Owning your future by understanding card payments

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In this article, you’ll learn

  • What a card payment is

  • What a credit card is

  • The different types of credit and debit cards

  • How a card payment works

  • How to use card payment device


Card payments are getting increasingly popular across Europe and around the globe, especially as the COVID-19 pandemic has made us more cautious about physical contact. In Ireland alone, card payments have increased by 79% between 2016 and 2020. Card use has been increasing in Ireland since the year 2000, and in 2020 accounted for 63.7% of payments (Source: Central Bank of Ireland).

It’s clear that card payment is more prevalent now. They’re faster and simpler for the merchant and the customer. 

What is a card payment? 

Card payment is the use of a credit or debit card to pay for a good or service. Paying by card is only possible when the merchant has a way to accept cards, usually a card machine. 

Card payments as they are understood today started back in 1946 when a banker in Brooklyn developed a card that forwarded purchases to his bank, which then reimbursed the merchant and collected payment from the customer. 

In 1958, American Express introduced their first charge card, and by then the idea was so popular that 250,000 copies were issued before they even launched. At first, these cards were made of paper, and then later became plastic a year later. 

Although people were excited about payment cards, and millions of people were using them, the way they actually worked was still unclear. A series of regulations in the 1970s aimed to clear this up. These regulations included restricting data gathering, allowing customers to dispute charges, and prohibiting discrimination against applicants on the basis of race, religion, gender, marital status, or national origin. 

In 1986, Sears introduced the Discover card, which allowed customers to get some cash back from their transactions. This kicked off a new wave of competition between card issuers, who started offering not only cash back, but discounts, frequent flier miles, and other perks with their cards. 

How do card payments work? 

Just like the card itself, the technology behind card payments has evolved. At first, card payments were processed via a manual imprinter and telephone authorization. The imprinter would manually capture the information on the card and make a copy for the bank, merchant, and customer. Telephone authorisation was also available in case clarification of customer details and available funds were needed. 

The next step in card payment technology was the magnetic stripe, which some cards still have. These were developed in 1969, and put on the back of all newly issued cards. The stripe contained all the cardholder information, including name, account number, funds, and the card’s security code. Customers would pay by swiping their card through a card machine so the magnetic stripe could be read. 

In 1994, the EMV chip card was introduced. Chip cards are the current standard. EMV cards are so named because of the EMV chip which replaced the magnetic stripe as the data point. Customers pay by inserting the chip into a card machine and typing in their four-digit PIN. 

Card payments can also be contactless. Contactless payment cards were first introduced in 2007, and have become a standard feature of the payment card landscape in the last couple of years. You can tell a card has contactless functionality when you see a symbol that looks like the sideways Wi-Fi symbol on it. 

Contactless payment uses radio frequency identification (RFID) and near-field communication (NFC) technology. Customers either tap their card on the reader or wave it a few centimeters away from it, and the payment is made. No PIN is required. 

What are the different payment cards? 

The most basic distinction between payment cards is between debit and credit cards. Both are simple, easy to use alternatives to cash, and most places that accept one will accept the other. The big difference between the two is where the money for payments comes from. 

A debit card pulls the money out of a checking account. That means even though there’s no physical money changing hands, you can’t spend more than you have available. That means it’s impossible to go into debt or have to pay interest when you use debit cards. 

Credit cards are funded by a line of credit issued by your bank instead of your own money, which means every time you purchase something, you’re essentially promising to pay later, usually at the end of the month. This means it’s possible to spend more money than you have when you’re using credit cards, and accordingly, people in Ireland make larger purchases with credit cards than debit cards. 

Credit cards often come with perks for users, like rewards points or cash back. Credit cards also tend to offer more fraud protection than debit cards. However they are much easier to abuse and if you aren’t careful, you can sink into debt quickly.

Different types of debit and credit cards

There are also different types of debit and credit cards.

The varieties of debit cards are: 

  • Standard debit cards, which simply draw money from your checking account whenever there’s a payment to make. 

  • Prepaid debit cards, which allow people without a bank account to make purchases for as much money as is on the card. 

In contrast to debit cards, which only have two variants, there are multiple types of credit cards.

The different credit cards you could sign up for are: 

  • Standard cards, which extend a line of credit to users for purchases, bank transfers, and cash advances. They often have no annual fee. 

  • Premium cards, which give perks, like concierge services or airport lounges. They typically have higher annual fees. 

  • Rewards cards, which offer cash back, travel points, or in-store credit based on their spending. 

  • Balance transfer cards, which have low introductory interest rates and fees on transfers from card to card. 

  • Charge cards, which have no spending limits, but won’t allow unpaid balances to carry over from month to month. 

How do you accept card payments? 

Accepting card payments is a simple matter of having a card reader available. A card reader is just a machine that reads the information provided by the card. They’re simple to use and many of them are completely mobile devices. 

SumUp has a few card payment devices to choose from, all affordable, intuitive, and pocket-sized. You can take them anywhere you sell your products because they can all access the internet. 

Many card reader providers will include unnecessary fees, like a monthly charge, or require you to enter a contract that puts restrictions on how you use the device. At SumUp, there’s no contract. You buy the reader and then have total control over when, where, and how much you use it. 

We also don’t charge anything other than a 1.69% fee per transaction after you’ve bought a reader. 

Debit and credit cards are becoming the most popular payment method around, and there are a lot of different card providers. You’ll likely see customers with different providers, and you should be prepared to accept them all. With SumUp, you can take: 

  • Visa

  • Mastercard

  • maestro

  • UnionPay

  • Discover

  • American Express

  • Diners Club

  • V Pay

SumUp also supports contactless payments. Customers just hold the card on or over the contactless symbol on the reader, and the payment is done. 

We make paying by card as easy as it can be for your customers. All they need to do is insert their card into the reader and type in their PIN. In a matter of seconds, the payment is done and you can serve your next customer. 

Does your business accept card payments?

The SumUp Card Reader enables businesses to accept debit, credit and contactless payments with a simple 3-in-1 device.

No monthly contracts. No hidden fees. Ever.

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About SumUp

Since its founding in 2012, SumUp has expanded to help 3 million merchants in 33 countries accept card payments and make life easier for their customers. In Ireland, SumUp offers the lowest transaction fee of any card machine provider. That and the free SumUp Business Account offered to merchants to help them get their money the next day make SumUp the ideal solution for Irish businesses. 

SumUp merchants can sell their products from anywhere thanks to the Online Store. In just a few clicks, let anyone from around the world browse and order your products. You’ll have access to sales reports and analytics on your store’s homepage and via SumUp POS. SumUp POS helps you run your business from day to day and streamlines all your processes. 


In Summary

  • Card payment is the use of a payment card to purchase a good or service.

  • There are debit cards and credit cards, and the main difference between the two is their source of funds.

  • Card payments work by reading the portion of the card with the cardholder information on it.

  • All that’s needed to accept cards is to buy a card machine.

Find the right payment solution for your small business today

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With SumUp, you can quickly and easily accept credit and debit card payments with your smartphone or tablet.

*Price excluding VAT. 30-day-money-back-guarantee from date of delivery. Further conditions apply.