Debitoor's accounting dictionary
Card reader

Card reader - What is a card reader?

A card reader is a device used in the sales process to read the payment data stored in a credit or debit card magnetic stripe or chip

Accept payments on invoices instantly with the Debitoor x SumUp integration. Learn more about managing card payments face-to-face and online.

In business, a card reader is typically a handheld device that can be wireless or connected by wire to a computer or sales terminal and is used to gather the data of the buyer’s credit or debit card to complete a sale.

This is not to be confused with a computer card reader, which is a piece of hardware, often part of a computer or with a USB connector port that allows a computer to read data from an SD card or other multimedia card.

How card readers work

In sales, credit and debit cards contain information in both the magnetic stripe and in a microchip embedded in the card. The information includes the following details about the cardholder:

  • Their name as it appears on their account statement
  • Their account number
  • The expiration date of their card
  • The validation code (the 3-digit code on the back of the card)

Essentially, all the information that must be entered when making a purchase online. Of course, when using a credit card to make a payment, this information is not visible to the seller. Typically, a card reader might display the name of the issuing bank for the card.

Once the card reader has ‘read’ this information, it is then processed through a payment processor to ensure that the buyer has sufficient funds to complete the purchase, and if so the card is accepted and the sale is completed.

In using a card reader, there can be an additional service charge added and this is typical for many merchants. The fee is generally a small percentage of the total amount of each sale and goes to the payment processor as part of their business model.

When to use a card reader

A card reader is generally required in any in-person sale that occurs involving a credit or debit card payment from the buyer. The seller would provide their card reader, which would read the card details in order to take payment from the buyer.

Handheld card readers today are highly portable and easy to use. There’s no need for a complicated computer program, as it’s possible to sync the latest technology with a smartphone via Bluetooth and an easily-downloadable mobile app.

Card readers can ‘read’ the card in three ways:

  • By reading the magnetic stripe on the back of the card combined with the buyer’s signature or confidential PIN code
  • By reading the chip when inserted into the reader, accompanied by the PIN code
  • By contactless payment, which often does not require a PIN code if it is under a certain specified amount

Some credit cards do not yet have all capabilities, so the most ‘old-fashioned’ way to accept a payment is by magnetic stripe, after which a receipt is printed off that can be signed by the cardholder.

Do I need to invoice with a card reader?

While many sales are immediate and don’t require an invoice, often customers might request an invoice. Because card readers are often portable and used in environments where it might not be feasible to sit down at a computer to create an invoice, there are useful Android and iOS mobile apps that make it easy to issue an invoice fast.

These mobile apps allow you to then accept payment from the buyer instantly, meaning that it takes no time at all to create and send an invoice and accept payment all in one go.

Managing payments from card readers

On the other side of card readers are the payments that are processed, generally through a third party before being deposited in your bank account. These third parties provide an array of services aiming to help you view and manage your payments.

In addition, online software is available to help you keep track of your business finances. This means that all payments are automatically registered in accounting software that makes it easy to manage your incoming and outgoing cash flow.

Debitoor and card readers

Debitoor online accounting & invoicing software now features a direct integration with SumUp, leading the market in card readers that link directly with your Debitoor account. This makes it easier than ever to track and manage your payments and keep up with your business bookkeeping.

In addition, you can create and enter payments on an invoice in less than 1 minute, even while at the market or on the road with Debitoor’s mobile apps.

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