Credit card terminals are devices used by merchants to read and approve credit cards. They are designed to communicate with a database containing the current status of a cardholder's account, and utilize that information to either approve or deny the transaction. Because credit card terminals provide access to sensitive data and are entrusted with credit card information, certain measures must be taken to ensure the integrity of the merchant using the credit card terminal. As a result, any merchant using a credit card terminal can only do so in association with a merchant account.

A merchant account is a business account provided by a bank. In order to be approved for such an account, a merchant must have their identity, credit history, and business history verified by the bank. The bank then investigates the merchant, ensuring that they have no history of fraud, and authenticates their identity, location, and contact information. This is especially important in the case of online merchants, who might otherwise hide behind false information in order to defraud the public before vanishing. After an applicant is found acceptable, they can open their merchant account, through which they must conduct all financial business. When a merchant account holder accepts a credit card at the business, a credit card terminal provides a point-of-sale connection between the merchant account, the customer, and the credit card provider.

Basic Credit Card Terminals

Basic credit card terminals include a small monitor, a keypad for manual data entry, a magnetic strip reader, and a small printer for receipts. The magnetic strip reader allows the merchant to swipe the card through the machine, which can then pull all of the customer's relevant information from the magnetic strip on the back of the card. The terminal then transmits this information to the card provider's customer database, via the merchant account. The terminal can then determine whether to accept or deny the card. A card may be denied if there is a hold on the account, which can occur if several suspiciously large purchases are made within a short amount of time. The provider does this in case the card has been stolen, as it prevents any further use of the account verifying the identity of the card holder. A card can also be denied if the card has exceeded its limit.

Other types of credit card terminals are designed to be used in specific trades. Wireless terminals are great for merchants who require freedom of mobility. One such example is taxi drivers, who can use wireless to securely process credit card payments from their cabs. Merchants who only conduct online or telephone transactions have no need of a traditional terminal, as they can't physically swipe the credit card through a magnetic strip reader. Virtual terminals are software programs issued by a merchant account provider in order to regulate such transactions. Virtual terminals can accept input from a secured web browser, which the software automatically encrypts to deter hackers. Once it receives the data, the virtual terminal transmits it to a secure server, where it is then relayed to a database, just as in a traditional transaction.