Does your business still rely solely on in-person payments? In today's increasingly digital world, you could miss valuable sales opportunities. Consider this: credit card use has increased by 78% from 2016 to 2024, while cash payments have declined by roughly 48%.

Accepting credit card payments over the phone is a simple yet powerful way to capture more sales, provide customer convenience, and even enable entirely virtual business models. But with the benefits come important considerations — from PCI compliance to fraud prevention to choosing the right payment provider.

In this comprehensive guide, we'll walk you through everything you need to know to start accepting payments by phone, including:

• The various methods and technologies available
• Step-by-step instructions to process a phone payment
• Essential security and compliance requirements
• Tips for delivering excellent customer service on phone orders
• Pricing models and how to choose a provider
• Alternatives and additional tools to streamline the process

Whether you're new to phone payments or looking to optimize your existing system, this article will provide the insights and actionable advice you need. Let's dive in.

3 Methods for Accepting Credit Card Payments by Phone

When it comes to taking card payments over the phone, merchants have a few options at their disposal. The right choice will depend on factors like your existing setup, sales volume, and tech-savvy. Let's break down the three most common methods.

1. Keying in Card Numbers on a Credit Card Terminal

The simplest way to accept a phone payment is to ask the customer to read their credit card number, expiration date, and CVV code aloud, which you then key into your physical credit card terminal.

This method requires no additional hardware or software, making it accessible for most merchants. However, it's critical that you never write down the customer's card information, as this could violate PCI compliance standards. Always enter the details directly into the terminal.

2. Using a Mobile Credit Card Processing App

If you want to take payments on the go or prefer not to be tethered to a physical terminal, mobile credit card processing apps can be a convenient solution. With this method, you simply enter the customer's card details into your smartphone or tablet app.

Look for an app that:

• Accepts all major credit cards
• Encrypts data for security
• Integrates with your POS or accounting software
• Offers competitive processing rates

Popular mobile payment providers include Square, PayPal Here, and Intuit GoPayment.

3. Virtual Terminals

Virtual terminals are another option for businesses processing a high volume of phone orders or looking for a more secure solution. These web-based platforms turn any computer into a secure credit card terminal.

Virtual terminals are hosted on a merchant service provider’s secure server, which can provide an extra layer of protection. Some virtual terminals also offer additional features like securely storing customer card information or processing recurring payments.

However, virtual terminals often come with monthly fees on top of processing costs, which may be cost-prohibitive for smaller merchants. Popular virtual terminal providers include Authorize.Net and PayPal Payflow Pro.

Processing a Phone Payment: A Step-by-Step Guide

So, you've chosen your phone payment method and are ready to accept orders. Let's walk through the process step-by-step to ensure a smooth, secure transaction every time.

Step 1: Collect the Necessary Credit Card Information

To process a card-not-present transaction, you'll need to gather the following details from your customer:

• Credit card number
• Expiration date
• CVV (3-digit security code on the back of the card)
• Cardholder name
• Billing ZIP code

Depending on your merchant account provider, you may also need additional information like the billing address, shipping address, email address, or the card issuer (Visa, Mastercard, etc.).

Step 2: Input the Card Details into Your System

Once you have the required information, enter it into your credit card terminal, mobile app, or virtual terminal. Take care to enter the numbers accurately to avoid declines or errors.

As a best practice, always repeat the card details back to the customer before submitting the transaction. This allows them to correct mistakes and helps prevent fraudulent charges.

Step 3: Process the Payment and Handle the Result

After inputting the card information, submit the transaction for processing. One of two things will happen:

1. The payment is approved. If the transaction is successful, your system will display a confirmation message and provide a unique authorization code. Make note of this code in case any issues arise later.
2. The payment is declined. A declined transaction could happen for several reasons, such as insufficient funds, an expired card, or a mismatch with the cardholder's information. If a payment is declined, ask the customer if they have another card they can use or if they need to contact their issuing bank for assistance.

Step 4: Send a Receipt and Complete the Order

Once the payment is approved, send a receipt to your customer documenting their purchase. Your credit and debit card payment processing system should allow you to email or text a receipt directly to the customer.

Be sure to thank the customer for their order and provide relevant details like an order number, expected shipping date, or tracking information. If you cannot fulfill the order as expected, promptly communicate any issues or delays to the customer.

Following these steps and communicating clearly with your customers can ensure a positive experience for everyone involved. Over time, processing phone payments will become second nature and a seamless part of your business operations.

Equipment and Technology for Phone Payments

To accept phone payments, merchants need the right mix of hardware and software to process transactions securely and efficiently. Let's take a closer look at the key components involved.

Credit Card Terminals

A credit card terminal is a device used to process card payments electronically. To accept phone payments with a terminal, a merchant must manually key in the customer's card information on the device's keypad.

Most modern terminals connect to the internet via Ethernet or Wi-Fi, enabling swift, secure transaction processing. When choosing a credit card terminal, look for features like:

• EMV compatibility for processing chip cards
• NFC technology for accepting digital wallets
• PCI PTS certification for data security
• Thermal printing for fast receipt generation

Mobile Card Readers and Apps

Mobile credit card readers are a compact, versatile solution for merchants on the go or those who want to accept payments via smartphone or tablet. These devices typically plug into a mobile device's audio jack or USB-C port, turning it into a card payment terminal.

To use a mobile card reader for phone payments, merchants will also need a compatible mobile app from their merchant account provider. The app will provide a secure interface for keying in card details and managing transactions.

Popular mobile payment solutions include:

• Square Reader and Point of Sale app
• PayPal Zettle and PayPal Here app
• SumUp Air and SumUp App

Virtual Terminals

A virtual terminal is a web-based application that allows merchants to process card transactions from any internet-connected computer. Essentially, it turns the merchant's computer into a secure payment terminal without additional hardware.

To accept a phone payment via a virtual terminal, the merchant simply logs into the web portal, enters the customer's card details, and submits the transaction for processing. Virtual terminals are a good fit for businesses that process a high volume of phone orders or want to avoid investing in physical equipment.

Setting up a virtual terminal is generally straightforward. Merchants will need to:

1. Sign up for an account with a payment processor that offers virtual terminal technology
2. Undergo a quick online application and approval process
3. Log in to the virtual terminal and start processing payments

Some of the top virtual terminal providers include:

• Authorize.Net
• PayPal Payments Pro
• Stripe Terminal
• Square Virtual Terminal

POS Systems with Phone Payment Capabilities

A POS (point-of-sale) system with built-in support for phone payments can be an efficient solution for brick-and-mortar businesses that want to streamline their payment processing. Modern POS systems often include a virtual terminal interface right on the device, allowing merchants to toggle between in-person and phone transactions easily.

When evaluating POS systems for phone payment acceptance, look for features like:

• Secure card storage for repeat customers
• Customizable transaction descriptors for easy recordkeeping
• Automatic receipts sent via email or SMS
• Integration with accounting or inventory management software

By investing in the right equipment and technology, merchants can create a phone payment acceptance process that is secure, efficient, and convenient for both the business and its customers.

Security and Compliance Considerations for Phone Payments

When accepting payments over the phone, security should be a top priority. Merchants must take steps to protect sensitive card data and comply with industry regulations.

PCI Compliance

The Payment Card Industry Data Security Standard (PCI DSS) is a set of requirements to ensure that all companies that process, store, or transmit credit card information maintain a secure environment. To be PCI compliant, business owners must adhere to strict guidelines around data protection, including:

• Encrypting transmission of cardholder data across open, public networks
• Restricting physical access to cardholder data
• Regularly testing security systems and processes
• Maintaining an information security policy

Failure to comply with PCI standards can result in hefty fines, legal liabilities, and even the loss of the ability to process card payments.

Tokenization and Encryption

Many payment processors offer tokenization and encryption services to further protect sensitive card data.

Tokenization replaces a customer's card number with a unique, randomly generated string of characters called a token. This token can be used for future transactions without exposing the real card number.

Encryption converts plain-text card data into an unreadable code, rendering it useless to would-be fraudsters. When a transaction is processed, the encrypted data is sent securely to the payment processor for decryption and authorization.

Secure Data Handling Practices

In addition to leveraging technology safeguards, merchants must train their staff on secure data handling practices. This includes:

• Never writing down or recording card numbers, CVV codes, or other sensitive data
• Properly destroying any physical documents containing card information
• Never sending card details like card number or billing address via unencrypted email or messaging apps
• Verifying a caller's identity before processing a payment

By prioritizing security and staying compliant with industry standards, merchants can protect their business and customers from data breaches and fraud.

Pricing Models and Fees for Phone Payments

As with any payment processing service, merchants can expect to pay fees for accepting credit cards over the phone. However, pricing structures and rates can vary widely between providers.

Common Pricing Models

The two most common pricing models for phone payments are flat-rate and interchange-plus.

Flat-rate pricing bundles all fees into a single, fixed percentage of the transaction amount. This model can be simpler to understand but may be more expensive for businesses with high sales volumes or low average tickets.

Interchange-plus pricing separates the interchange fees (charged by card networks) from the processor's markup. This model tends to be more transparent and can be more cost-effective for larger businesses.

Typical Fee Structures

In addition to transaction fees, merchants may encounter other costs associated with accepting phone payments, such as:

• Monthly or annual account fees
• PCI compliance fees
• Gateway or virtual terminal fees
• Chargeback fees
• Batch or settlement fees

It's essential to carefully review a provider's pricing disclosure and contract terms to understand the full cost of the service.

Rates for Card-Not-Present Transactions

Merchants should also be aware that card-not-present transactions, including phone payments, typically incur higher interchange rates than in-person sales. This is due to the increased risk of fraud associated with transactions without a physical card.

Rates for keyed-in transactions can vary depending on the card type, with rewards and business cards often commanding higher fees. On average, merchants can expect to pay between 2.5% and 3.5% per phone transaction.

Best Practices for Customer Service on Phone Orders

Accepting phone payments is not just about the technical process – it's also an opportunity to provide excellent customer service and build loyalty. Here are some best practices to keep in mind:

Communicate Clearly and Professionally

When taking orders over the phone, it's crucial to communicate clearly and professionally. Speak slowly and distinctly, and always repeat back the customer's information to ensure accuracy. Use a positive, friendly tone and avoid any language that could be perceived as pushy or aggressive.

Be Transparent About Fees and Policies

Be upfront with customers about additional fees, such as shipping or taxes, and ensure they understand your return and refund policies before processing their payment. This transparency can help build trust and prevent misunderstandings down the line.

Provide Order Confirmation and Tracking

After completing a phone order, always provide the customer with an order confirmation number and an estimated delivery date. Send a follow-up email or text message with tracking information so the customer can easily monitor their package's progress.

Handle Sensitive Data with Care

When asking customers to provide their credit card information over the phone, handle that data carefully. Never write down card numbers or read them aloud in a public space. If transferring a call, ensure the customer knows they will need to provide their payment details again to the next representative.

Resolve Issues Promptly and Professionally

Despite best efforts, issues like missing orders or incorrect charges can sometimes arise. Train your staff to handle these situations promptly and professionally, prioritizing customer satisfaction. Be proactive in communicating any delays or problems, and work quickly to find a resolution.

Merchants can build strong customer relationships and drive repeat business by prioritizing customer service on phone orders.

Alternatives and Additional Tools for Phone Payments

While traditional methods like keying in card numbers on a terminal or virtual terminal are still widely used, some alternative solutions can make phone payments even more seamless and secure.

Pay-by-Link

Pay-by-link solutions allow merchants to send customers a unique, secure payment link via email or text. The customer can then complete their payment on their own device without needing to read off their card details over the phone.

This approach can be more convenient for both parties and adds an extra layer of security, as the merchant never directly handles the customer's sensitive data.

Secure Customer Vaults

Secure customer vaults can be a valuable tool for businesses that process recurring phone payments or have many repeat customers. These vaults securely store customers' card information, allowing merchants to process future transactions without collecting the card details each time.

Customer vaults can streamline the checkout process and reduce friction for loyal customers. However, merchants must ensure their vaulting solution is PCI-compliant and follows all necessary security protocols.

IVR Payments

Interactive Voice Response (IVR) systems allow customers to make payments using an automated phone menu without speaking to a live representative. Customers simply dial a designated phone number, enter their credit or debit card details using their phone keypad, and receive an audio confirmation of the transaction.

IVR payments can be cost-effective for businesses with high call volumes or those looking to accept payments outside of regular business hours.

Implementing Phone Payments: Your Next Steps

If you're ready to start accepting credit card payments over the phone, here are your next steps:

1. Choose a payment processor that supports phone transactions and offers fair pricing and robust security features. Consider factors like PCI compliance, customer support, and integration with your existing systems.
2. Determine which equipment and technology you'll need, such as a virtual terminal or mobile card reader. Work with your payment processor to set up and test your chosen solution.
3. Train your staff on processing phone payments, handling sensitive card data, and providing excellent customer service. Develop scripts or templates to ensure a consistent, professional experience for every caller.
4. Educate your customers on your new payment options. Update your website, phone menu, and marketing materials to let them know they can now pay by phone.
5. Monitor your phone payment performance and customer feedback. Track key metrics like average order value, conversion rate, and customer satisfaction to identify areas for improvement.

By following these steps and partnering with a trusted payment processor, you can start leveraging the power of phone payments to boost sales, improve cash flow, and provide a more convenient experience for your customers.

Embracing the Power of Payment Flexibility With Zen Payments

In today's fast-paced, digital world, customers expect flexibility and convenience at every touchpoint – including when it comes time to pay. By accepting credit card payments over the phone, merchants can meet this demand and unlock many benefits, from increased sales to improved customer loyalty.

But with great opportunity comes great responsibility. Merchants must prioritize security and compliance, invest in the right tools and training, and continually seek ways to streamline and enhance the phone payment experience.

By embracing phone payments as part of a broader omnichannel strategy, businesses can position themselves for success in an increasingly competitive landscape. So don't wait—contact Zen Payments today to start exploring your phone payment options and take the first step toward a more flexible, customer-centric future.