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.

Start accepting card payments with SumUp. 

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, it includes all of 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’s 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 transaction 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 for in-person sales in which the customer is paying with a credit or debit card. 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 doesn’t require a PIN code if it’s under a certain specified amount

Some credit cards don’t yet have all capabilities, so the most ‘old-fashioned’ way to accept 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, some 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 into 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 your invoicing software that makes it easy to manage your cash flow.

SumUp card readers & invoicing software

SumUp offers 3 different card readers that vary in price and capabilities. With all of the card readers, you can accept payments on the go from all major credit and debit cards. 

SumUp Invoices is free invoicing software that helps you create professional invoices in under 1 minute. You can choose to include an online payment link directly on your invoice so your customers can pay instantly and effortlessly online. 


Start invoicing for free