How Credit Card Machines Work

They’re everywhere – there is no doubt you have seen credit card machines everywhere around you. At grocery stores, shops in malls, gas stations, and even the drive-thru window. So naturally, you must have wondered at one point or another why they’re everywhere and how do they make transactions so easy unless you own a business and are looking into buying a credit card machine for yourself to make things convenient for you and your customers.

Regardless, we will tell you they work in this article and answer a few other things you also wondered about. Keep reading to learn all you need to know about credit card machines.


Credit Card Machines Over The Years

The very first card machine was called the credit card imprinter. Initial payment cards were made of cardboard and needed manual recording at sale points. However, American Express came out with the first plastic credit card in 1959. People showed proof of transactions on carbon paper imprinted using a credit card imprinting machine. This machine saved people a lot of time, and some shops use flatbed credit card imprinters as a backup for when chip and PIN machines are down.

In 1970, the magnetic strip was added to plastic credit cards, allowing electronic payment systems. The magnetic strip, invented by an IBM engineer, made independent configurations of hardware and printers possible. But, in 1973, the first electronic transaction authorization system was launched in the US. Electronic payment systems were not widespread until the 1980s though.

Moreover, the more renowned chip card was patented in 1975 by French inventor Roland Moreno, who also referred to it as the smart card. Further devices and hardware were developed to read these micro-processing chips, and PINs came with them to allow cardholders to authenticate themselves. The chip and PIN cards made transactions much safer and reduced the chances of fraud.

Even though credit cards were turned electronic, most shops still used manual card imprinters and signature verification. Swipe cards invented in 1970 did not make much of a difference until the first electronic card machines were launched in 1979 by Visa. These machines significantly reduced the time it took to process cards. However, Verifone released its first POS terminal in 1982, and the 1983 ZON model was the benchmark for today’s card terminals.


Types Of Credit Card Machines

One of the first types of credit card machines we will get into is the stationary terminal. Initially based on a landline connection called PSTN (public switched telephone network), it was the first solution to transmit data between electronic payment terminals and customer banks. However, it is much faster to use an internet connection, so today’s terminals are connected through 3G, 4G, WiFi, GPRS or Ethernet.

Some merchants faced the inability to accept credit card payments if they were moving from one place to another. Therefore, wireless terminals were invented, and they’ve been useful for on-foot merchants, food trucks, or any mobile business – as long as there is a compatible network connection. The devices used to be bulky and heavy but have since been designed to be much lighter and easier to carry. Modern wireless terminals are now widely used by restaurants, gas stations, and most stores around the globe too.

App-based card readers came into existence only recently, but they are much more convenient and cheaper than traditional mobile credit card machines. They are connected to smartphones via Bluetooth, whereas they used to be connected by cables and a headphone jack. App-based credit card readers are perfect for street vendors and merchants or individuals who cannot afford a dedicated .

Much more recently, though, smart POS terminals entered the market. Smart POS terminals are multi-functional touchscreen devices that can support third-party apps and special POS software apps. Poynt introduced them in 2014, and ever since, various companies have introduced their tablet-like terminals with physical PIN pads with the touchscreen display.

You probably know that it is now possible to authenticate transactions biometrically. Some credit card machines are capable of reading fingerprints due to an integrated fingerprint reader on the terminal. It is much more secure than simple PINs and signatures and might replace all other credit card verification systems one day.


So, How Does A Work?

The seller will type the amount to be paid into the card machine and hand it to the buyer will confirm the amount, insert their credit card and enter the PIN. In the case of contactless transactions, the customer only has to tap their card onto the machine.

Here is how the payment process unfolds:

Payment Authentication

The seller’s bank will receive a request from the card machine to allow the transaction to occur. The main role of this bank is to create a merchant account that allows the seller/business to accept credit card payments.

Transaction Submission

When the merchant bank receives the request from the machine, it asks the card provider to authorize the buyer’s bank account to make the transaction.

Requesting Authorization

The card provider will verify the card details are correct and pass the authorization request to the buyer’s bank.

Authorisation Response

The issuing bank that supplies the credit card will check the buyer’s account for sufficient funds before clearing the payment.

Retailer Payment

As soon as the payment verification goes through, the credit card machine receives a signal that prints out the receipt of the transaction. Even though payments take seconds only, it takes a few days for the buyer’s bank to send payments to merchant banks.


How Credit Card Machines Make Life Easier

While paying with cash, the old-school way is the most secure way to conduct any transaction. However, credit cards have made payments much easier and convenient. You do not have to carry any cash on you; go through the hassle of counting your change and save space in your pockets, purses and wallets. It also saves you from losing a lot of cash when you get mugged – a mugger would have to know your PIN, but you could deactivate it before they use your card.

But how do credit card machines make life easier? Well, credit card machines have gotten better, more secure and faster over the years. They started quite simple and manual, but today they can use your biometric data or authenticate transactions without contact. Modern payment terminals are only getting better and allow you to authenticate and verify any payments without giving your PIN or sensitive information away.

If you are on the merchant’s end, they’ve become more lightweight and efficient. The internet connectivity that connects payment terminals to banks makes them much faster at authenticating transactions and verifying cardholder identities. The older landline-connected credit card machines were immobile, bulky, and slow. The more data there is to transmit, the slower they would be.

However, keep in mind that more modern versions of credit card machines are expensive and might be unaffordable for smaller businesses or street vendors.



To conclude, credit card machines have not been around for long at all, but they’ve quickly been improved and will only continue to be from the PIN and chip verification system being as secure as they already are to biometric and contactless verification. They also make shopping faster and hassle-free. You do not need to count your cash, take it out and put it into your wallet, give your credit card to the cashier, verify yourself, and that’s it.

It is safe to say that with the way credit card machines have been innovated lately, perhaps much faster and more secure payment methods will be available soon. There is no telling what the future holds, but we sure do look forward to it! We hope that this article fulfilled your curiosity or provided you with all the information you need about credit card machines.



What’s different between credit and debit card machines?

Credit and debit card machines are essentially the same way. They both read the magnetic stripe or chip, require some form of verification such as a PIN and authorize transactions between merchants and customers. Both machines require a network connection such as WiFi, Bluetooth, or a landline connection – except for much older, manual payment terminals. The only difference is between credit cards and debit cards themselves.


Are credit card machines expensive?

Credit card machines may cost you from $200 up to $1,000. Prices vary depending upon the features they provide and the company they’re purchased from. The best credit card machines will provide magnetic strip reader, keypad, display screen and chip card reading capabilities. More expensive options are available on the market, such as payment terminals with touchscreens and fingerprint scanners.

Credit card machine prices can run high if you are looking for the most convenient and efficient choice. However, if you are a small business or a street vendor, you are better off looking out for affordability, security and essential features. Although a wireless, mobile credit card machine will cost you quite a bit regardless, they are a good investment.


What is the cheapest alternative for credit card machines?

Today, there are not many methods or options that are as secure and convenient as credit card machines. However, if you own a small business and require a way to accept credit card payments without breaking the bank, you can read about some affordable credit card processing companies here.

You could also look into credit card processing apps that allow you to take credit card payments without owning or renting a credit card machine. Such apps are cheaper, and you can conduct all your transactions on your smartphone! It is the best option for a home-based business.

Suppose you cannot afford a credit card machine and do not trust apps or companies to handle transaction authentications and verifications. In that case, you could go about it a different way. You can provide your bank account details to your customers so they can directly transfer the required payments to you. It may not be the most reliable or secure way to ensure all your transactions occur. It is also not the best method for larger, commercial-scale transactions.


Are credit card machines secure?

Credit card machines are reliable and secure because they are hardwired and have security factors that prevent them from being vulnerable to data theft. You can rest assured that whether you are a business owner or a customer, your transactions are secure and will not be hindered or vulnerable to fraudulent activity. It is hard to commit credit card fraud because even if someone manages to use someone else’s credit card successfully, they can be tracked easily and caught.

As long as you invest in good credit card machines or take measures for your credit card security as a customer, there is nothing to worry about. With technological advancements, transactions are as secure as possible and will only get much better.

How Credit Card Machines Work  credit card terminal for small business