Card present vs. card not present rates: why keyed and online sales cost more

Card-present transactions, where the card is dipped, tapped or swiped at a terminal, usually cost less than card-not-present transactions such as online, phone or keyed-in sales. The reason is fraud risk: when the card isn’t physically there, the issuing bank charges higher interchange to cover the greater chance the sale is fraudulent.

Understanding card present vs. card not present rates helps you price remote sales, set up your equipment properly and avoid paying remote-sale rates on counter sales.

What counts as card present and card not present

How the card is taken	Usually treated as	Why
Chip inserted at a terminal	Card present	Chip creates a unique code for each sale
Tap with a card or phone wallet	Card present	Contactless uses chip-level security
Card swiped at a terminal	Card present	Card is there, but a swipe is less secure than chip
Typed into a website or shopping cart	Card not present	No way to read the physical card
Taken over the phone	Card not present	Card details read aloud and keyed
Keyed in at the counter	Often priced near card not present	Card data isn’t read from the card
Recurring or stored card billing	Card not present	Charged without the card in hand

The exact category depends on network rules, your business type and the data sent with the sale. The pattern above holds for most merchants.

Why remote sales cost more

Most of your processing cost is interchange, paid to the bank that issued the card. When a chip or contactless card is read at a terminal, the transaction carries strong proof that the real card was present. When card details are typed in, there is no such proof, so the risk of fraud and disputes rises. Interchange tables reflect that risk with higher rates for card-not-present categories.

The fraud risk also shifts responsibility. For counterfeit card fraud at a terminal, card-brand rules generally place liability on whichever party has the less secure technology. For card-not-present sales, merchants carry more of the dispute risk, which is another reason remote sales deserve extra care.

An example

Here is a hypothetical example with round numbers, for illustration only. Say a medical practice collects $30,000 a month from patients. If $20,000 is taken by chip or tap at the front desk and $10,000 by phone, the phone payments will usually carry noticeably higher interchange per dollar. Now suppose the front desk’s card reader breaks and staff key in every card for a month. Much of that $20,000 could price closer to the phone rate, and the practice would see its costs rise with no change in patients or sales.

The counter keying problem

One of the most common reasons for a jump in fees is keying in cards that could have been dipped or tapped. It happens when a reader is slow or broken, when staff are in a hurry, or when an old habit sticks. Each keyed sale can lose the card-present category. Our guide on why processing fees go up lists this among the usual causes.

• Replace or repair readers that fail to read chips or contactless cards.
• Train staff to dip or tap first and to key only as a last resort.
• Check your statement for keyed or card-not-present volume at a location that should be mostly in person.

Keeping card-not-present costs in check

Many businesses need remote payments: online stores, phone orders, invoices, patient balances and recurring billing. You can’t make those sales card present, but you can help each one qualify for the best category available to it:

1. Collect the billing ZIP code for address verification on keyed and online sales.
2. Collect the card security code, the three- or four-digit code on the card.
3. Use a payment gateway that passes complete data and supports fraud tools.
4. Settle batches daily, so sales don’t age into a higher category.
5. Send Level 2 or Level 3 data on business and purchasing cards when you sell to other businesses.
6. Use tokenization for stored cards and recurring billing, which reduces risk and the scope of your PCI requirements.

Card-brand rules and interchange categories change over time. Treat this as a general guide and check how your own transactions are categorized on your statement.

Reading the split on your statement

On Interchange-Plus pricing, you can usually see card-present and card-not-present categories as separate lines, with words like retail, card not present, keyed, ecommerce or similar in the names. On tiered pricing, card-not-present and keyed sales often land in mid-qualified or non-qualified buckets. On flat-rate plans, some providers charge one rate in person and a higher rate for keyed or online sales. Whatever your model, compare your in-person volume with the volume that priced as remote. If the second is bigger than it should be, start with the readers. Then look at how your staff handle phone orders and whether your online checkout is collecting the ZIP code and security code on every sale.

What PayZoom does

PayZoom sets up processing to fit the way you take cards, whether that’s a counter terminal, a POS, a payment gateway and virtual terminal or a shopping cart. On Interchange-Plus pricing, each sale passes through at its actual interchange, and our margin is a separate line, as low as 0.05% + $0.22 per transaction, depending on your setup. We don’t charge early termination fees or non-compliance fees. Send one statement for a free statement analysis and we’ll show you how much of your volume is pricing as card not present, and why.