Ideal Cost Reacts: Business.com’s “How to Accept Credit Card Payments Over the Phone”
In this article, the editor does not disclose that the website receives indirect third-party compensation from third-party advertisers. The author does post an editor’s note promoting their own credit card processing relationships as well as a link to Business.com’s “recommended” picks for credit card processors.
Neither the original article nor the linked recommended picks page discloses Business.com’s lead generation services for their credit card processing affiliates. Other than the lack of disclosure, does this article get the content correct?
Methods of Card Acceptance by Phone
“Accepting credit cards over the phone is often important in boosting customer satisfaction. It offers your customers another way to pay that might be more convenient to them, helping you to drive sales. Luckily, there are several methods for accepting a customer’s credit card over the phone.
- Keying in card numbers on your credit card terminal: One of the most straightforward ways to accept a credit card over the phone is to simply ask your customer to read off the card number, expiration date, and CSV code while you type the information into your credit card terminal at the point of sale.
- Keying in card numbers on your mobile credit card processing application: Alternatively, if you use your phone and a mobile app to accept credit cards instead of a terminal, you can enter a customer’s credit card information into the mobile app provided by your credit card processor.
- Keying in card information using a virtual terminal: Finally, you can key in a customer’s card with a virtual terminal, which is essentially a web-based credit card processing application. Virtual terminals sometimes allow you to bring down your costs of accepting credit cards over the phone with what is known as Level 2 or Level 3 processing. By capturing additional information that helps verify the authenticity of the transaction, Level 2 and Level 3 processing reduce the rate the processor charges you for phone transactions. However, this type of deal typically comes with an additional monthly charge, so it is likely only useful for businesses that accept high-dollar transactions or experience a great deal of purchasing volume over the phone.”
Is the list of payment methods correct and comprehensive? Physical credit card terminals were the original method of receiving orders by phone, although they are quickening losing market share to other payment vehicles. Mobile applications for credit card processing accounts for some of the replacement of physical card terminals. Virtual terminals were initially introduced as the original convenient source for credit card payments by phone after 800 number touch-tone processing. There is an entire subsection of credit card processing clients evolving from the introduction of virtual terminals, known as mail order telephone order, or MOTO. Virtual terminals also serve as the most secure of the three listed options for recurring billing.
When describing the three different types of card acceptance by phone, the author describes some key differences. The information is mostly accurate, but surprisingly omits the need to request billing address or even billing zip code information. Requesting this customer information at the point of sale will help reduce credit card processing fees.
The author appears to have a bias against virtual terminals by recommending it only in cases of high-dollar transactions or significant purchasing volume. Many virtual terminals don’t require monthly fees, and even if they do, they are minimal. As long as the credit card processor isn’t requiring a separate merchant account for using a virtual terminal for occasional MOTO transactions, it is a perfectly viable solution.
Finally, the list is surprisingly missing one of the most common and increasingly popular payment methods, Point of Sale systems, also known as POS systems. POS systems are all-in-one payment terminals, cash registers, and inventory management systems typically accessed from several locations inside of a restaurant or retail environment.
Cost Associated with Accepting Credit Cards by Phone
“Most credit card processors charge 2% to 4% of a given transaction. With card-not-present transactions, that number is likely to be on the high end because of the increased risk of accepting payment without a physical credit card. In addition, it is common for credit card processors to tack on a per-transaction fee to the percentage rate for higher-risk transactions like payments over the phone.”
The transaction rate of 2-4% is mostly accurate, and physical card-present transactions are indeed less expensive for the business. The per-transaction fee claim is peculiar. Almost all credit card processors have a per-per transaction regardless of payment method. Such fees range from 10-30 cents per transaction for a variety of reasons, largely unrelated accepting cards in person rather than by phone or online. The only exception we can think of includes reseller aggregators such as Square Payments, which until recently had no transaction fee for swiped, chipped, or dipped transactions.
Pros and Cons of Accepting Credit Cards by Phone
“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, whether credit card processors charge more for the pleasure or not.
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 in 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.”
Customers indeed desire convenience, and sometimes that includes paying by phone. Our firm has seen many companies evolve from accepting most of their payments by phone to set up a secure online gateway for customers to pay online. Regardless, customers are basing their purchasing decisions on convenience. Your business should be ready to accept credit cards in a variety of ways to dissuade customers from shopping elsewhere.
While it is true that non-face-to-face payment methods carry some additional risk, by using a word like “significant,” the author is inflating the amount of the risk increase. The author is correct to detail having a paper trail for all purchases in the event of an eventual dispute or case of fraud.
For a non-expert, the author is correct on the most important principles of accepting cards by phone. However, there are some unforced errors. The most glaring issue remains the lack of advertiser disclosure, which forces us to penalize the piece by two letter grades.
Our final verdict for this piece is a D-.
Don’t Take On The Credit Card Processors By Yourself
Since 2009, IdealCost.com has helped hundreds of companies nationwide reduce their merchant account fees through identifying and fixing hidden profit, overcharges, fake fees, and billing errors. Clients have saved $300-$20,000 per month on their credit card processing fees without going through the hassle of changing their processing vendor, bank, or equipment. Switching credit card processors should be a last resort, only reserved for funding delays, poor customer service, or technical difficulties. Before you consider switching credit card processors, see if you qualify for IdealCost.com’s monthly savings program. Upload your most recent merchant statement for a free analysis. You’ll receive an estimate within 24 business hours.
If you are opening a new credit card processing account or switching credit card processors, feel free to contact us for a free consultation. IdealCost.com can help secure the best terms and fees based on your specific needs.