Card readers work by extracting information from a customer’s debit or credit card, either when the card is inserted into the machine or tapped against the terminal (for contactless payments). This information is transmitted to the payment processor and information is collected from the customer’s bank. If there are sufficient funds in the account, the transaction will be approved.
The customer’s bank then puts a hold on those funds and the transaction is marked as pending. Over the next few days, the funds are moved across to the merchant’s bank account, processed and deposited into the account.