Payment Processing Terminals 101

Terminals are the physical machines that are leased or purchased from a vendor or your merchant account provider. Physical terminals allow point of sale merchants to accept card based transactions at their physical store front. These terminals each have different functions and features but most commonly should allow for the following functionality:


  • Card Swiped Transactions
  • Key Entered Transactions


How does the Processor receive funds from a credit card terminal?


  1. The card is either swiped or keyed into the terminal
  2. The terminal connections directly with your processors computer
    1. This connection is secure and encrypted to ensure card holder information is not compromised
  3. The processor recognized the terminal at your point of sale location as the terminal is linked to your merchant account
  4. The data obtained via the card swipe or information entered is verified
    1. Card Number
    2. Expiration Date
    3. Transaction Amount
  5. Based off the information obtained the processor will route the transaction to the appropriate source, (Visa, MasterCard, AMEX or Discover)
    1. Within a matter of seconds the transaction is verified
  6. After verification at the processor and issuing bank a result will be returned to the merchant, whether an approval or denial response.
  7. Depending on how the system is set up the retail merchant processor will send a collection request to the issuing banks to collect on the funds for purchases made.

With the low cost of terminals in today’s market, if possible it’s best to purchase your terminal outright as the leasing fees offered by merchant account providers and Terminal makers alike will end up costing you more money in the long run.


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