Credit Card Processing: Terminal vs. POS

Some merchants find themselves operating with both a Point of Sale System (POS) and a separate credit card terminal.  This happens when the merchant purchases or leases a credit card terminal before they purchase a POS system. This sort of configuration is sometimes planned.  For example, the merchant can't afford a POS initially but plans on buying one later. Most often however, this is almost always a costly unplanned scenario (CUS). This article addresses the benefits of "integated processing" (i.e. processing credit cards with the POS) and the ill affects of using two systems.  To avoid this sort of CUS in the first place, read the article "What the heck is a POS System?" posted on this blog.

Every creditable POS system has an integrated credit card processing option so it is hard to rationalize why a merchant would want to operate two systems. Here's a few reasons why:  

• Credit card processing rates and fees are typically lower with an integrated system. 
• If for some reason the rates are in fact lower with your credit card terminal provider, you probably will have to incur additional software gateway fees to integrate your incumbant processor into the POS.
• Credit card terminals often require long term leases (up to 4 years) with expensive premature cancellation fees.
• You have to give the customer two receipts: one from the terminal, one from the POS.
• Customer check out times are longer because you have two systems, two receipts. 
• Processing voids and returns takes longer because you have two systems.
• You have to balance two systems.
• Most integrated systems are internet based (2 to 3 second processing) vs. dial up for credit card terminals (5 to 15 seconds).
• A disintegrated system can look like crap. 
• It is easier for your employees to rip you off (we'll have more on this in another post).

Below is a promotional piece from one of our business partners, Mercury Payment Systems, outlining different though similiar benefits of using integrated processing.

Save time and money with Mercury Payment Systems’ smart payment processing


Mercury Payment Systems provides merchants with integrated transaction processing that simplifies the payment process and enhances customer satisfaction. For example, Mercury is directly integrated with Blue Sky POS creating a unique advantage for their customers. With Mercury, merchants enjoy an affordable solution for hassle-free, reliable transaction processing.

Why use integrated processing?

There is no need to purchase additional software. Merchants save money by having direct access to payment processing without using a third party payment processor and paying additional gateway fees. Also, there is no additional hardware to purchase and support such as stand-beside credit card terminals.

Merchants using a point-of-sale (POS) system that is separate from the credit card terminal understand the headaches and wasted time spent reconciling credit card sales at the end of each day. Without an integrated system, a sale must be entered in the POS and swiped through the terminal. This creates two separate sales slips and two different daily sales totals. Integrated payment processing solves this problem. It generates one sales slip, and eliminates the need for tedious reconciliation.

Additionally, using an integrated system reduces the customer’s check out time, increasing customer satisfaction. The purchase only has to be entered in one location. And, with a high-speed internet connection, a credit/debit card authorization only takes 2-3 seconds.

Why use Mercury?

With the Mercury, payment processing is fast and reliable. Mercury’s free, live support is available 24/7. Mercury technical support representatives have in-depth knowledge of integrated processing. This expertise makes troubleshooting and resolution efficient. Merchants avoid the aggravation of trying to get help from a payment processor that knows nothing about their system. Mercury’s free gift card processing is a great advantage for merchants with a gift card program. MercuryGift™ transactions are free. There are no monthly fees or maintenance costs. And, with 100 free cards to start, merchants can try the program with no commitment. Merchants can choose from a variety of packages and card designs to suit their needs. Merchants with multiple locations enjoy the ease of cross-store gift transactions with ACH funds transfers.

Mercury offers real-time transaction reporting and daily deposit details through the free web portal. Transaction reporting makes it simple to see if a card was run twice, if a refund was issued correctly, and many other daily transaction inquiries.

With Mercury, merchants never have to worry about authorization outages that can bring sales to a standstill. If the authorization network experiences an outage, Mercury stands-in and takes responsibility for all transactions within the floor limit so merchants continue processing without interruption.

What the heck is a POS System?

This article will help you gain some basic knowledge before you descend into the cosmic bunny hole of POS systems. POS means “Point of Sale”. Don’t confuse a POS with an Electronic Cash Register or “ECR”. A POS is a computer with hard drive, POS software, merchant account and other attached POS hardware (e.g. cash drawer, printer). An ECR, on the other hand, is a manual cash register, or electro-mechanical device, with limited data storage capability.

Remember this: A POS system is a mission critical survival tool. An ECR is a calculator with a printer. Though a POS system may cost 10 times more than an ECR, it provides 40 times more business benefits. Think of a POS as a car and an ECR as a bicycle.

A POS system generally includes four components:

1. POS Software
2. Computer
3. POS Hardware
4. Merchant Account (so you can accept credit cards)

Let’s talk about each.

1. POS Software: This is the most important part. POS software helps you perform four critical business functions:

a. Sell products quickly, take payments and balance your cash
b. Keep a customer database and do marketing stuff with it
c. Track inventory and determine inventory requirements and overages
d. Print sales, gross profit and cash management reports

Remember this: Most POS applications do the same thing at the small shop level. So don’t get “analysis paralysis” trying to compare specific features and functions across competing software packages (visit Blue Sky POS to get a basic idea of what a retail POS should do). Certainly make sure the software meets your basic requirements including the above items. And avoid POS software that requires non-standard operating systems like Linux, UNIX, MAC, etc. Stick with Microsoft Windows – good or bad, there will always be an abundance of geeks available at a moment’s notice who can fix Windows-based computers. Lastly, really zero in on support packages because it is support where the offerings can be vastly different. So make sure the support provided by the software vendor meets your specific support criteria (e.g. do they have phone support, what hours, after hours, onsite, etc.).

2. Computer: Two types of POS computer configurations are out there. Most retailers use a regular PC with monitor (touch or non-touch), keyboard and mouse. Restaurants tend to use the second type called an “all in one.” This is touchscreen and computer “all in one” unit – like what you see at Wendy’s or Carl’s.

Remember this: If you are a small shop, forget about the “all in one”. They cost more to buy and maintain. And if your software vendor (restaurant or retail) recommends a touch screen for their POS software then get one - even though it may cost a little more. Further, don’t get hung up on having to have a brand name like HP or Dell. Though there may be some comfort with a big brand remember there are also some big downsides primarily in getting timely and accurate support.

3. POS Hardware: The three essential POS hardware components are receipt printer, cash drawer and credit card swipe (a.k.a. magnetic stripe reader or MSR). Add a bar code scanner to the essentials list if you are a retailer. There are lots of other optional peripherals you can get to enhance your installation like a customer display (sometimes called “pole display”), signature pad, debit pin pad, scales, etc.

Remember this: Like software, there is not much difference between hardware components at the non-complex POS level. The key point here is to buy hardware and POS software from the same vendor. Don’t try to save a buck by stitching together your POS from a bunch of different vendors. Even if you pride yourself on knowing something about computers, you’ll regret it.

4. Merchant Account: A merchant account allows you to accept credit, debit and gift cards. You really need one of these since credit card sales will likely account for somewhere between 30 to 60 percent of your sales. The POS software and merchant account often go hand in hand much like POS software and hardware, peanut butter and jelly, pizza and beer, etc. so get it from the same supplier.

Remember this: Don’t get a merchant account before you buy a POS! It is very possible to sign up with a merchant provider that is not compatible with your POS software. Or worse yet you might be fooled into buying or leasing POS hardware that you may already get as part of your POS system  (read "Credit Card Processing: Terminal vs. POS" to learn about the ill affects of using both POS and credit card terminal together). Work with your software provider first to find out which merchant providers are already programmed into their software. If your candidate software supplier is not programmed to work with at least a few different merchant account providers then look elsewhere.

Let’s summarize some key points. First, a POS is a mission critical survival tool whereas an ECR is a calculator with a printer. Get a POS even if you think you can’t afford it as it will pay big dividends later. Second, don’t’ forget about support. Software features and functions being equal support offerings can vary widely. Third, buy everything from one supplier and don’t get a merchant account before you buy the POS system!

Now that you know little something about POS, be sure to read the companion article “What can a POS do for me?"