Credit card processing is a fairly complex topic, particularly since there are a lot of different ways to take a customer’s credit card information.
You can process credit card transactions online via your ecommerce store, in person, and over the phone.
Even in person, there’s more than one way to take the card. A customer can swipe, tap, or dip their card. They can even use a mobile wallet stored in their smartwatch/phone. And, of course, a service provider or accounts payable representative can always manually key in a transaction—which is what we’ll focus on today.
Keyed-in transactions happen when you enter the credit card information manually into your credit card terminal or point-of-sale (POS) system. This is in contrast to swiped, dipped, or tapped methods, which can capture payment data when the card makes contact with the payment device.
How to run a keyed-in credit card transaction
Running keyed-in transactions involves a higher risk of human error and is subject to stricter interchange qualification requirements than swiped or dipped transactions. Exactly how the process goes will depend upon the particular software you are using. That said, the general steps are:
- First, your salesperson will usually take the customer’s credit card to read. If they don’t take the card, they’ll have to collect the card information from the customer, as is the case when payments are made over the phone.
- Next, they’ll select the manual option in your POS or payment processing software.
- From there, the software will give them space to physically type the card number, along with the expiration date, and frequently, the CVV security code. You will usually be prompted to enter the billing ZIP code and/or full billing address for address verification service (AVS). Including AVS data is mandatory to achieve the best possible interchange rate for a keyed CNP transaction.
- After that, the salesperson will have to move on to the next step as directed by the software. Often this step is running the transaction.
The payment system first sends the encrypted card information to the payment gateway/processor for authorization. Tokenization typically occurs after authorization, if the merchant chooses to store the card for future use (card-on-file), to protect the stored data. Once it’s authorized, the bank will disburse the funds to your merchant account, and you can conclude the transaction.
Why do you run keyed-in transactions?
Keyed transactions happen for all sorts of reasons, the most typical of which is that your customer’s card isn’t swiping, dipping, or tapping correctly, so manual entry is the remaining option.
This is especially common for customers with older or well-loved cards.
The other reason you may key in a card is because the transaction is classified as card-not-present (CNP), requiring manual entry via a virtual terminal or API. These scenarios include:
- When you have to take a sale over the phone. In this case, a customer will read you the card information that you then manually input.
- You have salespeople or field service technicians who are equipped with a terminal and key in card information in order to collect payment and complete the transaction on site as soon as service is done.
- You take written orders from customers and require they share their card information on the order.
- You send out paper invoices and attach a payment form that customers can fill out and send back to you. This is a common case with many medical bills.
The pros of keyed-in transactions
Keyed transactions can be really useful for merchants for two main reasons:
- They provide you with the means to collect payments in the event that methods like swiping are not an option. Overall, keyed-in payments can be part of a well-rounded system that gives you the flexibility to accept all forms of payments.
- They ensure transaction continuity and salvage the sale when the primary (chip/tap) method fails, preventing cart abandonment or lost revenue.
Ultimately, a keyed-in transaction enables you to provide excellent customer service, so it’s an important tool in your arsenal.
The cons of keyed transactions vs swipe transactions
That said, there are a number of downsides to consider when it comes to keying in a transaction.
Higher credit card processing costs
Keyed-in transactions are always processed at card-not-present (CNP) interchange rates, which are significantly higher than card-present rates. This is because CNP transactions carry a much greater risk of fraudulent use of stolen card data (not counterfeit cards, which are typically prevented by EMV).
A keyed-in transaction is often subject to interchange fees that are 0.30% to 1.00% higher than the rate for the same card when it is chipped or swiped.
Increased data security and liability risks
Manual transactions also increase your own liability in a few ways because it’s the least secure way to run a payment.
- If a fraudster uses a counterfeit EMV card and the merchant keys in the data instead of reading the chip, the merchant is liable for the resulting chargeback under the EMV liability shift rule. In this specific scenario, the liability shifts to the merchant because they failed to use the more secure chip technology when it was available.(As a note, if you aren’t using updated hardware that’s EMV-compliant, you’ll face this level of liability with all transactions.)
- Second, it’s very easy for one of your employees to steal card information when they have such prolonged access to the card data, especially if they’re writing the card information down. To mitigate the risk of employee theft when card data is verbally or physically collected, businesses should use terminals with PCI-validated Point-to-Point Encryption (P2PE). P2PE encrypts the card data instantly, making it unreadable even if the terminal is compromised.
- Third, in the case of written card information, even with the most trustworthy employees around, if you don’t dispose of it correctly, anyone else can still get their hands on your customer’s card information. This practice must be governed by a strict PCI DSS Data Destruction Policy, requiring all paper records with card numbers to be immediately shredded after use.
How to reduce the number of keyed-in transactions in your business
You likely won’t be able to rid your business of manually entered transactions entirely. Technology will fail at some point.
That said, there are a number of ways you can reduce the amount of keyed-in transactions that occur at your store.
Train staff to prioritize chip-read/tap over key-in. A recommended phrase is: “I apologize, the chip on this card isn’t reading properly. To ensure the lowest rate and security, can we try tapping the card or using a different form of payment?”
When a customer places an order over the phone, use a virtual terminal (VT) to manually enter the card data. If the goal is to avoid keying it yourself, use a solution like digital invoicing or pay-by-link to send the customer a secure, hosted billing page for them to enter the card information directly.
Regularly update all your credit card terminal hardware. If you’re finding that your customers’ cards frequently aren’t reading, the issue may well lie with your hardware rather than their cards.
Provide workers who go out in the field with a mobile POS, card reader, or payment app. While mobile card readers are quite cheap these days, if that’s out of budget you can use a solution like the Stax mobile app, which lets users securely capture payment data without the need for extra hardware.
How to lower your payment processing fees
If keeping your payment processing fees low is the ultimate goal, consider switching to Stax. Our subscription service plus 0% markup on direct-cost interchange fees includes keyed-in transactions—so you actually don’t pay more when you have to manually enter a transaction!
Don’t cripple your business with credit card processing fees. Leverage Stax’s subscription-based pricing and improve your bottom line. Contact us to learn more.
FAQs about keyed-in transactions
Q: What is a keyed-in transaction?
A keyed-in transaction occurs when you manually enter a customer’s credit card information into your credit card terminal or point-of-sale (POS) system. This is the alternative to swiped, dipped, or tapped methods, which capture payment data when the card makes contact with the payment device.
Q: How do you run a keyed-in credit card transaction?
To run a keyed-in transaction, you first collect the customer’s credit card information, then select the manual option in your POS or payment processing software. You enter the card number, expiration date, CVV security code, and possibly the zip code or billing address associated with the card. The salesperson then completes the transaction as directed by the software. The payment system then tokenizes the card information and forwards the data to the bank for verification and authorization.
Q: Why are keyed-in transactions necessary?
Keyed-in transactions are necessary when a customer’s card isn’t swiping, dipping, or tapping correctly and manual entry is the remaining option. This might occur with older or well-used cards. Keyed transactions also occur when you can’t swipe the card in real-time for technical or practical reasons, such as over-the-phone sales, field service transactions, written orders, or paper invoices.
Q: What are the pros of keyed-in transactions?
The advantages of keyed-in transactions include the ability to collect payments when other methods aren’t available and the convenience they offer to customers. They are part of a well-rounded system that accepts all forms of payments and can help provide excellent customer service.
Q: What are the cons of keyed transactions vs swipe transactions?
Keyed-in transactions typically involve higher credit card processing fees and increased data security and liability risks. They are processed as card-not-present transactions, which increase the risk for fraudulence, hence the higher fees. Moreover, liability shifts back onto the merchant for keyed transactions, meaning you’ll be responsible for all the fees for a chargeback.
Q: How can the number of keyed transactions be reduced in a business?
To reduce the number of keyed-in transactions, you can train staff to prioritize chip-in/tap payment options, request a secondary payment method first, or use a virtual terminal for phone orders. Regularly updating your credit card terminal hardware can also help, as can equipping field workers with mobile POS or payment apps.
Q: How can payment processing fees be lowered?
To lower your payment processing fees, consider switching to a service like Stax that offers subscription-based pricing and doesn’t charge more for manually entered transactions.
Q: What are the security measures taken during keyed-in transactions?
During a keyed-in transaction, the payment system tokenizes the card information, which means it converts sensitive data into non-sensitive data, known as tokens, to ensure data security. The system then sends this information to the bank for verification and authorization.
