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How A Credit Card Swipe Machine Works
This article explains the working of a credit card swipe machine & its functionality. You will also get details on how to buy a credit card swipe machine in India as well as the eligibility requirements and the application procedure to get a credit card swipe machine, also known as an EDC or PDQ machine.
Carrying loads of cash with the constant fear of having it stolen is no longer a major blood-pressure inducing cause. The entry of the credit card has eliminated this tension – only to a certain extent though, because now you have the tension of the card being lost or stolen & misused! Nevertheless, it is a greatly convenient way to buy goods and order a service as and when needed, any time and anywhere. With this convenience came the need for retail stores, dining establishments, car showrooms, etc to acquire a machine which could record a sales transaction. Thus was born an ingenious piece of equipment called a credit card swipe machine.
What are the major functions of a credit card swipe machine?
The primary function of a credit card swipe machine is to record transactions done by credit cards. Unlike the times when such machines were first used, today there are also swipe machines for debit cards and charge cards. The credit card terminal also has the ability to deal with a refund. In addition, a credit card terminal performs the function of easy settlement of accounts of the entire day's transactions. The terminal can also automatically get updates of the latest related software of the merchant service provider.
Most important of all, the credit card terminal should be able to do a verification of a credit card payment with a Personal Identification Number(PIN). This ensures that a forged signature is not being used with a credit card that has been stolen.
In an establishment having more than one business, there may be one common terminal to record & process transactions of the varied businesses.
Step-by-step credit card transaction process through a credit card swipe machine
The credit card swipe machine was at one time known as a credit card terminal. Today it has various names including: Electronic Data Capture (EDC) machine and PDQ machine (the meaning of PDQ is process data quickly).
This is how the processing of your transaction takes place through the EDC machine:
1. You hand over your credit card to the cashier to pay for what you have bought or ordered.
2. The cashier puts your credit card in the swipe machine, passing it through a narrow slit.
3. The machine traps the vital information which is etched on the credit card, namely:
(i) the name on the credit card;
(ii) the number of the credit card and
(iii) the expiry date of the credit card (when it will mature).
It also records the location of the merchant where the purchase is made (the shop, restaurant, etc).
4. The information which is obtained is processed within seconds, meaning that the data captured by the machine is quickly transported to the merchant service provider. This transference of data incorporates wired or wireless internet facilities. At the other end, the data gets authorized & the amount is then transferred to the merchant.
5. The data mentioned in point 3 above can also be entered manually in the remote chance that the swiping of the card fails to register the data.
What is also involved as part of this processing is the signature of the person who holds the credit card. Look at the back of your credit card. The long, rectangular strip has your signature on it. When you submit your credit card to make a payment, the cashier will hand over a slip for you to sign. The cashier checks if the signature on the back of your card matches the one on the slip. This slip is kept by the merchant as a physical record of the purchase made by you, known as the point of sales transaction.
As you can see from the above information, there are various people involved during the use of a credit card swipe machine:
The person buying a product or ordering a service
The merchant – this is the shop or restaurant or service provider (such as a car rental service at the airport)
The merchant service provider – this is the bank
Speaking of merchant service providers, they are the ones through whom the business owner gets the credit card swipe machine.
Where to get a credit card swipe machine in India
Buying a credit card swipe machine in India is not a matter of entering a shopping establishment and buying it over the counter. This is because this type of machine incorporates monetary aspects (money is involved) and hence requires a proper official approval.
So what you need to do to acquire a credit card swipe machine is to put in an application as a franchise with a banker and Visa/Master/American Express/Diners Club. This enrollment, naturally, involves signing a contract and fulfilling 2 main eligibility criteria: (1) You must have a valid business establishment and (2) Your business should be in existence for a minimum of 6 months.
You will also need to submit certain documents along with your merchant application form. These include identity proof, proof of your current address and proof of your business. If by chance you already have an EDC machine from another bank, you would also need to give details of this. In case you need more than one EDC machine, you would need to submit a request letter for this & mention the number of required Terminals.
As for the cost of a credit card swipe machine this is part of the merchant service, which may vary from one bank to another. Besides the merchant services fees, you would be paying installation charges as per the type of business and the location, as well as a monthly rental for the GPRS terminal (this may be approx. Rs.1,500/-) and other charges such as service Tax & VAT.
One of the primary manufacturers of credit card machines is Verifone. Watch the video below to know how the Verifone Vx510 Credit Card Terminal and Payment Device works.
Important Tips when getting a credit card machine
1. The contract should be read thoroughly from beginning to end, including the tiny print that comes at the bottom.
2. Ensure you know exactly what charges are involved. Are there machine servicing charges? Is there a fee for an invoice? What are the installation charges? Are there any account closure fees? …and so on & so forth.
3. Find out, too, if the company which is administering your merchant account is the same as the one providing the credit card swipe machine since otherwise it means paying 2 different entities.
Dangers to look out for when using a credit card swipe machine
1. The signature on the card and the transaction slip needs to be checked if matching. If there is even a slight doubt that the signature does not match, then it is important for the cashier to request to see the buyer's personal ID. This could be a driving licence or PAN card. This is where the credit card terminal's most important function comes into play – by providing some kind of safety shield against a falsified signature.
2. It is important to have a locking system for the credit card swipe machine when not in use. This ensures that the machine is not misused in any way.
3. Training an employee to use the machine is crucial and understanding the features of the credit card machine is equally essential. It is best to acquire one which has easy-to-use features and not some complicated equipment which nobody can understand!
4. It is a good idea to have the option of providing a printed receipt of the transaction to ensure a proper record of the transaction.
All the information in this article also applies to portable credit card swipe machines. Companies which offer home delivered goods & services often use such portable machines for convenience. It also enables taking payments on the spot at places like trade fairs and mobile vans which move from one place to another selling a company's products.
As you can see, there are plenty of aspects to using a credit card swipe machine!
Read related articles: Credit card
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|Guest Author: Mohan 25 Aug 2012|
|Thank you for a well written article. Did clear all my doubts about the EDC. Little more information on the charges involved would have made this a all round complete article. Good Work! Thank you.|
|Guest Author: praveen 17 Feb 2014|
|I need more information about the swip machine.|
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