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How to Accept Credit Card Payments Over the Phone

Randa Kriss

Staff Writer at Fundera
Randa Kriss is a staff writer at Fundera, where she has written dozens of reviews on ecommerce, merchant services, payroll, and human resources solutions. She has a bachelor’s degree in English and Spanish from Iona College. Randa has written for KNF&T Staffing, PeopleKeep, Zoho, the American Kennel Club, Planted, and Serendipity magazine. Email: randa@fundera.com.
Editorial Note: Fundera exists to help you make better business decisions. That’s why we make sure our editorial integrity isn’t influenced by our own business. The opinions, analyses, reviews, or recommendations in this article are those of our editorial team alone.

With the continuous development of technology within the merchant services industry, there are more ways than ever for your business to accept credit cards. You can accept in-person payments with credit card terminals or mobile card readers,  you can accept payments online with a customized payment page or through a payment integration with an ecommerce platform, and more. Depending on your specific business and customer-base, however, you may find that you need to take orders and accept payments in a more traditional way—over the phone. 

Although not nearly as popular as it once was, there are a number of reasons why you might take phone payments, and therefore, it’s worth exploring exactly how to accept credit card payments over the phone for your business. This guide is here to help. We’ll explain the methods you can use to process phone payments, break down the security measures that you’ll want to take for these card-not-present transactions, and finally, discuss the actual process of how to accept credit card payments over the phone.

How to Accept Credit Card Payments Over the Phone: What You Need

Before we dive deeper into the process of how to accept credit card payments over the phone, we need to start with the basics. 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. When it comes to payment service providers, like Square or Stripe, on the other hand, you do not receive a unique merchant account with their service. 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. 

This being said, choosing between a merchant account provider and a payment service provider is up to you, as either can give you the ability to accept credit card payments over the phone. Generally, merchant account providers can charge extensive fees and require an application and a contract, but are also considered more secure. Payment service providers, on the other hand, typically charge fewer fees and allow you to sign up for an account online, receiving service instantly, but customers can face issues with holding funds and account freezes or closures. 

Once again, whichever option you choose is up to you—however, in order to accept credit card payments over the phone specifically, you’ll need to be sure the provider you work with can accommodate card-not-present transactions, and more specifically, offers a virtual terminal. 

How to Accept Credit Card Payments Over the Phone: 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. This being said, if you’re looking to accept credit card payments over the phone, you’ll need to talk to your merchant account or payment service provider to ensure that they offer a virtual terminal and can work with you to accommodate this kind of card-not-present transaction. 

how to accept credit card payments over the phone

How to Accept Credit Card Payments Over the Phone: Using a POS System

Although, on the whole, you’ll 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 as well. In this case, you would operate your POS system like 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. 

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, but doing so within the Square POS software. In this case, then, your POS software is operating as a virtual terminal—and it’s important to note that not all POS systems will offer this option. However, if you do use a POS system and are trying to determine how to accept credit card payments over the phone, it’s worth seeing if you can do so directly within your system. 

How to Accept Credit Card Payments Over the Phone: The Step-by-Step Process

Now that we know the methods you can use to take card-not-present phone payments, let’s dive deeper into the steps detailing specifically how to accept credit card payments over the phone. As we mentioned earlier, before you can start taking payments over the phone, you’ll need to work with a merchant account or payment service provider who can give you access to a virtual terminal. Once you have this capability as part of your service, 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, and 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 it may be worth reading through these documents to ensure that 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

Depending on the transaction, 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 to ask for 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.

Once you know the specific details you’ll need to in order to accept credit card payments over the phone, you’ll be able to talk to customers and start the process. 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 we discussed 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 (which we’ll discuss in greater detail shortly) 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 proceed and actually fulfill the customer’s order. 

how to accept credit card payments over the phone

Cost to Accept Credit Card Payments Over the Phone

As you can see, once you’ve found the right merchant service provider for your business who can provide you with the payment acceptance tools you need, the actual process of accepting credit card payments over the phone is fairly simple. 

Now that we’ve gone through this process, however, you may be naturally wondering about cost. How much does it cost to accept credit card payments over the phone? Is the cost of accepting credit card payments over the phone different than accepting them in-person? 

Let’s start with the first question. Essentially, one of the reasons that 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, there is not a straightforward answer to the question of how much card-not-present payments over the phone will cost you—it will vary based on the provider.

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

This being said, 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. Additionally, you may have to pay a monthly fee to work with your payment provider, as well as for access to your virtual terminal. Moreover, some providers charge a range of other specific fees for instances like chargebacks, set up, PCI compliance, account maintenance, and more. 

With this in mind, let’s explore two different examples, one payment service provider and one merchant account provider, to get a better idea of what it might cost to accept credit card payments over the phone. 

As we mentioned earlier, Square is a payment service provider that allows you to process phone payments using their POS app. However, Square also gives you the ability to use their virtual terminal via computer as well. This being said, one of the benefits of Square as a payment service provider is that they have flat-rates and do not charge a monthly fee for access to their 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. Moreover, unlike other providers, Square does not charge authorization fees, statement fees, refund fees, PCI-compliance fees, etc. 

On the other hand, if you work 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. Unlike Square, Payment Depot requires a monthly subscription, and operates on an interchange plus pricing structure for transaction fees, as opposed to a flat-rate structure. 

Therefore, the price you’ll pay to accept credit card payments over the phone with Payment Depot would depend on the plan you choose—however, unlike some providers, Payment Depot does not charge an additional fee for access to their virtual terminal. Instead, you’ll choose between one of their four plans, at either $49, $79, $99, or $199 per month and pay the plan’s transaction fees—interchange plus $0.15, $0.10, $0.07 or $0.05 respectively. 

Unlike Square, 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, thereby making these types of transactions costlier. Furthermore, whereas some traditional merchant service providers charge a variety of service or incidental fees, Payment Depot does not charge cancellation fees, account fees, statement fees, or service fees on any of their plans.

Therefore, 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. 

How to Accept Credit Card Payments Over the Phone: Security Measures

As we’ve mentioned, card-not-present transactions—and therefore, accepting credit card payments over the phone—are generally considered riskier than card-present, in-person transactions. Why is this the case? 

Essentially, 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 therefore, it’s much more likely that someone is fraudulently using card information to make a remote purchase. Plus, since neither the credit card nor the individual is present with this type of sale, it’s much more difficult to confirm that fraud is not taking place. 

This being said, 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. As we’ve discussed, 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 cards 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, most importantly considering PCI compliance. In short, 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. 

Ensure that you ask for all of the appropriate information from your customers. 

The next security measure you can take, as we’ve already discussed, is to ensure that when taking credit card payments over the phone from customers, you get all the necessary information and confirm with the individual to make sure that they’re correct. 

Once again, 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. 

Moreover, (and again as we mentioned above) another prudent action to take in this regard is to review the card holder guidelines for card-not-present transactions to ensure that you’re complying with the rules laid out by the respective networks. 

how to accept credit card payments over the phone

Save transaction records and take notes of phone-based transactions.

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. This being said, however, 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, there are additional security measures you can take to protect your business. First, 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. 

How to Accept Credit Card Payments Over the Phone: The Bottom Line

Whether you decide to take card-not-present phone payments, or ultimately opt not to, it’s worth knowing exactly how to accept credit card payments over the phone—especially as you can use a similar process for mail-order payments or recurring subscription payments. As we’ve discussed, the step-by-step process of taking credit card payments over the phone isn’t too complex, but you will want to implement additional security measures with this type of payment.

At the end of the day, the most important element of accepting credit card payments over the phone is choosing the right payment solution provider. Once again, you’ll want to make sure that the provider you work with is reliable, secure, and can give you the tools you need (virtual terminal or otherwise) at a fair price that you can afford. 

Moreover, it’s worth noting that many payment providers, like Square with Square Invoices, give you the option to send electronic invoices, so that you can take orders over the phone, but send the invoice directly to the customer so that they can pay themselves online. Although invoicing in this way isn’t quite the same as actually accepting credit card payments over the phone, it certainly might be another payment method for you to consider.

Randa Kriss

Staff Writer at Fundera
Randa Kriss is a staff writer at Fundera, where she has written dozens of reviews on ecommerce, merchant services, payroll, and human resources solutions. She has a bachelor’s degree in English and Spanish from Iona College. Randa has written for KNF&T Staffing, PeopleKeep, Zoho, the American Kennel Club, Planted, and Serendipity magazine. Email: randa@fundera.com.

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