Today 77% of Americans prefer to pay with plastic, which has helped make mobile credit card reader technology ubiquitous.[1] Where once merchants could only accept credit card payments for in-store purchases, now everyone from door-to-door salespeople to food truck operators need to be able to accept credit card payments, or risk losing a vast majority of their potential customers.
Fortunately, the market has responded to this need with a variety of intuitive and affordable solutions. In this guide we are going to explore that market to find the best mobile credit card readers for small business owners. In particular we’ll look at the prices, capabilities, and features of each card reader, so you can determine which best fits your business needs.
But first, let’s learn about what mobile credit card readers are, how they work, and why you should invest in one.
A mobile credit card reader is a mechanism (sometimes called a dongle) that is attached to a smartphone or tablet that allows the device to read and process debit and credit card payments. A mobile credit card reader works in tandem with mobile point of sale (mPOS) software, which typically takes the form of an application that you run on your phone or tablet. Mobile credit card readers provide merchants the ability to accept card payments in the absence of a credit card terminal by turning their web-enabled device into a point of sale.
Many businesses that provide mobile credit card readers are also payment processors, meaning they will acquire the funds from the customer’s issuing bank and deposit them in the merchant’s bank account. The cost of a mobile credit card reader and payment processor varies by provider. Typically, merchants will pay a per-transaction fee plus a one-time cost for the hardware.
A mobile credit card reader can process payments in up to three different ways:
Magstripe is shorthand for magnetic stripe. These types of cards store data in the magnetic stripe that is affixed to the back of the card, including a primary account number, name on the account, PIN code on the account, and expiration date of the card. In order for a mobile credit card reader to retrieve that data, the debit or credit card must be swiped through it. The mobile credit card reader then passes that info along to the payment processor.
It is important to note that magstripe technology is being phased out because it is prone to fraud. However, all mobile credit card readers are still able to process magstripe cards at this time.
What’s replacing magstripe cards is EMV chip technology. EMV stands for EuroPay, MasterCard, and Visa, and is becoming the standard for secure credit card payments. This is because the data on EMV chip cards is dynamically encrypted, meaning the encryption is constantly changing. Dynamic encryption makes it much harder to steal the data.
For a mobile credit card reader to extract data from an EMV chip card, the card must be dipped into the card reader. After the transaction is complete, the EMV chip card re-encrypts the data.
Contactless pay is made possible through eWallet apps like Apple Pay and Google Pay, which allow a customer to store their credit or debit card information on their phone. When a customer wants to pay using their eWallet, they must hold their phone to the mobile credit card reader and use their fingerprint to initiate the transaction.
The mobile credit card reader can then extract the credit card data from an in-range eWallet using technology called near field communication (NFC). Similar to an EMV chip, the credit card data is re-encrypted after the transaction.
The physical act of extracting data from a credit card is only the first step in processing a mobile payment. After the mobile credit card reader receives the data, it sends it to the payment processor. It’s the payment processor’s job to contact the merchant’s bank (known as the acquiring bank) and the customer’s credit card network (Visa, MasterCard).
The credit card network contacts the bank that issued the customer their credit card (known as the issuing bank). The issuing bank checks to ensure that the transaction isn’t fraudulent and the funds are available in the customer’s account. If the transaction is approved, the credit card network will inform the payment processor. The payment processor then puts a hold on the funds for one to two business days to ensure that the charge isn’t fraudulent. Afterward, the funds are released into the merchant’s account.
A mobile card reader can provide several benefits to your business.
The main benefit of a mobile credit card reader is that it allows you to sell your product wherever, whenever. This could come in handy if you are just starting out and don’t want to invest in a brick-and-mortar location. For example, a chef might open a food truck to establish a market for their product before later building a restaurant.
Other entrepreneurs get a mobile credit card reader because they sell from lots of different locations, such as trade shows, conventions, festivals, and pop-up shops. Mobile credit card readers are also used in door-to-door sales, or to collect donations during a fundraiser.
Finally, it is not uncommon to see mobile credit card readers used in brick-and-mortar stores in conjunction with a POS terminal, giving merchants the ability to service multiple customers at once. This is sometimes done in the food service industry to help manage an influx of customers.
The other benefit of mobile credit card readers are the backend infrastructure they provide. With so much competition, merchant service providers know that it is no longer enough to just offer merchants a way to accept credit card payments. That is why many also provide mPOS software, often at little or no cost. Good mPOS software can perform a variety of services for your business, including inventory, customer, and employee management, sales analysis, the distribution of email receipts, tipping options, ecommerce integration, and the ability to operate offline.
Before we get into our top picks, it’s important you understand what to look for in a mobile credit card reader in terms of price, features, compatibility, and security. In general, here is what you can expect:
As mentioned previously, to get a mobile credit card reader you will have to pay a one-time fee for the hardware plus a per-transaction fee. The per-transaction fee varies widely and depends on your payment processor and how you are taking payments (keying in credit card information generally carries a greater cost than swiping/dipping). Some mobile credit card reader providers also charge monthly fees for the use of their services.
All mobile credit card readers operate with some kind of mPOS. Try to find a feature-rich mPOS that can automate inventory, employee, and customer management to save you time. You will also want to see what type of payments the mobile credit card reader can accept. Some providers supply a card reader that can process swiped payments for free, but charge more for a card reader that accepts EMV chip and contactless payments.
Support is another important consideration. Not being able to accept card payments for even a short period of time could cost you sales, so try to find a provider that can offer support 24/7 via multiple channels of communication.
Most mobile credit card readers work with iOS and Android devices, and some also work with Windows and Blackberry devices. If you sell online, you may want to find a mPOS that also support ecommerce sales. Some mPOS systems also integrate with accounting software like QuickBooks.
You will want to use a credit card reader that is at least Level 1 compliant with the Payment Card Industry Data Security Standard (PCI DSS). This is a security standard designed to ensure that all companies that accept, process, store, or transmit credit card information maintain a secure environment.
| PRODUCT | BEST FOR | TRANSACTION FEE | HARDWARE COST |
|---|---|---|---|
|
Square
|
Feature-rich mPOS
|
2.6%+$0.10
|
$49 (swipe, chip, and contactless payment reader)
|
|
GoPayment
|
Bookkeeping
|
2.4% OR 1.6% + $0.30 (varies by plan)
|
$49 (swipe, chip, and contactless payment reader)
|
|
PayAnywhere
|
Cheap transaction fees
|
1.69% or 2.69% (varies by plan)
|
$39.95 (swipe, chip, and contactless payment reader)
|
|
PayPal Here
|
Varied payment options
|
2.7%
|
Starting at $24.99 (swipe and chip payments reader)
|
|
Shopify POS
|
Ecommerce small business owners
|
Starting at 2.7%
|
Free with subscription (swipe, chip, and contactless payment reader)
|
Now that you know what to look for in a mobile card reader, here are our recommendations for small business owners:
Square is one of the oldest and largest mobile payment companies in the world. Because Square pretty much invented mobile payments, it is no surprise that they offer one of the most feature-rich and affordable options. Here are the details:
GoPayment is a mobile credit card reader solution designed by Intuit, the same makers of the popular accounting software QuickBooks. Because of this, GoPayment offers robust Quickbooks integration, making your bookkeeping a cinch. Here are the specifics:
GoPayment fees are as follows:
PayAnywhere offers the lowest transaction rates of all the mobile card readers we evaluated.
Like GoPayment, PayAnywhere has two different price structures. The first plan offers only swipe payments, whereas the second allows for chip and contactless payment as well.
If you already use PayPal merchant services to handle online, invoice, or subscription payments, PayPal Here is a good option because it allows you to seamlessly track your entire payment history in one place. In addition, PayPal Here can accept bitcoin and payments from the PayPal app.
For ecommerce small business owners who want the opportunity to do in-person sales, Shopify POS offers a comprehensive solution.
Shopify has four different pricing plans, three of which provide access to a Shopify online store.
Note that the more expensive plans offer more ecommerce functionality as well.
To make sense of the options we’ve provided you with, think about which features address the specific needs of your business. Do you have a high monthly transaction volume? Do you operate an online store? How much is your average sale? Knowing the answers to these questions will help you decide which mobile card reader provides the most value to your business.
With the right card reader technology in hand, you’ll be ready to start treating the world as your sales floor.