How Telephone Credit Card Processing Works

Although many people are very used to using their credit card to pay for things, and pay our bills, on-line these days there are still instances when things have to be paid for by credit card over the telephone. A lot of the time this no longer even involves speaking with an actual human being, the process is entirely automated. But as you listen to robotic voice asking you to press 1 for yes and 2 for no did you ever wonder just how telephone credit card processing works? Or how your payment is processed when a merchant uses a telephone based credit card system? Here is a brief guide:

Automated Telephone Credit Card Processing

These days you can pay most of your bills with your credit card or debit card just by heading on-line or by picking up the telephone. The actual processing system is usually completed while a caller is on the phone and only takes a few minutes. During the course of the average credit card telephone bill payment things go a little like this:

  • Caller is prompted to identify themselves. This is usually achieved by entering an account or invoice number that is specific to them.
  • The system, which can either be one designed by the company itself if it is a larger business like your electric company or in the case of a smaller company a service provided by a third party company, then tries to match the identification conformational with an account.
  • Once the account is verified and the amount of the payment is decided a caller is prompted to enter their credit (or debit) card information. This will always include the credit card number and expiration date but as an extra security measure many companies have a telephone credit card processing system that will also ask for the CSV code on the caller’s card. A CSV code is a 3 digit number code located on the back of Visa and MasterCards next to the signature line, while on an American Express card it is a 4 digit code located on the front. You may also be asked for the billing zip code associated with the card.
  • Once the system has all of the information it requires it contacts the issuing bank to verify the details are correct and that there are sufficient funds available for the transaction to go ahead. If everything is good the caller is told that their payment is being processed.
  • The funds are then placed into the company’s merchant account and will then be released to their usual bank within a day or so, or on a schedule the company chooses to set.

Often when paying by credit card on the telephone the caller is charged a fee, even if they are not charged a fee to pay on-line (if that option is available to them) This is usually in order for the merchant to offset some of the fees they are charged by the processing company that do tend to be higher than those charged by Internet payment gateways.

How Secure Are Telephone Credit Card Payments?

Telephone credit card payments via an automated system are designed to be as secure as on-line credit card payments. When the credit card information is sent to the credit cards issuing bank it is encrypted in the same way and the whole transaction takes just a few seconds.

The issue of human operators taking credit card information over the phone is a little stickier. In theory the person on the other end of the line will indeed have all the information they would need to steal your identity right at their fingertips. And while you would certainly hope they would not do so it is a possibility that will occur to many a caller, which is why even small companies often prefer to avoid such a situation altogether by using an automated payment systems.

How Offline Merchants Use Telephone Credit Card Processing

You have probably been in a great many smaller stores, restaurants and other places of business where merchants can accept your credit card using a small machine that is hooked to a telephone line. This has for a number of years now been an affordable way for small businesses to accept credit and debit cards which in this day and age is almost essential. The actual acceptance process works in the same way as the automated telephone credit card processing described above ans is just as quick and secure.

The one thing that some small merchants dislike about this traditional telephone credit card processing system is that not only are they charged fees on every transaction by their chosen credit card processing company but they also have to buy or rent the credit card machine as well. Most businesses choose to rent their credit card processing machine as each is tied to a specific provider and at a cost of $500 and up it is an expensive piece of equipment to replace if you need to change credit card processing companies.

This is all changing though in the era of the smart-phone. A number of companies are now offering a small device that attaches to the top of a smart phone that turns it into a credit card processing machine. These companies do still charge fees for each transaction but the hardware is free. This opens up a whole new world for small business owners as now they can take credit card payments at an outdoor flea market, on the road, wherever they (and their customers) might be.