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Credit cards and debit cards have become ubiquitous. Almost everyone carries them, and fewer customers are paying cash than ever. For most businesses, accepting credit cards is imperative. Partnering with a credit card processor and setting up a card reader at the point of sale (POS) is often just another cost of doing business for entrepreneurs. But what happens when a customer wants to use their credit card outside the POS?

Many businesses, from restaurants to retailers, take orders over the phone. It’s generally thought of as an added service to boost customer satisfaction in an increasingly card-centric society. Accepting credit cards over the phone can also help businesses close sales quickly and reduce collection times. 

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Here are some types of businesses that are increasingly taking credit card payments over the phone: 

If you’ve ever wondered how to accept credit card payments over the phone, this guide can help. We’ll also walk you through the pros and cons of accepting credit cards over the phone and how you can best ensure your customers’ data remains safe.

Accepting credit cards over the phone is an important way to boost customer satisfaction. It offers your customers another way to pay that might be more convenient for them, helping you drive sales. Luckily, there are several methods for accepting a customer’s credit card over the phone.

It’s important to note that accepting credit cards over the phone is less secure than accepting a card physically at the POS. To account for this higher fraud risk, credit card processors generally charge higher rates and per-transaction fees for card-not-present transactions, including keying in card information over the phone.

Did you know? When you or your employees accept orders over the phone, it’s crucial not to write down any cardholder information, as this puts you at risk for PCI noncompliance.

Exactly what accepting cards over the phone will cost depends on your credit card processor and pricing model. Generally, though, accepting credit cards over the phone will cost you more than accepting a physical card with a credit card reader.

Most credit card processors charge 2% to 4% of a given transaction. For card-not-present transactions, that number is likely to be on the higher end because of the increased risk of accepting payment without a physical credit card. In addition, it’s common for credit card processors to tack on a per-transaction fee to the percentage rate for higher-risk transactions such as payments over the phone.

Tip: For a breakdown of the standard pricing models and how the rates apply to card-not-present transactions, see our recommendations for the best credit card processors.

When a customer pays with a credit or debit card over the phone, there’s always a risk that the customer is not the authorized card user. This risk leads credit card processors to hike rates on card-not-present transactions, including keyed-in card numbers accepted over the phone. To avoid fraudulent charges, you should take several extra steps to secure transactions over the phone:

While accepting credit cards over the phone is often convenient and sometimes necessary to keep customers happy, it does come with added risks. Still, if you take the proper steps, accepting payment by card over the phone can benefit your business. Just be sure to follow best practices at all times to avoid being the victim of fraudulent transactions.

FYI: If you’ve received fraudulent phone payments before, you should keep a list of the delivery addresses associated with disputes and chargebacks. Check the addresses for incoming orders against your list to avoid fraud.

Many businesses already accept credit cards through PayPal online and in-store. To accept credit card payments over the phone using PayPal, you’ll need to pay for a virtual terminal in addition to PayPal’s credit card fees. 

You can use PayPal’s virtual terminal on a mobile device or desktop as long as you maintain internet access. When a customer calls in to place an order, launch the virtual terminal on PayPal and key in the customer’s credit card information, billing address and shipping address. Once you’ve filled out all the customer’s information, you can complete the transaction and print a receipt, packing slip and shipping label.

PayPal’s virtual terminal costs $30 per month, with a transaction rate of 3.09% plus 49 cents per transaction for payments in U.S. dollars. The virtual terminal subscription includes PayPal Payments Pro, which essentially allows you to turn your website into an e-commerce site, including shopping cart integrations. Online transactions through PayPal Payments Pro cost 2.89% plus 49 cents.

When using Square, you have the option to manually key in a customer’s credit card information over the phone. First, download the Square Point of Sale app on an Android or iOS mobile device. When signing up, you can also elect to have a free magstripe card reader mailed to you, or you can purchase an EMV-compliant card reader.

Once your account is active, set up inventory and adjust pricing and tax settings accordingly, or manually enter the price of an item when a customer is ready to make a purchase. You can accept credit cards over the phone by keying in the customer’s card number, expiration date and CSV code. 

Manually keying in customers’ credit cards is significantly more expensive with Square, however. Swiped cards start at a flat rate of 2.6% plus 10 cents, while keyed-in cards cost 3.5% plus 15 cents per transaction. Read our in-depth review of Square’s credit card processing service for more information.

Tip: In addition to PayPal and Square, other virtual terminals will help you accept credit card payments over the phone. Learn more about top options in our review of Payline, our Payment Depot review and our Shopify Payments review.

In many cases, small businesses have no choice but to accept at least some credit cards over the phone. The modern customer seldom carries cash and, especially for delivery-based businesses, often expects to complete an order from the comfort of their own home. That means businesses are expected to accept payment over the phone, even if credit card processors charge more for them to do so.

Offering your customers the option to pay by card over the phone is good for business, but it also carries a significant risk of fraud. Implementing best practices and policies to ensure your business doesn’t unknowingly engage in fraudulent transactions is an absolute must when you begin accepting cards over the phone. Always take down the customer’s complete information, invest in a highly secure POS system and credit card reader, and always confirm the receipt of goods with the customer to establish a paper trail.

In many cases, small business owners are caught between customer demand and secure payment methods. In a perfect world, every transaction would be airtight. Unfortunately, customers expect your business to support their preferred payment method. To do so the right way, take the appropriate precautions and ensure your staff always adheres to the policies you’ve established.

Here’s a look at some top credit card processing virtual terminals for phone payments and their rates. 

Jennifer Dublino contributed to the writing and research in this article.