At one time, when accepting a credit card payment retailers had to collect signed paper forms and then send the forms to banks for processing -- a method that was time-consuming and prone to fraudulent payments. Today retailers use systems that contact a bank to verify and authorize a payment in real time, reducing the chances of the retailer being ripped off. Most systems use either an ordinary phone line or an Internet connection to contact the bank or payment processor.
Using a phone line is usually the cheapest option for a retailer. The setup doesn't need any special telecommunications to be installed and requires only a small device, known as a terminal, for reading the card and passing the details down the phone line. These can be cheap enough to buy outright, although some retailers lease the terminal from a card processor or other company.
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Phone-based terminals require retailers to either pay for an additional phone line or have the terminal share the line with other equipment such as phones and fax machines. Not only does this have physical logistical challenges (often requiring additional sockets or adapters), it also means the credit card terminal won't work if another device is in use. In some cases, a card transaction could be interrupted or terminated if somebody tries to call or fax in on the line. Phone-based terminals can also be slow to complete a transaction that can be a problem in busy outlets where delays may put off other potential customers.
Internet-based terminals can work either over a broadband Internet connection or via a cellular network. The main advantages are that there's no need to worry about other phone equipment on the line and that transactions can be processed much more quickly. Using the cellphone network can be useful for people who want to take payments in different locations such as sellers at trade fairs or markets, or people who work at the customer's site such as construction or maintenance workers.
Internet-based terminals tend to be more expensive than those that work over a phone line and are also dependent on a reliable broadband or mobile Internet connection. Because the data is transferred over the Internet, there's more potential for security breaches, although card processing firms and terminal equipment manufacturers include security features to combat this risk.