Monday, January 2, 2012

Card Readers And Institutions.

Recently the credit card companies raised the price to vendor's with card readers. Can someone help me with which side of the business got hit? Was it the debit card or the credit card transactions?

Today I would like to talk a bit about closed loop card readers. Some colleges, prisons and other locations have set up, what I call, closed loop card readers (we will use prisons going forward in this article).

The way it works is a machine is set up that sells a card to a new customer and at the same time puts some credit on the card for the purchaser. The machine is close to the same size as a bill changer and works in a similar manner. A new customer puts in a $20.00 bill into a bill acceptor and normally $18.00 credit is put on the card. The other two dollars is a one time fee charged for the card.

When the card gets low on credit, the customer returns to the same machine. They put their card into the card slot and deposit a $20.00 bill, and the card is credited with $20.00.

The card machines money is collected daily by the prison and deposited into the prisons account. The machines in a prison are set up with only card readers so that cash does not work in them.

As a customer spends money in the machine it keeps track of how much money has been spent. Usually once per week the vendor will use a handheld device to download the sales information. It is then processed back at the office and a statement is sent to the prison for payment.

These readers keep track of a lot of information. Lets say that one of the inmates claims a machine took advantage of them. You, the vendor, can go back and check to see if that inmate even made a transaction at the time they are claiming the machine took advantage of them. Many machines will give them the credit back if they do not receive their product and you the vendor can check your records to see if it did.

Can you see where a card reader could help you gain business? 

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  1. Great informative article. I wonder why you chose to proceed with the prison example and not a college for instance. It's good to have a system which is independent of the credit card companies and allows customers and vendors to monitor their funds.

  2. I chose the prison because that is where my experience come from. It would work just as well or better in a college setting.


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