How to Accept Credit Card Payments Over the Phone

Today’s super-competitive marketplace dictates that small business owners take a multi-channel sales approach. Yes, shoppers continue to make purchases at brick-and-mortar stores with point of sale systems. However, you may also find yourself having to accept phone orders from customers who can’t make it to the store. 

Restaurants take carry-out and delivery orders that require telephone prepayment. Some e-commerce retailers accept phone orders for their merchandise. Many mobile businesses rely on phone-based transactions. Plumbers, traveling dog groomers, independent vehicle detailers, and mobile marine mechanics are good examples.

Accepting credit cards over the phone

Telephone transactions do have some logistical issues and inherent risks. In this post, you’ll get details on security precautions that will increase phone-based transactions’ safety factor.

You’ll also about two methods of accepting over-the-phone payments, 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.

What are merchant services providers and why do you need them to accept credit card payments over the phone?

If you plan to accept credit card payments over the phone, you’ll need an electronic 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 a reputable merchant services provider can help. A good payments partner can supply you with a merchant bank account. The provider also maintains the hardware and software that enables you to process credit card payments.

Your merchant services provider should also be equipped to handle card-not-present transactions. This capability will require them to maintain a virtual terminal for their merchants’ use.

Small business credit card processing costs  

Taking a credit card authorization over the phone generates income for your business. During the sale, however, you’ll incur varied transaction-related costs. Your selection of a merchant services provider and pricing model will determine how much you’ll pay for each transaction. As a general guideline, most merchant services providers charge merchants between two to four percent of each transaction.

Beyond that, know that phone-based transactions carry more risks than card-present sales. As a result, merchant services providers typically charge more for phone transactions.

Besides a per-transaction processing fee, you may be assessed a monthly service fee and/or virtual terminal access fee. Some providers assess 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

The term “virtual terminal” refers to software that enables a merchant to process card-not-present transactions via an online sales application. Most Internet-enabled devices can be used as virtual terminals. Many merchant services providers supply virtual terminals to business customers.

A POS app

Your business’ merchant services provider may require you to download their proprietary application. This will be a credit card payment app for Android or an iOS platform. Send the app to your mobile phone, install the software, and begin processing sales.

A credit card reader

Your merchant services provider should provide you with a mobile credit card reader. Some processors choose hardware that contains a built-in mobile card reader. Other providers ask the merchant to plug the card reader into the mobile phone’s headphone jack.

A mobile phone

Your smartphone can serve as a card-not-present transaction platform. Purchase a smartphone at an electronics or big box retailer or a mobile phone specialty store.

Obtain more details on Android and iPhone user requirements to process phone-based credit card transactions.

Step-by-step process for accepting credit card payments over the phone

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 income for your business.

Step 1: Choose a merchant services provider

Your business’ merchant services provider will serve as your credit card processing partner. To ensure that you select the right provider for your business’ needs, take time to consider two important factors.

First, evaluate your business’ stage and financial situation. Maybe you operate a frugal start-up business, and you anticipate low-volume transactions for the near future. If so, your perspective (and needs) will be different than an existing business that does a brisk-to-heavy volume on a regular basis.

Next, compare the two types of merchant services 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 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 furnishes all hardware and software needed to facilitate the payments.

A business customer must complete a service application, and a longer-term contract and long list of fees are standard provisions. However, remember 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 positive 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.

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 access your merchant services provider’s virtual terminal via your computer, tablet, or smartphone. Your provider’s service package should include the virtual terminal setup instructions. To process a virtual transaction, simply follow the screen prompts. 

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 addition, each major credit card issuer may have information requirements that specifically relate to card-not-present transactions. Your virtual terminal may also require specific customer details.

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 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 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 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.

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

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

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. Write “phone transaction” on the receipt or electronic signature screen.

Check the billing and shipping address

If the customer’s billing and shipping address don’t match (especially if they’re far apart), that may be a red flag.

Get additional details for your records

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

Request that the buyer sign for the item when it’s delivered. This helps to ensure that the proper person receives the package.

Adhere to PCI 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.

Maybe a customer is purchasing a product they haven’t personally seen. Perhaps they 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

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.