Cloud based POS systems vs. credit card machines: What’s the difference?

The payments industry is full of different technical terms, like “cloud based POS systems” or “credit card machines.” For someone new to payments, these may feel like similar concepts. They are both systems to accept payments, but there are some key differences between the two.

This blog will explore the differences between each system and help you decide what is right for your business.

What is a cloud based POS system?

A POS system, at its core, combines software and hardware to manage all of your payments, while also tracking inventory and collecting customer data. A cloud based POS does all of that, but instead of running on a closed internal network and storing data on a physical hard drive, it operates completely in the “cloud”. If you’re not sure what the cloud is, it’s basically a server that you can access over the internet, rather than a physical server at your location.

Some key features you get with a cloud based POS are as follows:

• Use it on any device: You can manage sales, inventory, and customer data from your smartphone, tablet, or computer. You’re not tied to the physical POS system at your office or store.
• Real-time updates: You can track transactions and inventory as they happen in real-time.
• More than just in-person payments: You can accept online payments, issue invoices, and track online sales data on the same platform as your in-person sales system.

What is a credit card machine?

A credit card machine (aka credit card terminal) is the physical device you use to take a credit or debit card payment in person. It processes transactions by reading your customer or client’s card information via chip, magnetic stripe, or contactless NFC technology. It’s the most common and secure way to take a payment at your store or office.

There are a few types of credit card machines you’ve likely encountered in your day to day.

Traditional countertop credit card machines

These countertop credit card machines are most common in retail stores, restaurants, and other traditional brick-and-mortar businesses. Their defining feature is that they must be connected to a power source, a network, and a POS system. They are fixed to one location, limiting mobility for merchants that need to accept payments away from the counter.

Portable credit card terminals

Portable credit card terminals bring payment processing beyond the traditional checkout counter. You’ll often run into these at a restaurant, or with a contractor at your home, or any other businesses that require payments away from the front desk. They either have a built-in POS software or connect to a POS on your phone/tablet so you can take it with you anywhere.

Portable credit card terminals use batteries, so you’re not stuck near an outlet. They connect through Wi-Fi, Bluetooth, or even a cellular network, so you can take payments almost anywhere. These credit card machines work with chips, contactless payments, and even mobile wallets like Apple Pay. It’s all about making sure payments are quick, secure, and convenient—no matter where you’re doing business.

The disadvantages of these devices are that they require a stable network connection and weak signals can cause delays. You also need to make sure that your portable credit card machines are fully charged to avoid interruption during busy hours.

Mobile credit card processing machine

A mobile credit card processing machine is unique in that you can use your phone as a credit card machine. Tap to Pay on iPhone and Tap to Pay on Android are the two main methods in this space. You simply download a POS app (make sure it offers Tap to Pay on iPhone or Tap to Pay on Android first) on your iPhone or Android and can take contactless payments with no extra hardware required.

Tap to Pay on iPhone is a game-changer for businesses that need flexibility, such as:

• Home services professionals: Plumbers, HVAC specialists, landscapers, and other service providers can leave the bulky equipment behind. With Tap to Pay on iPhone, they can process payments seamlessly at the customer’s doorstep, making transactions quick and convenient.
• Health, beauty, and wellness providers: Mobile hair stylists, massage therapists, and wellness practitioners can now focus on delivering exceptional service, wherever they are. Tap to Pay on iPhone eliminates the hassle of carrying heavy payment terminals, letting them accept payments with ease.
• Automotive service businesses: Whether it’s roadside assistance, towing, or mobile car detailing, Tap to Pay on iPhone ensures you get paid right on-site. It’s fast, secure, and fits perfectly with businesses that thrive on mobility.
• Retailers at events: Small retailers selling at trade shows, pop-up markets, or local fairs can skip the complications of setting up traditional payment systems. With just an iPhone, they can take payments quickly and efficiently, making it easy to connect with customers anywhere.
• On-the-go food vendors: For food trucks, coffee carts, and other mobile businesses, Tap to Pay on iPhone is a hassle-free way to accept payments on the go. No cords, no clunky terminals—just a streamlined payment experience that keeps the line moving.

The difference between a cloud based POS system and a credit card machine

Different functionality

A cloud based POS system has more advanced features and allows businesses to accept payments in-person and online by complimenting its set up with a credit card machine. Some features include:

• Software for tracking sales, managing inventory, and analyzing data.
• Hardware such as receipt printers, cash drawers, and barcode scanners.
• Often includes a credit card machine if you’re using it for in-person payments.

In contrast, a credit card machine focuses solely on processing payments for in-person transactions, lacking features like inventory management or online sales tools.

Different roles in the payment process

A credit card machine is part of the POS. The credit card machine reads the card data for the transaction and transfers it to your payment processor. Once that’s over, its role is done. The POS then takes over and performs the other operations related to the payment, like updating inventory, creating the receipt, and logging the sale for reporting later.

Varying costs

With a credit card machine, you’re only paying for one item—the machine itself. That can either be a one time purchase or a monthly lease.

A POS, on the other hand, can have multiple components to it. You could be paying for the credit card machine, a receipt printer, tablets, smartphones, computers, and more, depending on your requirements. Sometimes there will even be a monthly software fee. But I’d recommend scouting out a POS that wont charge you for the software, like the Helcim POS.

Varying transaction fees

Credit card machines only process in-person transactions. Since the credit card itself must be present for a transaction on these machines, they are considered less risky by the card brands (Visa, Mastercard, etc…) and come with a smaller transaction fee.

POS systems can do both in-person and online payments. An online transaction does not have a credit card present, and thus is more susceptible to fraudulent transactions. The card brands deem these to be more risky and will charge a higher transaction fee.

Types of POS systems for small business

Traditional POS systems

Traditional POS systems are fixed, hardware-intensive setups commonly used in retail stores, restaurants, and other brick-and-mortar businesses with steady foot traffic. These systems typically include:

• A central credit card machine for processing transactions.
• Other hardware like receipt printers, cash drawers, barcode scanners, and monitors.
• Limited mobility, as they are hardwired to a location.

While they are reliable, traditional POS systems lack the flexibility of modern alternatives. Another disadvantage of traditional POS systems is the requirement for merchants to invest in a physical server to store transaction data locally. Renting or purchasing these servers adds to the upfront costs, and ongoing expenses to maintain data security.

They are ideal for businesses that require customized stationary setups, such as retail stores with checkout counters.

Cloud POS systems

Cloud based POS systems leverage the power of internet servers, allowing you to manage your payments from anywhere. They’re becoming increasingly popular among small businesses due to their affordability, flexibility, and ability to integrate with other software. Some features include:

• Accessibility from multiple devices, including tablets, smartphones, and computers.
• Real-time synchronization across devices for sales, inventory, and customer data.
• Seamless integration with e-commerce platforms, online payment gateways, and accounting tools.

Another big advantage of cloud-based POS systems is that all your data, such as transactions, sales records, inventory, and customer information, is managed and stored securely on the cloud by the payment processor. As a result, you don’t need to buy or rent physical servers or worry about maintaining costly IT infrastructure.

The payment processor takes care of data security, backups, and updates, giving you peace of mind so you can focus on growing your business.

On-the-go POS systems

On-the-go POS systems are designed for mobility, making them ideal for businesses that operate outside traditional storefronts, such as food trucks or delivery services. Key features include:

• Compact hardware, such as portable card readers paired with mobile apps.
• Connectivity through Wi-Fi or cellular networks to process payments on the spot.
• Compatibility with smartphones or tablets for a lightweight, cost-effective setup.

What can you do with a POS system?

A POS does more than just process payments—it helps you manage your business. Whether you’re selling in-store, online, or on the go, a POS system provides the tools and flexibility you need to stay organized and efficient.

Online POS system (virtual terminal)

An online POS system, or virtual terminal, lets you manually process a transaction when you don’t have the credit card on hand. It’s ideal for remote payments over the phone. You simply pull up your virtual terminal in a web browser or app, and then type in the credit card details and payment information.

Invoicing

Some POS systems let you send branded digital invoices directly to customers. Often they will also automate payment reminders and provide secure online payment options, which are particularly valuable for service-based businesses.

Open an online store

From 2016 to 2023, the percentage of online purchases has grown 175% out of the total yearly purchases. If your payment provider has the option to build an online store, you can build your online storefront and integrate it with your POS system. Every sale you make will be tracked and inventory will automatically update.

By taking your store online, you open the door to 24/7 sales, giving customers the freedom to shop when and where it suits them. It also allows you to tap into new markets, test products, and increase brand visibility.

Customer management

Built-in customer management tools help you track customer purchase histories, create loyalty programs, and send targeted promotions, for a more personalized service and stronger customer relationships.

Inventory management

One of the main features of a POS system is real-time inventory tracking. The system will automatically keep track of your inventory and alert you when stock is low so you can reorder before you miss a sale.

Reporting tools

Your POS system will also likely come with in depth reporting tools for insights into sales trends and staff productivity. These tools are important because you can’t effectively run a business without knowing your numbers. Understanding your top-performing products, peak sales times, and the most used cards helps you identify the areas to reinvest. Without this data, you’re relying on guesswork instead of actionable insights.

Operational tools (discounts, tipping, staff management, etc.)

You can also expect extra features like discounts, tipping, and staff management so you can control even more of your operations.

• Discounts and promotions: You can create and apply discounts, promotions, or coupon codes during checkout to drive sales and improve customer satisfaction.
• Tipping options: For businesses in the service industry, a good POS system makes it simple for customers to leave tips, offering preset percentages or the option to enter a custom amount based on their experience.
• Staff management: Some retail and restaurant POS software allows you to keep track of employee hours, manage shifts, and organize floor plans directly through your POS system.
• Customizable receipts: You can customize your digital or printed receipts with your brand color, font and logo.
• Operational efficiency: Features like split payments and order management also give you more control over daily operations.

With these operational tools at your fingertips, your POS system becomes an all-in-one solution for running your business efficiently, ensuring nothing slips through the cracks.

Should I choose a cloud based POS, a credit card machine, or both?

The answer depends on your business:

• If your payments are only online, you don’t need a credit card machine. Stick with just a cloud POS solution.
• If you accept payments in person, you’ll need both a credit card machine and a POS. Whether you choose a traditional POS or cloud based POS is up to you. If you need something basic, traditional is the way to go. If you need integrations and access to data from any device, cloud is the way to go.

Need a cloud POS system or credit card machine? Helcim has you covered.

Helcim offers both a free cloud based POS and two options for credit card machines: a mobile Card Reader and an all-in-one Smart Terminal. If you’re ready to start taking payments, it’s free to get started with Helcim.

If you're feeling stuck with a traditional POS system that's slowing down your business growth, it's time to make a change. Our Helcim Merchant Buyout program offers up to $500 in credits to cover your contract cancellation or equipment costs. By switching to Helcim, you'll enjoy better service, lower fees, and a system designed to support your business's success.

Break up with bad rates.

Feeling stuck with your provider? We'll waive $500 of your processing fees when you switch to Helcim.

Learn more

FAQs

What does POS stand for?

POS stands for Point-of- Sale, which refers to the system or location where a transaction occurs.

Is a POS the same as a payment processor?

No. A POS system for small business manages sales and customer interactions, while a payment processor facilitates the actual transfer of funds between banks.

What’s the difference between POS software and a POS system?

POS software refers to the programs that run the system, while a POS system includes both the hardware and software.

Can I use my credit card machine without a POS system?

Typically no. Your credit card machine needs somewhere to send the payment data.