Phone payments work by reading card details aloud, then processing them through your payment processor

When a customer calls to pay by phone, they read you their card number, expiration date, and CVV (the three-digit code on the back). You enter those details into your payment processor—either through a virtual terminal on your computer, a phone line connected to a payment system, or a mobile app. The processor checks the card with the bank, holds or takes the money, and sends you a confirmation. The whole transaction takes two to five minutes.

Phone payments are slower than online payments and carry more fraud risk because you're handling card details directly. But they work when a customer cannot or will not use a website, and they let you take payment from someone who calls in with an order or a bill.

You need three things to accept phone payments: a merchant account (a bank account that receives card payments), a payment processor (the company that handles the transaction), and a way to enter the card details securely. Many small businesses use the same processor for both online and phone payments.

Key Takeaways

  • You need a merchant account and a payment processor that supports phone payments; many processors offer both online and phone options in one account.
  • Never write down or store card numbers after the transaction is complete—delete them immediately or use a processor that handles storage for you.
  • Ask the customer for the card number, expiration date, and CVV only when you are ready to process the payment, and process it right away.
  • Phone payments cost more per transaction than online payments, usually 2.5% to 3.5% of the sale plus a per-transaction fee of 20 to 50 cents.
  • If a customer disputes the charge later, you will need to prove the customer authorized the payment—keep call recordings or written notes of the conversation.

Setting up a merchant account and payment processor for phone payments

A merchant account is a bank account that accepts card payments. You cannot deposit card payments into a regular checking account; the bank will freeze it. You open a merchant account through a payment processor, a bank, or a payment service provider like Square, Stripe, or PayPal.

Ask your processor whether they support phone payments (also called card-not-present or CNP transactions). Most do, but some online-only processors do not. If your processor supports it, they will give you a virtual terminal—a web page where you type in the card details—or a phone line you can call to process payments.

Fees for phone payments are higher than fees for online payments because the bank sees them as riskier. You will typically pay 2.5% to 3.5% of the sale amount plus a per-transaction fee of 20 to 50 cents. Some processors charge a flat monthly fee instead of per-transaction fees. Ask your processor for their phone payment rates before you sign up.

How to take a card payment over the phone safely

Call the customer back if they call you first. Do not take payment information on an incoming call unless you initiated the conversation. This protects you if the call is a scam or the customer later claims they did not authorize the payment.

When you are ready to process the payment, ask for the card number, expiration date, and CVV in that order. Read each number back to the customer to confirm. Do not ask for the cardholder's name or address unless your processor requires it for fraud checking.

Enter the details into your virtual terminal or payment system immediately. Do not write them down on paper or type them into an email or text message. If you must write them down temporarily, cross them out or shred the paper as soon as the transaction is complete.

Once the processor confirms the payment went through, tell the customer the transaction is complete and give them a confirmation number. Do not repeat the card number or CVV back to them. Delete any notes or recordings of the card details from your system.

Protecting yourself from fraud and chargebacks on phone payments

Phone payments have higher fraud risk than online payments because you cannot verify the customer's identity the way you can with a website login or email confirmation. The bank assumes the cardholder might dispute the charge later, claiming they never authorized it.

To protect yourself, keep a record that the customer authorized the payment. This can be a call recording (if your state allows one-party consent recording), a written note of the conversation with the date and time, or an email confirmation you send to the customer after the call. Your processor may also keep a record of the transaction.

If a customer later disputes the charge with their bank (called a chargeback), you will need to prove the customer authorized it. Send your processor the call recording, email, or written note. If you have no proof, the bank will refund the customer and you lose the money.

Some processors offer chargeback protection or fraud insurance for an extra monthly fee. This covers you if a customer disputes a legitimate transaction. The cost is usually $10 to $30 per month, depending on your sales volume.

When to use phone payments instead of other methods

Phone payments are useful when a customer cannot pay online—for example, an older customer who does not use the internet, or someone calling to place an order by phone. They are also the only option for customers who do not have email or a mailing address.

Phone payments are slower and more expensive than online payments, so do not use them as your main payment method. Offer them as a backup option for customers who cannot or will not use your website or mobile app.

If you take many phone payments, consider a phone-based payment system like a PIN pad connected to your phone line, or a mobile app that lets you swipe or tap cards. These are faster and more secure than typing card numbers by hand.

Keeping card details secure and compliant with payment rules

The payment card industry has strict rules about how you handle card details, called PCI DSS (Payment Card Industry Data Security Standard). The main rule is: never store a full card number after the transaction is complete.

If your processor stores card details for you (so the customer can pay again without reading the number twice), that is allowed—the processor is responsible for keeping it secure. But you should not write down or save card numbers yourself.

Use a processor that is PCI compliant, meaning they follow the security rules. Most major processors (Square, Stripe, PayPal, Authorize.net) are compliant. Ask your processor for their PCI compliance certificate before you sign up.

If you record phone calls to keep proof of authorization, check your state's recording laws. Some states require both people on the call to consent to recording; others require only one. Tell the customer you are recording before you take their payment information.

Troubleshooting common phone payment problems

If a payment is declined, ask the customer to check with their bank. The bank may have flagged the transaction as suspicious, or the card may be expired or over its limit. Try the payment again, or ask the customer for a different card.

If your virtual terminal is down or your internet is out, you cannot process phone payments. Have a backup plan: ask the customer for their card details and process the payment as soon as your system is back up, or ask them to pay online or by mail instead.

If a customer claims they never authorized a payment, check your call recording or written notes. If you have proof they authorized it, send it to your processor and they will defend you in the chargeback. If you have no proof, you will likely lose the money.

Frequently Asked Questions

Can I write down a customer's card number and process it later?

You can, but only if you process it the same day and delete the written number immediately after. Do not store card numbers on paper or in a file. If you take many phone payments, use your processor's virtual terminal to enter the number right away instead of writing it down.

What if a customer wants to pay by phone but I do not have a merchant account yet?

You cannot accept card payments without a merchant account. Open one with a payment processor like Square, Stripe, or PayPal. The process takes one to three business days, and you can start accepting phone payments as soon as your account is active.

Do I need to ask for the customer's name and address when they pay by phone?

Only if your processor requires it for fraud checking. Most processors only need the card number, expiration date, and CVV. Asking for extra information slows down the transaction and does not reduce fraud risk much.

What happens if I lose a dispute over a phone payment?

The bank refunds the customer and takes the money back from your merchant account. You lose both the payment and the product or service you provided. This is why keeping proof of authorization (a call recording or written note) is important.

Is it safer to ask customers to mail me a check instead of paying by phone?

Checks are slower but have lower fraud risk for you because the customer's bank verifies the check before it clears. Phone payments are faster but require you to keep proof of authorization. Use whichever method your customers prefer and your processor supports.