Types of Credit Card Payment Systems

Photo of credit card terminal

Three types of credit card payment systems are widely available to merchants, including:

  • Standalone terminals
  • Cellphone processing solutions
  • Virtual terminals

These payment systems allow merchants to process a variety of transactions, such as credit card and gift card payments. Customers are more likely to shop from a merchant if they offer a variety of payment options at checkout.

Standalone Terminals

Standalone terminals are the type seen at retail stores. The customer, or the merchant, slides the card through a magnetic strip reader. The information is then sent to the credit card processor and is either accepted or declined. Accepted transactions are credited to the merchant's account at the time of sale.

The standalone terminal payment system transmits information in a variety of ways. Transmission is via a phone line or high-speed cable system, using ethernet wiring. Terminals are typically plug-and-play, meaning once they are plugged into a computerized system, they are immediately recognized as part of the system.

The standalone terminal is designed to process:

  • Credit cards
  • Gift cards
  • Loyalty cards
  • Check verification
  • Check conversion
  • Age verification

Cellphone Processing Solutions

Businesses that need to operate on the road, such delivery drivers or antique dealers, can accept credit cards using mobile technology. Cellphone payment systems utilize Wireless Application Protocol (WAP) technology. WAP enabled phones send credit card information to the processor. Cellphone systems depend on the availability of a satellite connection. Merchants that operate in populated areas find the system ideal. Merchants who operate in rural or mountainous areas may experience difficulty using cellphone processing, due to signal interference.

Virtual Terminals

Virtual terminals are designed to process online credit and debit cards payments. Virtual terminals are very useful for recurring payments, such as monthly installments or membership fees. The virtual terminal payment system is also a mobile system, it can be used anywhere there is an Internet connection. Merchants benefiting from a virtual terminal, include merchants that operate online auction sites, sales via a Web site or who charge recurring fees.

Payment Processing Gateway

Once merchants have a terminal to accept credit card payments they need a way to process those payments quickly and easily. A payment-processing gateway does just that: it can manage recurring payments, ACH payments, and process online reports.

Merchants that process hundreds or thousands of payments each month can benefit from using their own payment-processing gateway. The gateway can streamline payment processing by allowing the merchant to integrate their payment systems with their verification and transaction manager systems. This, in turn, eliminates the middleman and enables merchants to obtain immediate online reports.

Automated Clearing House (ACH)

ACH, or Automated Clearing House, is a process that clears credit and debit transactions from payment systems through participating financial institutions. ACH is faster and less expensive than processing paper checks or credit card transactions. Five steps are involved for an ACH transaction:

  1. An authorized originator receives permission from a receiver to initiate a transaction.
  2. The originator creates an ACH entry for a processor.
  3. The processor sends the information to the participating financial institution.
  4. The ACH entry is then sent to an ACH operator, which is usually the Federal Reserve.
  5. The ACH entry is sent to the receiving institution, where a debit or credit to an account takes place.


Merchants can expand their business by providing a credit card payment system to customers, at the checkout line. Customers indulge in impulse buying if they can utilize a variety of payment methods. Credit card terminals are an efficient answer, since a variety of payments, including gift cards and checks, are accepted. Credit card payment systems increase merchant sales and their bottom-line.

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Types of Credit Card Payment Systems