Accepting Credit Cards by Phone

Merchant Warehouse |

November 23, 2010

Processing Credit Cards over the Phone

Different merchants do different kinds of business. Some have traditional retail stores that they operate that require the acceptance of credit cards. These merchants primarily use credit card terminals that process those cards over telephone lines. Others have a presence in the online (virtual) world, where customers use their PCs to choose and shop for the goods that the merchant has to offer. There, the merchant uses online payment gateways that, in concert with the merchant’s software, essentially act like traditional point of sale credit card terminals for credit card processing. Sometimes both types of businesses, as well as traveling sales companies or those doing low-volume business out of home offices, will need to accept and process credit cards over the telephone, either when they don’t have a credit card terminal or the payment gateway is temporarily not working.

Accepting credit cards by telephone is a very low-cost way to accept payments for businesses that are regularly “on the go.” It is also an affordable alternative for small business that can’t afford expensive credit card processing machinery and the requisite services that are often tied to the purchase or long-term lease of those devices. For businesses that are often on the move and require the use of a wireless credit card machine, one of the very best alternative solutions is to sign up for a merchant account that allows you to process credit card payments by telephone.

Straightforward Processing

Using a simple telephone allows merchants to enjoy the advantages of new payment processing technology without having to invest in dedicated point-of-sale terminals. Many merchant service providers allow merchants to authorize and electronically capture the financial details of a credit card sales transaction this way, in addition to other processing methods. And many of these telephone payment systems offer complete reporting capabilities and the full performance of an electronic payment system. As such, many are able to take advantage of the performance and accuracy of the exclusive point-of-sale processing network.

Accepting credit cards by telephone can save merchants time, money and energy, also enabling them to move from paper processing to the efficiencies of electronic technology. A merchant’s telephone has access to a range of features available on many dial terminals and can also be used as a full-featured back-up for other POS systems that are being operated already.

Since these credit card transactions are not hard copy-based, merchants benefit from reduced posting time and can greatly improve the processing cycle. In addition, mail and telephone order merchants can utilize the system’s security services to help reduce the risk of fraud and financial loss.

Convenient and Simple

In some cases, the end of day’s business transactions can be automatically settled for you without being prompted. All batch and settlement history can often be reviewed and accessed through operator assistance, on your monthly paper statement or online.

Rates and fees in general can be higher for the merchant with an account that accepts credit cards over the telephone. This is because of the risk that a merchant processor takes. When the customer and the credit card are not present at the time that a sales transaction is processed, credit card processors consider these transactions to be higher risk than other retail merchant account dealings. In all cases, it is difficult to determine if the actual owner of the credit card is the one making the purchase. The higher risk associated with the account is primarily the reason for higher rates and fees.

Unlike regular retail credit card transactions – with rates in three distinct categories: qualified, mid-qualified and non-qualified – telephone order and mail order transactions fall under just qualified and non-qualified. The qualified rate is what most transactions are processed under, provided the merchant batches the transaction within 24 hours. This is the lowest type of rate.

Non-qualified rates are those that apply to all corporate, government and reward cards that are charged regardless of batch processing time. It also applies to charges batched after 24 hours that would otherwise be qualified had they been batched sooner.

As a merchant who does substantial telephone business, if you have an account that gives you good rates for card-present transactions, it will typically penalize you for credit card not present sales transactions. However, as a merchant, you can get a merchant account that is designed for these card not present transactions that will provide you with substantially lower rates. Before selecting an account, you need to understand the type of transactions you use most. Also note that it is very important to immediately destroy credit card information provided in writing or over the phone, and to store electronically submitted information safely.

Don’t forget that the rate for each credit card transaction is determined by both the kind and brand of card used, the way it is processed and the time that it takes the merchant to batch the transactions for processing at the end of the day. It is important to know whether, as a merchant, you perform mostly card present or, rather, card not present transactions. If you decide to choose a processing plan that works mostly for retail transactions, it is best not to increase telephone sales as you will be charged a much higher rate. Ultimately, it is best to pick a plan that is most appropriate for your primary transaction type to save you money.