It goes without saying that businesses with products or services for sale must have a method of collecting payments from customers. In this day and age, paying by check is a somewhat antiquated method (and may even disappear sometime sooner or later). In contrast, credit card processing services are favorable to most businesses and preferred by customers.
Traditional credit card processing terminals with a magnetic strip reader have been in use for 40 years and are still being widely used. When it comes to taking payments online, services such as PayPal work for small volume merchants; however, most businesses find that a merchant account and payment gateway are more efficient and effective for online payment processing.
This article series will discuss different credit card processing terminals and their uses: Stationary credit card terminals, wireless terminals, virtual terminals, and complete point-of-sale systems.
Stationary Credit Card Terminals
Stationary credit card terminals are mostly used in brick-and-mortar locations, where having a dedicated phone or Internet line for connectivity and power source is available and not a hindrance.
Most of us are familiar with what these terminals look like, as they are common in many retail locations. We have all swiped our cards through the reader possibly thousands of times and scribbled away on the authorization slip produced by the tiny printer.
Traditional stationary terminals have a display screen, keypad, and the magnetic strip reader on one of the sides. Some stationary terminals come with a printer attached while others do not, requiring a separate detached printer. However, the stationary terminals used in these brick-and-mortar stores will soon be less familiar to us due to a small yet major upgrade.
As mentioned above, the technology behind stationary terminals is over 40 years old. Despite the fact that many newer terminals quickly and efficiently process transactions via IP connectivity rather than phone line, the static method in which card data is processed has made these terminals the subject of security breaches. The rising costs to the credit card industry relating to stolen credit card information and the fraud associated with it, has led to the development of a new technology known as EMV.
EMV (EuroPay, MasterCard, Visa) technology is prevalent in Europe and will soon be much more common in the United States as a result of the card associations’ push for entities involved in processing face-to-face transactions to be EMV compliant by October 2015. Entities that are not compliant may be required to accept some sort of liability in the event of a security breach. For merchants, this mainly means that their credit card terminals will need to be upgraded to an EMV terminal with an EMV port.
When a credit card is inserted into this special EMV port, the terminal reads an embedded chip in the credit card – rather than the static data on the magnetic strip. The chip uniquely encrypts the credit card information for each individual transaction, making it impossible for stolen data to be deciphered.
Most EMV terminals being manufactured today also have the old magnetic strip reader, but it’s likely that sometime in the future it will disappear.
Choosing a Stationary Terminal
Just like everything else in the world, when it comes to choosing a terminal, there are often too many choices that end up making life more confusing.
If you’re just starting your business, and are sure that a stationary terminal will work for you (the case with most brick-and-mortar locations) you’ll first contact a credit card processing company and set up a merchant account.
The merchant account provider will set you up with a credit card processing terminal that is programmed to work for your business. Although most terminals are very similar, it’s generally a good idea to choose a terminal from a highly reputable brand. Popular brands in the U.S. include Verifone, Hypercom and Lipman. Ask about these brands, and have the merchant account provider make recommendations based on your businesses requirements. And, you might as well chose an EMV equipped terminal, as it will be necessary in the future with the EMV liability shift.
Buy or Lease?
Merchant account providers usually offer two options; purchase the credit card terminal and own it outright, or lease it. The average terminal costs about $500. Not outrageously expensive, but significant enough that some new businesses opt to lease a terminal because it seems like it’s the least expensive option when just getting started.
However, leasing is rarely the best option. Some providers lock merchants into lease deals as high as $50 a month for a term as long as 2 years. Only 10 months of lease payments would have covered the cost for the new terminal – and so over the term of the lease the merchant would have been able to buy two or three terminals for the same price!
In most cases, terminals can be re-programmed to work with another provider. This may be necessary if a merchant decides to switch credit card processors down the road.
If you have an existing business, and are upgrading your existing equipment, it’s also best to purchase. In some cases, existing businesses are eligible for promotions for free terminals. A partner of The Transaction Group is actually giving away FREE EMV terminals to businesses that are currently processing, in order to encourage the shift to EMV compliance.