You need to do the tests I suggested in order to isolate the problem. It has nothing to do with the relay.
@jim-p I bypassed the relay and connected the power straight through, and the swipe works now. Tested with the Arduino powered by both USB port from my laptop and by the mains power adaptor inside the casing. So it’s power going through the relay that affects this.
I don’t know if the relay as an optical de-coupler. Do I need to fashion a diode or something to prevent any interference with the Arduino from the relay?
Regards, Ian
For opto isolation you need a special relay and a separate supply to power the relay coil.
So the answer is no, you don't have opto isolation.
In post#11 I asked you if you had a snubber circuit, which is needed if you are switching an inductive load.
So what are you switching with that relay.
Leo..
That relay looks way too small to have the appropriate creepage and clearance to make it safe to use.
Test two cases:
Case 1:
Connect a DC load to relay, a basic LED circuit.
If that works perfectly, then we can assume that the AC current passing through the relay is interfering with the RFID reader.
Case 2:
Keep the AC load connected, but instead of using the swipe module, trying using a switch to trigger the relay(keeping all other functionalities of the code same).
If that works perfectly, then we can assume that the relay coil and RFID reader are interfering.
Just looking at the picture in post #8 it appears that the relay module is supported by what looks like antistatic foam. If so, that may not be a good idea, especially if it comes in contact with the solder pads of the mains power connector.
@Wawa I am switching through 240V AC. I have 5 other builds of this configuration that don’t require any other circuits or snubbers, so I am suspecting that the one build with this particular model of relay is a fluke.
I have already ordered some more relays (of the other kind I use) so I will swap this out one when they arrive, and see if the issue continues.
@6v6gt no foam pads, actually all my components are mounted on custom 3d printed mounts and held in place with rubber bands (see screenshot of esp8266 bracket within printer render).
That looks OK. Can you show a picture of the inside of one of the working units which has a different relay module to the one in your current design.
What is the 240V load.
I find the unusual but I guess it is possible but why do the others work?
I don’t know if the relay as an optical de-coupler. Do I need to fashion a diode or something to prevent any interference with the Arduino from the relay?
It does not.
You could try adding an optpcoupler but I'm not sure if adding one will solve the problem. You can of course try one and see. It may be easier to buy a relay with an optocoupler.
In your original post you you claimed you had multiple instances of the design with that same relay built and running.
Are you now saying they use a completely different relay?
The one shown in your diagram has an optocoupler!
@jim-p I have 5 instances of this design already built, one of which uses this model of relay, the others use a different model relay. All of these instances are offsite, i will try to visit Saturday this week to figure out what the configuration of that single instance is.
It could actually be a defective relay. I know you said you tried several but maybe they used a different brand (BESTEP) for the actual relay (the blue square thing).
Hi, @iandennison
Looking at your pictures, you might improve things if you dress your wiring so that the mains wiring is kept together and tidy away from the controller and its low voltage wiring, also dressed neatly to keep the two voltage systems apart.
Tom.... 
I don't think you realise that its not the current but the switching of the current that is causing what sounds like a lockup of the controller.
Or the fields produced by the mains wiring causing interference.
What is the load and what are its specifications.
Tom....
37 posts and we still do not know that all units are the same but 6 are switching a light bulb and the last one is switching a TL light... or a water pump of some sort...
Well, i tried a completely new setup on a new enclosure with new components (30A controller controlled by 5V, acs712 current reader, separate power transformer, new arduino esp8266) and it has exactly the same symptoms. So I am even worse off than before.
@TomGeorge I am using a 2A column heater as load, but that is irrelevant. I get the same issue regardless of whether anything is plugged into the other end.
How is it going if you keep the relay and all power wiring far from rest of the circuit?
On your previous image you had rfid reader right on top of relay coil and ac wiring running here and there...