How to Accept Credit Card Payments Over the Phone

In general, you'll want to use a virtual terminal or point-of-sale system and follow certain security measures.
Randa KrissAug 7, 2020

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While there are more ways than ever for your business to accept credit cards, you may find in some cases that you need to take orders and accept payments in a more traditional way: over the phone.

In order to accept credit card payments over the phone, you’ll need to work with either a merchant account provider or payment service provider. With your chosen provider, you’ll be able to take phone payments by inputting credit card information into a virtual terminal on your computer, smartphone or tablet, or — if you have a POS system that allows you to do so, you can input phone-based payments this way.

What you need

In order to actually accept and process these phone payments (or any credit card payments for that matter), you’ll need to work with either a merchant account provider or a payment service provider. Both of these entities will provide you with the appropriate tools (bank account, software, hardware) that will allow you to take a credit card payment, process that payment and receive the funds.

What’s the difference between a merchant account provider and a payment service provider? With a merchant account provider, like Fattmerchant or Dharma Merchant Services, you receive a dedicated merchant account for your business — the bank account needed to accept credit card payments — in addition to specific tools (card readers, terminals or software) that you need to take credit card payments in the way that works best for you. With payment service providers, like Square or Stripe, on the other hand, you do not receive a unique merchant account. Instead, payment service providers aggregate all of their customers’ funds into one merchant account and then transfer the appropriate funds into the respective business bank accounts.

Generally, merchant account providers can charge extensive fees and require an application and a contract but are considered more secure. Payment service providers, on the other hand, typically charge fewer fees and allow you to receive service instantly after signing up for an account online, but customers can face issues with them holding funds and freezing or closing accounts.

Whichever option you choose is up to you — however, you’ll need to be sure the provider you work with can accommodate card-not-present transactions and offers a virtual terminal.

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Using a virtual terminal

Overall, in order to accept credit card payments over the phone, you’re going to need a virtual terminal. In essence, a virtual terminal is a piece of software, hosted online, that allows you to input and process a customer’s payment information when their card is not present. Therefore, if you’re trying to accept credit card payments over the phone, you’ll use this application to input the information the customer gives you, process the payment to charge their card and eventually, receive the appropriate funds for the sale.

Typically, virtual terminals can be accessed with any internet-enabled device — computer, smartphone or tablet — and include security measures, the ability to send electronic receipts and sometimes the option to save payment information. You should talk to your merchant account or payment service provider to ensure it offers a virtual terminal and can work with you to accommodate this kind of card-not-present transaction.

Using a POS system

Although you typically need access to a virtual terminal to be able to accept credit card payments over the phone, it’s worth noting that if you’re using a POS system, you may be able to process card-not-present transactions using this system. In this case, you would operate your POS system as a virtual terminal — inputting the credit card information the customer gives you over the phone into the appropriate part of your system and then submitting it.

As an example, if you use Square POS, you can use the Square POS app to charge a “manual card entry,” in which you would key in the appropriate details and hit “charge,” thereby processing an over-the-phone payment within the Square POS software. In this case, your POS software is operating as a virtual terminal, but not all POS systems will offer this option.

The step-by-step process

Once you work with a merchant account or payment service provider to have access to a virtual terminal, you’ll be able to start the process of accepting credit card payments over the phone.

Step 1: Determine what credit card information is required.

After you have a payment provider and access to a virtual terminal, you’ll need to determine what credit card information is required in order for you to accept credit card payments over the phone. Each provider and the corresponding virtual terminal that you work with may have different requirements; therefore, you’ll want to know what information you need before talking to any customers.

Additionally, the major credit card providers each have specific regulations regarding card-not-present transactions, so consider reading through these documents to ensure you’re complying with their rules as well.

Generally, you’ll at least be required to ask your customers for the following information in order to process their credit card through your virtual terminal:

  • Credit card number.

  • Expiration date.

  • Security or CVV code.

  • Customer name.

  • Billing ZIP code.

You may also need to ask for the type of card (Mastercard, Visa, etc.), as well as the customer’s address, email or phone number. If you’re going to be shipping orders, you’ll need the customer’s shipping information, and if you’re going to be sending email or text receipts, you’ll need the respective email or phone number.

Step 2: Take the customer’s order and input it into your system.

When you have a customer on the phone looking to make a purchase and pay by providing their credit card details, you’ll want to input their order details into your system and calculate the total order amount, considering any sales taxes and shipping costs as appropriate. Then, you’ll want to communicate the final sales total to your customer.

Step 3: Ask for their credit card information, key it into your virtual terminal and submit the payment.

After the customer has approved the total and indicated they’d like to pay over the phone, you’ll want to ask for all of the necessary credit card details above and key this information into your virtual terminal (via computer, phone or tablet). Once you’ve entered all of the information and confirmed that it’s correct, you can submit the payment. Your virtual terminal should tell you almost instantly whether the transaction has been approved. If the transaction is approved, you’ve successfully accepted a credit card payment over the phone. If the transaction is declined, you might need to reconfirm the details with your customer or ask if they have another card they can use.

Step 4: Send the customer a receipt and complete the order.

Once you’ve submitted the customer’s credit card payment using your virtual terminal, you’ll want to send the customer a receipt. Depending on your system, you may be able to send an email or text receipt, or you can print a receipt to be mailed to the customer. You’ll also want to save a receipt and any additional information as appropriate for your records. As card-not-present transactions inherently pose more risk, you may decide to make specific notes regarding the sale and your phone call with the customer.

Finally, with all of these steps completed, you’ll be able to fulfill the customer’s order.

Cost to accept credit card payments over the phone

The actual process of accepting credit card payments over the phone is fairly simple, but you may be wondering about cost.

One of the reasons the merchant account or payment service provider you choose is so important is because the provider you work with will dictate how much it costs for you to accept credit card payments over the phone. Therefore, the cost of card-not-present payments will vary based on the provider.

Overall, however, you can expect to pay more to accept credit card payments over the phone than for in-person transactions. As card-not-present transactions are considered riskier (just like online payments), payment solution providers are more likely to charge you more for this transaction type.

Although the specific costs will differ based on provider, you can expect to pay credit card processing fees for these payments, which are typically priced as a percentage or flat fee for every transaction you make. You may also have to pay a monthly fee to work with your payment provider, as well as for access to your virtual terminal. Some providers charge a range of other specific fees for instances like chargebacks, set up, PCI compliance, account maintenance and more.

To get a better idea of what it might cost to accept credit card payments over the phone, here are a couple of examples.

Square is a payment service provider that allows you to process phone payments using its POS app. However, Square also gives you the ability to use its virtual terminal via computer as well. Square has flat rates and does not charge a monthly fee for access to its software.

Therefore, if you want to use the Square virtual terminal (or key credit card information into the POS app) to accept credit card payments over the phone, you’ll only pay processing fees — 3.5% plus $0.15 per transaction. This Square processing rate for card-not-present transactions is more expensive than the rate for in-person transactions, which is typically 2.75% per transaction. Square does not charge authorization fees, statement fees, refund fees, PCI-compliance fees, etc.

If you work with a more traditional merchant account provider, like Payment Depot, the cost you’ll pay to accept credit card payments over the phone will look a little different. Payment Depot requires a monthly subscription and operates on an interchange-plus pricing structure for transaction fees, as opposed to a flat-rate structure.

The price you’ll pay to accept credit card payments over the phone with Payment Depot would depend on the plan you choose, at either $49, $79, $99 or $199 per month. Then you'd also pay the plan’s transaction fees—interchange plus $0.15, $0.10, $0.07 or $0.05 respectively.

Your transaction fees from Payment Depot do not cost more when using the virtual terminal vs. accepting an in-person payment. However, the interchange rate (which comes from the credit card network) may be more expensive for card-not-present transactions, making these types of transactions costlier. Payment Depot does not charge cancellation fees, account fees, statement fees or service fees on any of its plans.

As you can see, the cost you’ll pay to accept credit card payments over the phone will wholly depend on the merchant account or payment service provider you work with — making it all the more important to compare your options and find the payment processing company that can best accommodate your business, especially if you know you’ll be taking credit card payments over the phone.

Security measures

Card-not-present transactions are riskier because they have a higher chance of fraud. When you accept an in-person credit card, the customer actually has to present the physical card to pay for the purchase and should also be able to show the proper identification to confirm it’s their card, if necessary.

In the case of a card-not-present transaction, you’re not actually seeing the physical card, and it’s more likely that someone could be fraudulently using card information to make a remote purchase. Since neither the credit card nor the individual is present with this type of sale, it’s more difficult to confirm that fraud is not taking place.

If you think you’re going to be accepting credit card payments over the phone, it’s important to discuss the security measures you can take to help secure your transactions and prevent fraud.

Choose a reputable payment provider

The first and perhaps most significant measure you can take to ensure that your credit card phone payments are secure is to work with a reputable payment provider. Researching your options and choosing the right provider for you is essential, especially since this is the company that you’ll be working with to actually accept and process credit card payments.

You’ll not only want to ensure that the provider you choose can give you access to a virtual terminal, but that the provider’s solution includes security measures, especially PCI compliance. PCI compliance refers to a set of standards that dictate how businesses accept credit card information to maintain security and prevent fraud.

Some payment providers handle PCI compliance on behalf of their customers, whereas others require more action from the merchant themselves. Either way, you’ll want to ensure that PCI compliance is part of your payment solution and that you’re adhering to the necessary regulations.

Ask customers for all of the appropriate information

The next security measure you can take is to ensure you get all necessary information from your customer and confirm with the individual to make sure they’re correct.

You’ll want to make sure that you ask for the person’s credit card number, security code, name on the card and billing ZIP code — at the very least. If you’re shipping the order to the customer, you may want to check the billing ZIP code to the shipping ZIP code, and if they don’t match, ask the customer why they’re different. If the customer doesn’t have a clear and appropriate answer, you may consider asking for another type of payment to ensure that the transaction isn’t fraudulent.

Another prudent action to take in this regard is to review the cardholder guidelines for card-not-present transactions to ensure you’re complying with the rules laid out by the respective networks.

Save transaction records and take notes

Just as you would for any other type of transaction, you’ll want to keep records and receipts of any credit card payments you take over the phone. Because payments over the phone are typically riskier than in-person payments, you may decide to take more detailed notes and store them with the transaction records. You might include the name of the customer you talked to on the phone, what time the call was made and anything else you find relevant — just in case you later find yourself having to deal with an instance of fraud.

Set up delivery confirmation

Finally, if you’re shipping orders to customers after you’ve taken a credit card payment over the phone, you might consider purchasing tracking or insurance for the shipment, especially if it’s a particularly costly purchase. Similarly, you might require a signature from the customer when they receive the shipment, or you might require your shipping service to provide you with proof of delivery.

By taking these shipping confirmation measures, you’ll have added protection in the case of a chargeback or even simply a lost shipment claim.

A version of this article was first published on Fundera, a subsidiary of NerdWallet.