Card-Present vs. Card-Not-Present Transactions: What’s the Difference? 

TL:DR 

Card-Present vs. Card-Not-Present: What’s the Difference? 

When a customer pays your business, the transaction may seem pretty simple: they provide a card, the payment is approved, and the sale is complete. But behind the scenes, how that card information gets from the customer to your business matters. 

A customer tapping their card at your counter is different from someone entering their card information on your website. Taking a payment over the phone is different from sending a customer a payment link. And those differences can affect everything from processing costs to fraud risk and chargebacks. 

Card transactions generally fall into two categories: card-present and card-not-present transactions. Understanding the difference can help you make smarter decisions about how your business accepts payments and why certain transactions may cost more to process than others. 

What Is a Card-Present Transaction? 

A card-present transaction occurs when a customer makes a payment in person using their physical card or payment device. Think about paying at a restaurant, retail store, salon, or service counter. 

Card-present transactions can include: 

Despite the name, the physical card doesn’t necessarily have to be involved. A customer tapping their phone or another supported device at checkout can still be considered a card-present transaction because the payment credentials are being securely transmitted through a contactless, in-person payment method. 

These transactions generally carry lower risk because the payment is being authenticated through secure technology at the point of sale. 

What Is a Card-Not-Present Transaction? 

A card-not-present (CNP) transaction occurs when a payment is made without the customer’s physical card or payment device being presented to the business. 

This can include transactions made: 

For example, imagine you own an appliance repair company. After completing a service call, you email the customer an invoice with a link to pay online. The customer enters their card information from home later that evening. That’s a card-not-present transaction. 

Or maybe a customer calls your business and gives you their card information over the phone. You enter the information into a secure virtual terminal to complete the payment. That’s also card-not-present. 

The biggest distinction is that the card isn’t being tapped or inserted into a payment device in front of you. 

Why Do Card-Present and Card-Not-Present Transactions Have Different Costs? 

From the customer’s perspective, both transactions may feel almost identical. They provide payment information, the transaction is approved, and they’re done. 

From a payments perspective, however, there can be an important difference: risk. 

When a customer inserts or taps a card in person, payment technology can help verify that the card or payment credential is legitimate. With a card-not-present transaction, the business can’t physically verify that the person entering the information has the card in their possession. 

For example, someone making an online purchase could potentially be using stolen card information. 

That additional risk is one reason card-not-present transactions may have higher processing costs than comparable card-present transactions. 

However, how a payment is accepted is only one factor that can influence processing costs. Other factors can include: 

That’s why two $100 transactions don’t necessarily cost a business exactly the same amount to process. 

Does That Mean Businesses Should Avoid Card-Not-Present Payments? 

Not at all. Card-not-present payments can be incredibly useful, and for many businesses, they’re essential. 

The goal isn’t necessarily to choose the payment method with the lowest possible processing cost. It’s to choose the right payment method for the situation while understanding the potential costs and risks involved. 

Giving customers convenient ways to pay can also help businesses collect payments faster and create a better overall customer experience. 

What Are the Different Types of Card-Not-Present Payments? 

Card-not-present payments aren’t limited to online shopping. Businesses can accept CNP payments in several ways depending on how and where they interact with their customers. 

Online and ecommerce payments: Customers enter their card information through a website or online checkout page to complete a purchase. This can include traditional ecommerce purchases, online ordering, booking, and other web-based transactions. 

Virtual terminal payments: A virtual terminal allows a business to securely enter a customer’s payment information through a browser-based system rather than a physical card reader. This can be useful for payments taken over the phone, mail orders, invoices, or other situations where the customer isn’t physically present. 

Payment links and digital invoices: Businesses can send customers a secure payment link by text or email, allowing them to enter their own payment information and complete the transaction remotely. This can be especially convenient for service businesses, contractors, and other businesses that don’t always collect payment at a traditional checkout counter. 

Recurring and card-on-file payments: Businesses offering memberships, subscriptions, recurring services, or payment plans may securely store a customer’s payment credentials for future transactions. Because the card isn’t physically presented for those future payments, they are generally considered card-not-present transactions. 

Each of these options gives businesses more flexibility in how they get paid. However, because CNP transactions don’t involve a card being physically presented, businesses should use secure payment technology and follow applicable payment security requirements when accepting and storing payment information. 

How Can Businesses Reduce Card-Not-Present Risk? 

Businesses don’t have to give up the convenience of remote payments to help manage risk. There are several ways to create a more secure card-not-present payment process. 

First, use secure payment technology rather than collecting card information through unsecured channels. Avoid keeping card numbers in spreadsheets, notebooks, emails, or other places that aren’t designed to securely store payment data. 

Businesses can also use available fraud-prevention and verification tools. Depending on the payment solution and transaction type, these may include security codes, address verification, tokenization, and other fraud-management tools. 

Clear receipts, recognizable billing descriptors, accurate transaction records, and clearly communicated refund or cancellation policies can also help reduce confusion that may lead to disputes. 

Most importantly, businesses should understand the tools available through their payment provider and how to use them correctly. 

Should Businesses Accept Both Card-Present or Card-Not-Present Payments? 

For many businesses, the answer isn’t choosing between card-present or card-not-present payments. It’s being able to offer both.  

For example:  

Having multiple ways to accept payments gives businesses flexibility while allowing customers to pay in the way that’s most convenient for them. 

Wrapping Up 

How your business accepts payments can influence more than just the checkout experience. It can also affect processing costs, fraud risk, and how easily customers can pay you. 

The right approach will depend on your business, your customers, and where transactions typically take place. For many businesses, offering a mix of payment options can provide the flexibility to accept payments wherever and however customers prefer to pay. 

Understanding how different transaction types work can help you make more informed decisions about your payment setup while balancing convenience, security, and cost. 

The right payments partner will help you find payment solutions that make getting paid simpler, whether you’re accepting payments at the counter, online, over the phone, or on the go. 

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Frequently Asked Questions 

What is the difference between card-present and card-not-present transactions? 

A card-present transaction occurs when a customer makes a payment in person using their physical card or payment device. A card-not-present transaction occurs when the card or payment device isn’t physically presented to the business, such as when paying online, over the phone, or through a payment link. 

Why do card-not-present transactions typically cost more? 

Card-not-present transactions can carry greater fraud and chargeback risk because the business can’t physically verify that the person making the payment has the card in their possession. This additional risk is one reason CNP transactions may have higher processing costs, although other factors can also affect transaction pricing. 

Is a virtual terminal considered card-not-present? 

Yes. Payments entered through a virtual terminal are generally considered card-not-present because the customer’s physical card or payment device isn’t presented to the business. Virtual terminals are commonly used for payments taken over the phone or from remote customers. 

Are online payments considered card-not-present transactions? 

Yes. When a customer enters their card information through a website or online checkout page, the transaction is generally considered card-not-present because the physical card isn’t presented to the business. 

Are payment links and digital invoices card-not-present transactions? 

Generally, yes. When a customer receives a payment link or digital invoice and enters their card information remotely, the resulting payment is typically considered a card-not-present transaction. 

Should businesses accept both card-present and card-not-present payments? 

For many businesses, offering both can provide greater flexibility. Card-present payments can support in-person transactions, while card-not-present options can make it easier to accept payments online, over the phone, through invoices, or from customers who aren’t physically present.