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check the feed tires ,the ones that feed the paper/cards into the printer. they maybe slick with paper dust. I recommend taking a cotton dish cloth or rag with some 409 cleaner on it the the feed tires clean all the paper dust off the tires let dry then try to feed card again. sound like the sensor is covered with paper dust, and is giving a false error.
Card readers build up magnrtic particles from the cards they read . u might try cleaning it with a blank card that has a rough surface/ladened with alcohol, or a very small q-tip ladened with alcohol to remove the dirt and magnetic residue. too much built up residue can cause, loss of reading ability, and lost sensitivity between the card and the reader.