How does a Merchant Terminal Work?

Are you a merchant who is interested in accepting credit cards, but unsure how the process works?  It is quite easy to understand actually once you understand how the physical parts of your store, such as you point of sale system, interact together to process a payment. One of the parts of the point of sale system is a merchant terminal. This is the hardware needed to accept credit cards. You probably will recognize this because it is the machine that credit cards are scanned or swiped into.

These days, it is almost necessary to accept credit cards in order to be successful in business. When you have a merchant terminal in order to accept credit cards, you will find that profit will increase, customers will be happier and you will be able to offer the convenience of quick, hassle free checkout. A merchant terminal will be able to process a transaction in seconds, where it can take a person several minutes to complete the same transaction. This can be a huge benefit to your customers who probably want to get in and out as quickly as possible without waiting in a long line.

The way a merchant terminal works is quite simple as mentioned above. The first step is of course, swiping the card into the machine and entering the sales amount. When this is done the information will automatically be sent to your payment processor to begin the authorization process.

The processor sends the information through to the bank that has issued the credit card so that the information can be verified. If the charged amount is available according to the current balance, the bank sends the information back with an approval notice. If not, and the card is declined, the bank attaches information to the transaction giving the reason for declination, i.e. expired card or insufficient funds.

At this point, the information will be sent back to the merchant terminal and a receipt will be printed, ready to be signed by the customer as long as it is approved. If denied, the merchant terminal will show the information for declining the transaction and the customer will have a chance to enter another payment method to cover that transaction. The transaction will be complete at that point as far as the customer is concerned. For you, the merchant, there is still one more step that needs to be completed.

The final step for a merchant is to settle your account with the payment processor. This is also called “batching” or “sending the batch”. Generally this means you will send all of your credit card sales for the day to your payment processor and they will begin the process of paying your money out. The money will be deposited into your merchant account and it will typically take about 1-3 business days for the money to be deposited.

As you can see, though you may think using a terminal is confusing, it is really quite easy once you understand the process.