Most people use them at least once a day, but do you actually know how a credit card scanner works? Chances are high that the answer to this question is a resounding NO! Most people don’t give a second thought to the piece of technology that makes it possible to pay for things using a piece of plastic that you carry around in your wallet or purse, but by the time you finish reading this, you will be able to answer yes to the previous question with certainty.
Credit Card Scanner Basics
Also known as credit card readers, these devices represent the first step in paying for goods or services with a credit card. The process of paying using a credit card is a relatively simple and easy to understand process. The transaction process involves three steps, Authorization, Capture, and Settlement.
The First Step – Authorization
Once you swipe your card (or if it’s a chip card, insert it into the reader), your card is scanned by the reader and the information is sent to whoever issued you the credit card. Your account is checked to verify that you have sufficient funds to cover the charge, and once this is confirmed, the transaction is authorized to take place.
Step Two – Capture
This is the point at which the money is sent to the acquiring bank. It generally takes place in batches, so this is sometimes referred to as ‘batching.’ Typically, a business will send a receipt showing all the credit card transactions they made that day to their bank, which will process each transaction with the appropriate credit card company. Once this is completed, the funds can be transferred to the business that made the sale.
Last Step – Settlement
Here the business that made the sale receives the money that they are owed. This generally takes a few business days from the point of sale, long enough for the banks to process the transaction and verify things on their side of the sale.
How Credit Card Scanners Function
There are a few different ways for a credit card to be scanned by a reader. The oldest and most widely available method is through a magnetic strip on the back of the card. This technology is outdated, and is quickly being replaced by newer and more secure methods of data transfer, namely EMV (chip) cards and contactless payment cards. Cards that have only a magnetic strip are vulnerable to data theft, because the information on the tape cannot be changed once created. This makes it easy for a thief to copy the information onto a blank card, and then charge fraudulent transactions to your account. Chip cards get around this danger by dynamically encrypting the information on the chip, so that it cannot simply be copied onto a new card and used for fraud.
Credit card readers may at first seem like a complex piece of equipment that is hard to understand, but when you get down to it, they are quite simple. The transaction process is simple and mostly automated, enabling credit card users the world over to make fast and easy transactions without having to carry around wads of cash.