile terminals rely on a wireless connection through Wi-Fi, a phone or a tablet to process card payments on the go. This means they can be moved from the checkout counter to other places in the store ― or even taken out to events. Here are some advantages of using mobile terminals:

  • Portability: Your business can better serve your customers’ peak demand by sending cashiers in line to process orders. Perhaps your company is portable by nature and the mobile terminal gives it more profitability.
  • Sleek design: To enable portability, these units are much smaller and lighter than countertop terminals.

The downside to mobile terminals is security:

  • Nonsecure device: Since payment information is sent wirelessly, there is some concern that it may be intercepted. Employees should be trained in data security best practices to keep customers’ payment information safe.

Mobile terminals are best for businesses that are mobile and/or participate in events, such as food trucks and farmers or flea market vendors. They are also useful for high-demand businesses, such as ticket vendors and Chick-fil-A locations. Finally, businesses that do house calls, such as plumbers and tow truck drivers, can benefit from mobile credit card terminals.

Mobile terminals are around the same price as the countertop units, starting at $100 to $350.

TipTip
Mobile terminals are great for businesses that sell on the go, such as at trade shows or events.

Virtual terminals

These terminals allow your e-commerce business to process credit and debit cards by entering the payment information into a secure website. A client’s card does not need to be present to process this type of transaction.

These are some benefits of using virtual terminals:

  • Cards optional: You can run your business virtually and still process credit card transactions with this type of system.
  • Complete mobility: No credit card processing device or accessories are necessary, so you don’t need to pay additional costs.
  • Low rates: Business-to-business transactions are less subject to fraud so processors may charge lower fees for them ― a benefit if you sell primarily to other businesses.

These are some drawbacks of virtual terminals:

  • High costs: Because card-not-present transactions are more prone to fraud, credit card processors tend to charge higher fees for them.
  • High mishaps: With this type of system, you’d have to type in the credit card number, expiration date and security code each time a customer makes a purchase. This is time-consuming and more likely to result in errors.
  • Credit cards only: Virtual terminals only process credit cards ― not cash, checks or debit cards ― so you’d need a backup system in place to process those kinds of transactions.

Some virtual terminals charge a subscription fee, in addition to your transaction fees on purchases. The transaction fees tend to be higher than when customers insert, tap or swipe their cards in person because of fraud.

Integrated POS terminals

These terminals tie card processing hardware to a POS system. The setups allow a POS system and card processing system to work together.

Here are some benefits of integrated POS terminals:

  • Fast checkout: Since the system ringing up the purchase and the system processing the payment are integrated, the correct purchase amount is automatically processed. This system thus reduces human error and speeds up checkout.
  • Easy accounting: When purchases are tied directly to your POS, it is easier to see and analyze sales trends, total sales by product and inventory levels.

These are some disadvantages of integrated POS terminals:

  • Limited processors: Each POS system usually only has a few payment processors that integrate with their system. You will need to choose from among that limited group. It will also be more difficult to switch to another payment processor that has low rates.
  • High costs: The added convenience comes with a cost for the POS capability. Integrated POS terminals start around $400 and can run well over $1,000.

Editor’s note: Are you looking for the right credit card machine for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.

What is the difference between a credit card machine and a POS system?

A credit card machine is a credit card reader and PIN pad. A POS system is a complete checkout terminal that comes with a credit card machine, monitor or tablet, a cash register and printer. POS systems can also include additional software or apps that track inventory, monitor sales, generate discounts, create financial reports and help with marketing. Do you need some real-life examples? Check out our list of the best POS systems.

What are the best POS systems and credit card processors?

When choosing a POS system or credit card processor for your business, you have many choices. To make it easier, we have evaluated the top providers in the industry and chosen the best picks for different needs.

Recommended POS systems

  • Square: Affordability and ease of use make Square a great choice of POS system for accepting payments, tracking sales and scheduling appointments with customers. There are three pricing tiers and there’s a free version. If you run into customer disputes, rest easy — there’s no chargeback fee. Check out our Square review here.
  • Clover POS: First-rate hardware and lots of options for customization make Clover a great POS choice. Not only is the hardware intuitive to set up, but it’s also attractive and durable too. Click here for our Clover POS review and find out more about a system that will help you manage employee and customer information while you accept payments.
  • Toast: Our Toast POS review suggests restaurant owners will raise a glass to Toast with its scalability and the ease it brings to digital ordering. It will stand up to the task with restaurant-grade hardware and accessories!
  • Lightspeed: Are you ready to learn about a retail-specific solution? Look no further than our Lightspeed POS review. Lightspeed allows for inventory tracking across store locations and integrates easily with numerous apps. There’s 24/7 customer support for those times when you need questions answered efficiently.
  • TouchBistro: Looking to bring restaurant guest experience to the next level? Our TouchBistro review will tell you everything you need to know about the ease of use of this POS for staff, along with its delivery, reservation- and table-friendly features. It supports offline transactions for those times when the internet’s down.

Recommended credit card processors

  • Clover Credit Card Processing: For easy pricing that includes month-to-month and flat rate options, consider Clover for credit card processing. Our Clover review will fill you in on its pricing flexibility and users’ ability to use an e-commerce interface or virtual terminal without purchasing hardware.
  • Merchant One: For business owners who may have had a past hiccup with their credit, Merchant One is a good route. Our Merchant One review will give you all the info you need about its data security and fraud protection features and the software’s ability to sort through and categorize past transactions.
  • Stax by Fattmerchant: High-revenue small business owners will find lots of features to love with Stax by Fattmerchant. Top-tier bank partnerships allow this credit card processor to offer access to more funds for higher-risk businesses. Peruse our Stax review and find out more about the live chat, email and phone customer service options and features that include invoicing and report generation.

How much do credit card machines cost?

Many vendors offer free credit card machines; others allow you to buy or lease your equipment. Pricing depends on the model and features, such as Europay, Mastercard and Visa (EMV) and near-field communication (NFC) capabilities. Costs are also based on whether you rent or purchase the machine and if you receive it from the vendor or a third party. Generally, the most basic credit card machines cost less than $100 and more expensive models can cost several hundred.

Other costs to consider include credit card processing fees, monthly service fees, setup fees, gateway fees and compliance fees. These costs vary by vendor and many waive some fees for new customers.

Key TakeawayKey takeaway
The cost of a credit card machine generally ranges from $100 to a few hundred dollars ― depending on the model and added features.

What are the different credit card processing fees?

There are three main pricing structures for credit card processing fees: interchange plus, tiered pricing and flat percentages.

Interchange-plus

This type of pricing ― also known as wholesale pricing, true pricing and cost-plus ― is the preferred choice because it gives your small business the same low rates used by big-box stores. Interchange-plus charges a flat fee that consists of a small percentage plus some cents per transaction. You can often negotiate lower rates if your company has a high sales volume.

Tiered pricing

By contrast, tiered pricing depends on the type of credit card being used. This pricing structure is less favorable because it works by bundling different types of credit cards into tiers ― with increasing swipe rates. These tiers are classified as qualified, midqualified and nonqualified cards. These include regular cards, debit cards, rewards cards, business cards and other types of credit and debit cards. Generally, credit card processors decide which types of cards are qualified, midqualified and nonqualified for their particular service, so tiers and pricing vary.

Flagship Merchant Services is our choice for a flexible credit card processor because it uses both interchange-plus pricing and tiered pricing. (Note that tiered pricing is the advertised cost, so you’ll have to ask for interchange pricing.) Flagship’s interchange-plus rate is 0.3% plus 10 cents per transaction and is negotiable for your company’s high sales volumes. Its tiered pricing starts at 0.38% for qualified debit cards and 1.58% for credit cards, plus 19 cents to 21 cents per transaction ― the price increases for midqualified and nonqualified cards.

Flat percentage

Some credit card processors also charge a flat percentage per transaction. Typically, this is the case with mobile credit card processors, such as Square and PayPal, which charge 2.6% and 2.9%, respectively, per swipe.

What is a merchant account?

When you’ve decided to accept credit cards, it’s important to know what a merchant account is. Essentially, it allows your business to accept cards ― it transmits payment data from a customer’s bank to your company’s bank and authorizes credit card transactions. Merchant accounts are offered either by the credit card processor or directly from a financial institution ― typically a bank. You will normally need to apply for a merchant account. However, not all credit card processors require a merchant account.

Can I use an iPhone, iPad, Android and other mobile devices with a credit card machine?

Some credit card machines are compatible with tablets, but the most common way to accept credit cards with an iPhone, iPad, Android or other mobile device is by using a credit card swiper. This small dongle attaches to the headphone or auxiliary plug on a mobile phone or tablet and processes credit cards using a mobile app. Another way to accept credit cards using a mobile device is by using a virtual terminal: A feature that lets you input credit cards into the app manually.

Did You Know?Did you know
Some credit card terminals can connect directly to a smartphone or tablet through the charge port of the headphone jack. Here’s some information on upgrading credit card terminals to enhance your understanding.

What is NFC?

Is not accepting credit cards bad for business? Trust us: you want to get in that game and NFC technology puts you there by letting you accept credit cards without swiping them. Accepting NFC mobile payments is possible only after you acquire an NFC-enabled credit card machine, such as Apple Pay, Android Pay or Samsung Pay.

What are EMV cards or chip cards?

EMV technology aims to defend both the consumers and your business from credit card fraud and cyberattacks. It also protects your company from liability in the event of a credit card-related security breach. Traditional credit card swipers read the magnetic stripe on the back of credit cards. For better security, EMV reads a chip embedded in new credit cards. Most new credit card machines are equipped with both an EMV chip reader and a traditional credit card swiper.

FYIDid you know

What security features should I look for?

The two main security features to look for in a credit card machine and credit card processor are data security standard ― also known as the Payment Card Industry Data Security Standard (PCI DSS) ― and EMV capabilities. PCI DSS consists of several security measures, including point-to-point data encryption. Although credit card processors have PCI DSS as a part of their service, it is your responsibility to make sure they are compliant to protect sensitive information and keep your credit card processing fees low. [Related article: Accepting credit cards? PCI compliance a concern for small businesses]

How soon are funds transferred to my bank account?

As with most banking transactions, credit card funds go through an automated clearing house and transactions typically are completed within two business days. There may be delays in some cases, usually because of holds by banks or chargebacks. Each credit card processor and bank has its own policies, so be sure to read the fine print regarding holds on funds.

Key TakeawayKey takeaway
Most credit card transactions are completed within two business days but the time can vary depending on your bank.

Can I still get a credit card machine if I have low or bad credit?

Generally, yes, you can still get a credit card machine if you have bad credit. However, many credit card processors consider your personal credit when processing merchant account applications. If you want to obtain a credit card machine and you have low or bad credit, look for a credit card processor that either doesn’t require a merchant account or specializes in high-risk applicants. 

What are some types of credit cards?

There’s certainly no shortage of options for consumers looking to open an account with a major credit agency, preferred brand or favorite store. Here are a few of the card types your customers may use to make purchases:

  • Consumer credit cards: These are the most common credit cards issued. Consumers can obtain these credit cards from several preferred brands and services, such as an airline or online shopping platform. Often, these cards offer special deals on select products and services.
  • Business credit cards: Having a small business credit card is important as these cards cater to the needs of your growing business, offering high lines of credit and the ability to authorize employees. They often include special offers tailored to the industry.
  • Student credit cards: Typically, student credit cards come with offers specific to young people, have lower credit limits and generally are unsecured, which means they don’t require a deposit to be opened.

Elizabeth Crumbly and Stella Morrison contributed to this article.

author image
Jennifer Dublino, Business Strategy Insider and Senior Writer
Jennifer Dublino is a small business owner and skilled strategic marketer who specializes in designing campaigns for sales conversion. For more than 30 years, she has helped businesses with market research and planning, budgeting for marketing initiatives, lead generation and more. Over the years, she's founded and sold her own marketing firm, served as COO of the Scent Marketing Institute and launched a second marketing company — which she still runs today. Dublino holds a bachelor's degree in business administration and an MBA in marketing and finance, both from the University of Miami. Her expertise, which extends to all facets of business operations, from POS systems to compensation management, has been quoted in AdAge, Adweek, Reuters and other outlets.
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