How to Accept Credit Card Payments Over the Phone

How to Accept Credit Card Payments Over the Phone

Today’s super-competitive marketplace dictates that small business owners must take a multi-channel sales approach if they want to reach customers and secure more conversions. Shoppers continue to make purchases at brick-and-mortar stores with point of sale or POS systems at a high rate, especially amongst younger generations, 84% of which view shopping as a social pastime. However, you may  still find yourself having to accept phone orders from customers who can’t make it to the store. 

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Yet telephone transactions do have some logistical issues and inherent risks that can make them a less secure payment method. In this post, you’ll get details on security precautions that will increase phone-based transactions’ safety factor.

You’ll also learn about two methods of accepting payments over-the-phone, and view a step-by-step transaction tutorial. By the end of this guide you’ll be able to confidently choose a telephone-based payment processing model that best meets your business’ needs.

Why Is It Important to Accept Phone Payments?

Phone orders might sound outdated in the era of online payments, but they are more common than you might think.

For example, restaurants  receive carry-out and delivery orders that require telephone prepayment. Some eCommerce retailers accept phone orders for their merchandise. Many mobile businesses rely on phone-based transactions, especially if they cannot easily offer mobile credit card processing on location. Plumbers, traveling dog groomers, independent vehicle detailers, and mobile marine mechanics are just some of the businesses who benefit from phone payment solutions. 

Phone payments offer your customers an additional layer of flexibility and convenience. Not all customers are comfortable with shopping online, and accessibility issues may prevent them from doing so. Moreover, it also doubles as a customer service option by allowing shoppers to ask questions about products and services before committing to a purchase, rather than leaving an email and waiting for a response. It’s a faster, more streamlined payment system that boosts customer satisfaction.

What Is a Merchant Services Provider?

A merchant services provider is a company or financial institution that offers a range of services to facilitate electronic payments. This includes payment gateways, payment processing, merchant accounts, and payment security. Choosing a merchant services provider is essential for any business who wants to process payment electronically, such as credit cards, debit cards, or mobile wallets like Apple Pay or PayPal.

Why Do You Need a Merchant Services Provider to Accept Credit Card Payments over the Phone?

If you plan  on accepting credit card payments over the phone, you’ll need a framework in which to process those payments. You’ll also need a way to get those sales proceeds into your business bank account.

That’s where  your merchant services provider comes into play.  A good payments partner can not only supply you with a merchant bank account,  but also maintain the hardware and software that enables you to process  card-not-present payments quickly and securely, such as maintaining a virtual terminal for their merchants’ use.

Small business credit card processing costs  

Credit card authorization over the phone can generate significant income for your business. During the sale, however, you’ll still incur  transaction fees.  Your merchant services provider and their pricing model will determine how much you’ll pay for each transaction. As a general guideline, most merchant services providers charge merchants between  2-4% of each transaction.

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 Because phone-based transactions are considered card-not-present  (CNP) transactions, they have a higher risk of fraud than card-present sales. As a result, merchant services providers typically charge more for phone transactions than for a traditional credit card terminal.

Besides a per-transaction processing fee, you may be assessed a monthly service fee and/or virtual terminal access fee. In addition, some providers  may also charge set-up, PCI compliance, chargeback, and other fees.

What Else Do You Need to Accept Credit Card Payments over the Phone?

Accepting credit card payments over the phone requires two hardware items and two software applications. Once everything’s up and running, taking phone-based card payments is very easy.

A virtual terminal

A virtual terminal is a type of software interface that allows businesses to manually process credit card payments without the need for a traditional credit card terminal or POS system.

Most Internet-enabled devices can be used as virtual terminals, since terminals often take the form of web-based browsers. Most merchant services providers will supply virtual terminals to business customers.

A POS app

Your merchant services provider may require you to download their proprietary application in order to process payments.  This software allows you to manually process credit card transactions, initiate the payment process, and keep customer card details on file for recurring payments. Send this app to your mobile phone or desktop, install the software, and begin processing sales.

A credit card reader

Your merchant services provider should provide you with a mobile credit card reader. A mobile card reader is a small device that can be connected to a smartphone or tablet to enable businesses and individuals to accept credit card and debit card payments. Some processors  may offer terminal hardware that contains a built-in mobile card reader, or a separate mobile card reader for a lower fee..

A mobile phone

Your smartphone can also serve as a card-not-present transaction platform, in the case that your business isn’t using a mobile terminal. In this case, the smartphone and the payment software it’s hosting becomes a tool for entering customer card details and initiating transactions. Mobile payment apps should use encryption and tokenization to safeguard payment information and protect cardholder data.

Accepting Credit Card Payments over the Phone: A Step-by-Step Process

If you’ve wondered how to accept credit card payments over the phone, it’s actually a rather straightforward process. By following five simple steps, you can set the stage for seamless phone-based transactions that generate significant income for your business.

Step 1: Choose a merchant services provider

Your business’ merchant services provider will serve as your credit card processing partner. A merchant account provider establishes a dedicated bank account for every business. This account serves as the destination for all credit card payments. The merchant account provider also furnishes all hardware and software needed to facilitate the payments.

To ensure that you select the right provider for your business’ needs, evaluate  the size of your business and your financial situation. Maybe you operate a l bootstrapped start-up business, and you anticipate low-volume transactions for the near future. If so, your needs will be different than an  established business that does a brisk-to-heavy sales volume on a regular basis.

Next, compare the two types of merchant services providers: Merchant service providers and payment service providers. Each provider will help your business to process credit card payments and funnel the sales proceeds into your business’ bank account. However, the two providers have very different operations frameworks and processing cost structures.

A merchant service provider specializes in setting up and managing merchant accounts for businesses. Typically, a customer must complete a service application, and a longer-term contract is usually required. The advantage is that the merchant account provider has vetted your business before approving your account. For that reason, you can expect few disruptions in your day-to-day credit card processing operations.

In contrast, a payment service provider pools your business’ card processing receipts into one aggregate merchant account. The provider transfers each business customer’s net sales proceeds into the business’ bank account as required.

This payment processing model often appeals to newer businesses that might not have the established financial and operations history to merit an application approval. Customers can quickly open an online account and begin processing transactions. These providers also typically charge fewer fees compared to a merchant account provider. However, business customers may experience account holds and even freezes while payments clear, which can be very disruptive to cash flow.

Step 2: Obtain the card processing hardware and software

In most cases, your merchant services provider will furnish your processing hardware, such as a mobile credit card reader. However, maybe you’ll be processing credit card payments with your smartphone. If you don’t currently have one, purchase it at an electronics or big box store or mobile phone specialty retailer. Your provider will likely instruct you to download their proprietary app that drives the processing operations.

Step 3: Set up your virtual terminal

You’ll be accessing your merchant services provider’s virtual terminal via your computer, tablet, or smartphone. Your provider’s service package should include  self-service virtual terminal setup instructions. It’s a good idea to scope out help guides online in advance to speed up the set-up process. To process your first virtual transaction, simply follow the screen prompts. You should do this ahead of an actual customer sale to ensure that the system is working correctly.

Step 4: Determine the required credit card information

Your merchant services provider will tell you what information you need to collect from each customer in order to process a sale. In addition, each major credit card issuer may have information requirements that specifically relate to card-not-present transactions. In all cases, you’ll need the customer’s credit card number and type, its expiration date, and its CVV code. You should also confirm the customer’s name exactly as it appears on the card. In certain cases, you may need their phone number and email. If you’ll ship the order, you’ll also need a valid shipping address.

Step 5: Process customers’ payments and send receipts

Each phone-based credit card transaction follows the same sequence. First, enter the customer’s order details into your system, and calculate the final amount due. This amount should include sales tax and shipping costs (if applicable).

Next, obtain the customer’s credit card details. Ensure that you meet the card issuer and merchant services provider information requirements. Enter this data into your virtual terminal, and verify its accuracy with the customer.

When everything is correct, submit the payment. If you receive an approval, thank the customer and send an electronic or paper receipt. If the transaction is declined, explain that there’s a discrepancy, and ask the customer to repeat the transaction with another card.

Tips to Help You Safely Accept Credit Card Payments over the Phone  

When a customer is paying over the phone with credit card, the process carries inherent fraud risks that are minimized during an in-person transaction. With careful preparation, however, you can considerably minimize your business’ risk of card fraud or a chargeback.

Telephone credit card processing risks

When you process an in-person sale, the customer must produce their credit card or debit card to complete the transaction. The customer should also be prepared to show you the physical card with the signature, plus identification.

If you process a customer’s payment over the phone, however, you’re engaging in a transaction with increased card fraud risks. First, you can’t visually inspect the card or see the purchaser’s photo identification. That means you can’t confirm their identity and verify that the card and ID match. This is what makes verbal phone payments less secure than card-present payments, and causes some businesses not to accept them.

With careful preparation, however, you can considerably minimize your business’ risk of card fraud or a chargeback.

5 Key Tactics for Preventing Card Fraud

Fortunately, you can increase the chances that phone-based card transactions are legitimate. These five security precautions apply to any size or type of business.

Record all relevant transaction information

When processing a card-not-present payment, note the buyer’s card number, expiration date, CVV code, and ZIP code. Ask the caller to state exactly how their name is shown on the credit card, since this may differ from the name they have given for the order. Write “phone transaction” on the receipt or electronic signature screen so your business can track transactions.

Check the shipping and billing address

If the customer’s billing and shipping address don’t match (especially if they’re in different regions or countries ), this  may be a red flag and indicate that a counterfeit or stolen card is being used. An address validation system on your POS or virtual terminal when cross-reference the address on file for the credit card to alert to any unusual activity.

Get additional details for your records

Because of the higher fraud risk, it’s a good idea to ask for identification that can be checked in the case that something goes wrong with the order. Obtain the customer’s driver’s license number, birth date, and phone number (if your state permits). Securely store these details until the transaction is complete and the customer is satisfied with their purchase.

Require the purchaser’s signature upon delivery

If a customer is placing a phone order for home delivery, request that the buyer sign for the item when it’s delivered. This gives your business an extra layer of protection for phone orders, especially when it comes to chargebacks or shipments being lost in transit.  It also helps to ensure that the proper person receives the package, as well as avoiding issues such as porch piracy.

Adhere to PCI DSS compliance requirements

If your business takes credit card numbers by any method, especially in paper form, you must comply with PCI (payment card industry) requirements for secure storage of customers’ personal data. Work with your merchant services provider to ensure compliance. In general, it isn’t recommended to physically store card details due to the risk they could be stolen or lost.

 Also, consider that a customer is purchasing a product they haven’t personally seen. Perhaps they might think the product isn’t as advertised, or they feel they’ve received an incorrect bill. To minimize unpleasant disputes, carefully describe the product before the buyer commits to purchase it. Clearly post your business’ return policy in your retail store and on your company website.

Making the Right Choice: Choose Payment Depot

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Now, you’ve learned the distinction between a merchant account provider and a payment service provider. You’ve gotten an overview of the equipment and costs involved in processing phone-based purchase transactions.

Finding a provider that’s compatible with your business characteristics and goals is important. When you make the right choice, you’ve set the stage for secure, reliable phone-based credit card payments.

Determine what services your business needs from a merchant services provider. Carefully consider your business stage and financial condition. Then, choose the provider who’s best positioned to help you accept the phone-based card payments that will help your business grow.

And if you need help finding the best payments partner, get in touch with Payment Depot. Our membership-based pricing model saves merchants an average of $400 per month. Get in touch and we’ll help accept credit cards over the phone, behind counter, online, and anywhere else that your customers like to pay.


FAQs about Credit Card Payments over the Phone

Q: What is the need for accepting credit card payments over the phone?

Businesses such as restaurants, small-scale mobile businesses, and eCommerce retailers often need to accept payments over the phone. This method offers an additional layer of flexibility and convenience for customers who may not be comfortable or able to shop online. It also doubles as a customer service option, allowing customers to ask questions about products and services before committing to a purchase.

Q: How does a business setup the way to accept telephone payments?

Businesses should work with a merchant services provider. This provider can supply them with a merchant account, hardware, and software for processing card-not-present payments securely. Besides, businesses will require a virtual terminal, a software interface that enables manual processing of credit card payments without a traditional card terminal or POS system.

Q: What costs might businesses incur when accepting credit card payments over the phone?

Businesses may face transaction fees, which typically range between 2-4% of each transaction. The exact amount depends on the merchant service provider and their pricing model. Due to the increased risk of fraud associated with phone-based transactions, providers often charge more for these than traditional credit card transactions. Additional costs may include a monthly service fee, virtual terminal access fee, setup, PCI compliance, chargeback, and other fees.

Q: What information is required to process a phone-based credit card transaction?

Information required typically includes the customer’s card number and type, expiry date, and CVV code, and their name as it appears on the card. Additional details like their phone number, email, and shipping address may also be necessary.

Q: What precautions can I take to minimize the risk of fraud during phone-based transactions?

Asking for complete card information, ensuring matching billing and shipping addresses, obtaining additional identification details, requesting that the buyer signs for the delivered item, following PCI compliance standards for the secure storage of card details, and clearly informing customers about return policies can help minimize the risk of fraud.

Q: What is the role of a merchant services provider?

A merchant services provider is crucial for businesses wishing to accept electronic payments. They provide a range of services including payment gateways, processing, merchant accounts, and payment security. They also offer the necessary hardware and software to process card-not-present payments, and help guide the business on PCI compliance requirements.

Q: What is a good way to process a customer’s payment over the phone?

After entering the order details, get the customer’s card details making sure to meet the card issuer’s information requirements. Enter these into a virtual terminal, verify its accuracy with the customer, and upon confirmation, submit the payment. If approved, thank the customer and provide a receipt.

Q: What is a virtual terminal and what is it for?

A virtual terminal is a software interface that allows businesses to manually process credit card payments without the need for a traditional card terminal or POS system. Using any internet-enabled device, businesses can use merchant services providers’ web-based virtual terminals to process payments.

Q: What role does a merchant account provider play in my business?

A merchant account provider establishes a dedicated bank account for credit card payments and provides you with all the necessary hardware and software to facilitate the payments. Based on your business size and financial situation, it is crucial to select a suitable provider for your needs.

Q: What are the different types of merchant services providers?

There are primarily two types of merchant services providers – Merchant service providers, who specialize in setting up and managing merchant accounts, and payment service providers, who pool your business’s card processing receipts into one aggregate merchant account and transfer each business customer’s net sales proceeds into the business’ bank account as required.


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