What Is a POS Terminal?

A point-of-sale terminal allows businesses to process payments. Here's what to know, and which one you need.
Dalia Ramirez
Caroline Goldstein
By Caroline Goldstein and  Dalia Ramirez 
Edited by Ryan Lane

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A point-of-sale or POS terminal is the hardware that enables merchants to process payments to complete a customer purchase. Cash registers are the classic example. But modern POS terminals can range from smartphones with plugged-in card readers to countertop terminals that print receipts, scan bar codes and more.

POS terminals are part of your overall point-of-sale system, which includes all relevant hardware and software. The best POS systems can do more for your business than just process payments, offering additional capabilities like inventory management and employee management.

What does a POS terminal do?

A POS terminal processes different types of possible payment methods. Ideally, the terminal you choose for your business can accept all of the following payment types:

Chip

Due to their increased security measures, chip cards embedded with EMV technology are growing in popularity in the U.S. In fact, under EMV compliance guidelines, fraud liability falls on the party with the less advanced payment type, so terminals that can’t accept “dip” cards are more likely to pay out for fraud losses.

Magstripe

Even though credit card companies are phasing out credit cards equipped solely with magnetic strips, magstripe cards are still widely used. Thankfully, it’s easy to find chip and swipe card readers on the market.

Contactless payment

More and more consumers are using credit cards with contactless payment technology, as well as NFC-enabled digital wallets like Apple Pay and Google Pay. This method is significantly faster and more hygienic than most other methods, and the revenue from contactless payments is projected to reach $6.25 trillion by 2028, according to a 2021 study by analysis platform Research and Markets.

Online payments

If you have an online store in addition to an in-person shop, your POS terminal should accept online payments as well as physical card transactions.

If your business is exclusively online, you don’t need a physical POS terminal. E-commerce businesses run with a merchant account and a secure payment gateway, which you can acquire through separate providers or bundle together through a POS provider like Stripe or Square.

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Other POS terminal features

POS terminals streamline the sales process by doing much more than simply processing payments.

Payment add-ons

After accepting payment, POS terminals can offer customers the option of choosing whether to receive a digital receipt (either via text or email), a printed receipt or no receipt.

Terminals can also present pre-calculated tipping options that customers can choose by tapping on that same user-friendly screen. Most POS terminals can also provide refunds, tax calculations and sales discounts and allow you to set up recurring payments or create invoices.

Daily operations

Many POS systems on the market offer accompanying features to aid business operations that are managed through that same payment terminal. These include inventory management, insights on sales trends and customer behaviors, employee scheduling and wages, marketing and more.

Integrations

You may also be able to integrate other apps you use for your business with your POS system. For example, Clover integrates with apps like MailChimp, Gusto, Xero, Yelp and others, turning your POS terminal into a hub for all your business management needs, from emails to reviews to accounting.

Choosing the right POS terminal for your business

Different businesses have different needs from a POS terminal. Consider the following to help determine which terminal is right for you:

Business type

Brick-and-mortar stores should prioritize a countertop POS over a mobile POS system, or vice versa if you’re not attached to a physical location. Most POS software is compatible with mobile devices like smartphones and tablets and can be paired with a card reader to make your smartphone into a smaller-scale POS terminal.

Restaurants may benefit from self-service terminals for customers for easy ordering and payment, while retail stores often prefer a terminal with advanced inventory management. Small service businesses work well with terminals that have scheduling and check-in features.

Payment method

At a minimum, your POS terminal should be able to process NFC, magstripe and chip cards. Some businesses rely on QR-code payments and peer-to-peer payment apps, which some terminals are equipped for.

E-commerce businesses will need to be able to accept online payments, too, which requires a merchant account and a payment gateway — or an all-in-one solution, like those from Square and Stripe.

Cost

Finally, consider the price you’re willing to pay for your POS terminal. Keep in mind that in addition to the hardware itself, you might also need to pay a subscription for any software you choose, as well as per-transaction payment processing fees.

Small, mobile retail shops can function with a smartphone-and-reader terminal, while restaurants and larger businesses may need to invest in a larger system.

Best POS terminals for small-business owners

Square: Best overall

Payment processing fees:

  • 2.6% plus 10 cents for in-person transactions (2.5% plus 10 cents with Retail Plus plan).

  • 2.9% plus 30 cents for online transactions or invoices without a card on file.

  • 3.5% plus 15 cents for manually keyed transactions or card-on-file invoices.

Monthly fees:

  • $0 for Square POS, Restaurant, Retail and Appointments Free plans.

  • $29 for Square POS Plus and Square Appointments Plus plans.

  • $60 for Restaurant Plus and Retail Plus plans.

  • $69 for Square Appointments Premium plan.

Hardware cost:

  • $0 for Square magstripe-only card reader ($10 for each additional) or if using Tap to Pay for iPhone (iPhone not included).

  • $49 for Square Reader contactless and chip card reader.

  • $149 for Square Stand iPad POS or Square Stand Mount (iPad not included).

  • $299 for Square Terminal mobile card reader with built-in printer.

  • $799 for Square Register two-screen system.

  • $659-$1,479 for various bundles of stands, cash drawers, printers and card readers.

Why we like it: With Square, you can choose among several hardware options and benefit from Square’s free POS app with built-in payment processing capabilities. The company’s upgraded plans can track and manage inventory across various locations, create custom reports, scan bar codes for faster checkout and more.

Square POS

Square
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Shopify: Best for online retailers

Payment processing fees:

  • 2.4%, 2.6% or 2.9% plus 30 cents for online payments for Advanced, Shopify or Basic plan, respectively.

  • 2.4%, 2.5% or 2.7% for in-person payments for Advanced, Shopify or Basic plan, respectively.

Monthly fees:

To use Shopify POS, you also have to have a Shopify plan for e-commerce.

  • $29 for Shopify Basic.

  • $79 for regular Shopify.

  • $299 for Shopify Advanced.

  • $2,000 for Shopify Plus.

Once you have a Shopify plan for e-commerce, add either:

  • $0 for Shopify POS Lite (free with all Shopify plans).

  • $89 per location for Shopify POS Pro (free with Shopify Plus).

Hardware cost:

  • $49 for Chipper 2X BT card reader or Tap & Chip card reader.

  • $219 for Retail Kit.

  • $399 for Shopify POS Go mobile device ($429 with case).

Why we like it: Shopify POS is a great option for retail shop owners, whether they’re running brick-and-mortar or e-commerce operations. With the Shopify POS terminal and app, store owners can accept a variety of payments, including credit and debit cards, gift cards, store credits, split payment and partial payment. You can also apply discounts and automatically calculate taxes and tip during the checkout process. Shopify’s robust inventory management is another standout feature.

Shopify Retail POS

Shopify
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on Shopify's website

Intuit QuickBooks POS system: Best for easy bookkeeping

Payment processing fees:

  • Pay as you go: 2.7% for in-person transactions; 3.5% per keyed transaction.

  • Pay monthly: $20 per month; 2.3% plus 25 cents for in-person transaction; 3.2% plus 25 cents per keyed transaction.

  • 1% for ACH transactions.

Monthly fees:

  • $1,200 one-time fee for POS Basic.

  • $1,700 one-time for POS Pro.

  • $1,900 one-tine for POS Multi-Store.

Hardware cost:

  • $49 for QuickBooks card reader.

  • $79 for QuickBooks card reader with charging stand.

  • $389 for black pin pad card reader.

  • $900 for black or white hardware bundle (cash drawer, receipt printer, barcode scanner, pin pad card reader).

  • Other printer, stand and scanner accessories available.

Why we like it: QuickBooks, the leading name in business accounting, offers a POS system that integrates with its accounting system for easy, mistake-free data integration (a bonus during tax season). QuickBooks POS terminals can ring up sales, process payments, provide inventory insight, track customer accounts, offer rewards and more.

Clover: Best all-in-one mobile POS terminal

Payment processing fees:

  • 2.3% plus 10 cents for in-person transactions for most plans.

  • 2.6% plus 10 cents for in-person transactions on Retail Starter, Personal Services Starter and Professional Services Standard plans, as well as Home & Field Services Standard and Advanced plans.

  • 3.5% plus 10 cents for online or keyed-in transactions.

Monthly fees:

  • $14.95 for Starter Retail, Starter and Standard Professional Services, and Home & Field Services plans.

  • $44.95 for Standard Retail, Starter and Standard QSR, and Advanced Professional Services plans.

  • $54.90 for Advanced Retail and Advanced QSR plans.

  • $74.95 for Starter Full-Service Dining plan.

  • $84.90 for Standard Full-Service Dining plan.

  • $94.85 for Advanced Full-Service Dining plan.

Hardware cost:

  • $49 for chip, swipe and contactless Clover Go card reader.

  • $499 for Clover Flex mobile POS with printer.

  • $799 for Clover Mini POS.

  • $1,349 for Clover Station Solo.

  • $1,799 for Clover Station Duo.

Why we like it: Clover POS has robust mobile and static solutions. The Clover Flex is a standout option for business owners who sell their goods or services on the go — it’s an all-in-one mobile terminal that can accept all types of credit cards (including magstripe, chip and contactless payments). The cloud-based system can quickly deposit funds into your bank account, scan bar codes, capture signatures and track your sales.

Clover

Clover
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A version of this article was first published on Fundera, a subsidiary of NerdWallet.

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