You're nearly correct.

Readers and Writers manipulate chars under an encoding (UTF-8, ISO8859-2,
etc.), also called "text".  Streams manipulate bytes, not necessarily bytes
that make up an arbitrary object.  (Most just manipulate byte arrays.)  These
data are also called "binary data".

Readers and Writers are wrappers for streams.  They apply an encoding to the
data to turn them from text into binary data (in the case of Writers) and from
binary back to text (in the case of Readers).  The binary data in turn are run
through the underlying streams.

Character is a Java class.  The concept of a class no longer has any meaning
once data are on the stream.