May 2, 2021

Virtual Terminals

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A virtual terminal lets you process credit cards from anywhere without needing a physical machine. But it can be an expensive way to take payments.

Not all businesses have a physical store or operate online. But you still need a way to take credit card payments. This is when a virtual terminal comes in handy.

A virtual terminal is a simple and flexible solution to process payments quickly. It fills in gaps, so you never need to turn down customers just because you don't have a card machine or website.

So what exactly is a virtual terminal? How do you use it and how much does it cost? Read on for everything you need to know.

What Is a Virtual Terminal?

A virtual terminal is a web-based platform that allows you to manually enter credit card payments straight from your computer or smart device.

It lets you process card payments without the need for physical equipment. Essentially, it turns your web browser into a credit card processor. You only need a device and an internet connection.

Usually, a virtual terminal is used for phone orders. A customer tells you their card details over the phone and you manually enter them into the virtual terminal and submit payment.

It's similar to online checkout, but the difference is that you (the merchant) are entering the card details on behalf of your customer.

What's the difference between a virtual terminal and payment?
A payment gateway is required for online businesses. The customer enters their own credit card information and processes the sale themselves. With a virtual terminal, the merchant enters the card information for the customer. You don't need a payment gateway for virtual terminal transactions.

What Types of Businesses Use Virtual Terminals?

Virtual terminals are ideal for businesses that don't have physical card machines or online payment options. This usually applies to phone-in or mail-order businesses. But a lot of small service-based businesses will benefit as well.

Some types of businesses that may find a virtual terminal useful include:

  • Remote freelance professionals (copywriters, developers, graphic designers, etc.) who don't physically meet with clients
  • Those who travel to their clients and don't have processing equipment
  • Local services (lawyers, accountants, dentists, auto repair shops, etc.) who may not have online payment
  • Restaurants that want to settle the bill by phone first before delivering

Virtual Terminal Processing Rate

The average processing rate for virtual terminal transactions is 2.9% - 3.5%, plus an additional flat rate of $0.15 - $0.30.

Unfortunately, manually entered payments via virtual terminal have the highest processing rates. This is because there's a greater risk of fraud since the card or cardholder is usually not present for these payments.

Even if you enter a customer's card details in-store with the customer in front of you, that's still considered a card-not-present transaction. If you take cards in person, avoid manual entry as much as possible.

For example, Square's per-swipe rate is 2.6% + $0.10. But the manual entry processing rate is 3.5% + $0.15. That's a huge difference.

Pros of Using a Virtual Terminal

Virtual terminals can be a very convenient way to take payments. Here are some of the top benefits.

No equipment or setup required
Virtual terminals are completely web-based. All you need to do is log into your merchant account platform or app and enter the payment details from there. You don't need equipment or special software.

On-the-go processing
Since all you need is a device and internet connection, you can take payment from anywhere, anytime. This makes it ideal for those who travel to your customers to sell products or perform services.

Fast access to funds
When you submit a payment through a virtual terminal, the transaction goes through immediately. The funds can be settled into your account as early as the next day.

This is a lot faster than sending an invoice and waiting for the customer to pay. And in worst cases - even having to chase payment and risk not getting it at all.

Recurring billing
Most virtual terminals give you the option to store cards on file. This is great if you have customers on a subscription billing plan. You can schedule and automate future payments without having to contact your customers every time a bill is due.

Security
Virtual terminals are a secure way to take payment. But make sure that your provider complies with PCI standards. Also, verify that it offers end-to-end encryption and tokenization to protect your customers' card data.

Good backup solution
Even if you have processing equipment, a virtual terminal comes in handy. It's good backup if the card isn't swiping or your machine isn't working.

Cons of Using a Virtual Terminal

Though virtual terminals are easy to use, they're not ideal as your primary processing method if you're concerned with cost. Here are some downsides to be aware of.

Higher processing rates
As mentioned before, virtual terminal transactions incur the highest rates. So it's best to limit these kinds of transactions unless it's absolutely necessary. Keep on reading for some cheaper alternatives.

Greater risk of chargebacks
Card-not-present transactions have a higher risk of fraud since you can't verify the identity of the cardholder. Fraud disputes and chargebacks can cause a small business a lot of lost revenue and stress.

How to Get a Virtual Terminal

You can get a virtual terminal through a credit card processing provider. Just about all providers offer a virtual terminal. Some may offer it for free, while some have it as an optional feature with an extra monthly charge.

Without a merchant account
If you're a new or micro-business, you don't need to open a full-fledged merchant account. It's better to use a third-party payment service provider (PSP) like Square.

PSPs let you set up very quickly without an approval process. Once you sign up, you can begin taking payments through the virtual terminal right away.

A huge plus is that PSPs don't have any monthly processing minimums or monthly fees. It's ideal if you're just starting out or only process orders occasionally.

Read more: How to Process Credit Cards Without a Merchant Account

With a merchant account
For more established businesses processing at least $5,000 a month, we recommend going with a traditional merchant account provider.

Getting a merchant account will require underwriting to approve you as a client. But they offer lower processing rates, so you can save a lot more money.

Keep reading for the best virtual terminal providers.

How to Process Credit Cards Manually

Virtual terminals are super easy to use. You just need to log into your merchant account platform and find the manual entry feature.

Typically, at the very least, it will ask for:

  • Cardholder name
  • Card number
  • Card expiration date
  • CVV code
  • Amount to be charged
  • Customer email to send receipt

A lot of virtual terminals also have fraud management tools. You may be able to customize security settings to also require the customer's billing address. This is to verify that it's the same as the address on file of the credit card account.

Once you've filled everything out, just press submit. It'll then go through the process of requesting authorization from the customer's bank. If approved, the transaction will be completed immediately.

Alternatives to Virtual Terminals

Since virtual terminal processing rates are high, you're probably wondering if there are cheaper options. Here are a couple of alternatives.

Send an invoice
Instead of you entering the card details on behalf of your customers, send them an invoice instead.

Invoices are considered online orders and are charged at the online rate, which is typically lower than virtual terminal rates. But the downside is that you'll need to wait for the customer to make the payment.

Just about all providers offer an invoicing feature. You can create a custom invoice straight from the app or desktop platform. Once your customer receives it, they just need to follow the instructions to pay with their credit card.

Use a mobile card reader
If you travel to your clients, use a mobile card reader to accept payments on-the-go. It's small and plugs right into your smartphone. Then just complete the transaction through the app.

Swipe payments have the lowest processing rates, so this will help you save a lot of money.

If you're a new or micro-business, Square offers a free mobile reader and you only pay when you process something. There's no monthly fee. So there's no downside to keeping one around for when you need to take a payment on-the-go.

Best Virtual Terminal Providers

Here are some of our top recommended processing providers for different types of businesses.

Square: Best for New Businesses

Square is an ideal entry-level provider for just about all new businesses. It offers simple flat-rate pricing. The really good thing is that features come included. You get a virtual terminal, payment gateway, and even online store at no extra cost.

The Square Virtual Terminal has tons of functions:

  • Itemize sales
  • Split transactions between different payment methods
  • Email, text, or print receipts
  • Schedule recurring payments
  • Export transactions to QuickBooks

The processing rate for Square Virtual Terminal transactions is 3.5% + $0.15.

Square has no monthly fees and no contract. You can stop and go at any time, which makes it ideal for businesses with sporadic sales.

Payline Data: Best for Growing Small Businesses

Payline Data is a full-service merchant account provider. It offers interchange-plus pricing, which comes out to be cheaper than Square's flat rate.

Most interchange-plus providers only work with more established businesses. But the good thing about Payline is that it accepts smaller businesses processing only a couple thousand a month. So it's a good choice if you're still growing your sales.

Payline's virtual terminal allows you to schedule recurring billing and send electronic invoices. It costs an additional $10 a month. The processing rate is Interchange + 0.4% + $0.20.

Dharma: Best for Small to Mid-Size Businesses

For slightly more established businesses, Dharma offers lower processing rates compared to Payline. But they usually only accept businesses processing over $10,000 a month.

All accounts get the MX Merchant payment gateway, which also includes a free virtual terminal, mobile processing, customer database, and reporting tools.

Dharma's virtual terminal processing rate is Interchange + 0.2% + $0.10. In addition, there is a $20 monthly fee. Invoicing and recurring billing is another $10 per month.

Fattmerchant: Best for High-Volume Businesses

Fattmerchant is a subscription-based merchant account provider. You pay a monthly fee for the service, but each transaction only has a very small fixed-fee markup. This justifies the subscription fee if you have a lot of sales.

One big advantage of Fattmerchant is the powerful Omni payments platform. It includes the Omni Virtual Terminal where you can:

  • Schedule recurring billing
  • Send electronic invoices via email or text
  • See history of customer activities
  • See detailed sales reports and analyses
  • Sync with QuickBooks

Fattmerchant starts at $99 per month for processing and $49 per month for the Omni platform. The virtual terminal processing rate is Interchange + $0.15.

Bottom Line

A virtual terminal is great if you don't have equipment with you or online payment options. Basically, if you don't have a way to accept cards, a virtual terminal will come to the rescue.

However, be aware that the processing rate for manual keyed-in entries is the highest. The fee can really eat into your profits. So you may not want to use it as your main processing method (unless you really are primarily a phone order business).

If you have a physical location for your business, then it's best to invest in a credit card machine (or even a mobile reader). If you offer services remotely, consider whether sending invoices may be better instead.

Anna G is a contributing writer at CreditDonkey, a credit card processing comparison and reviews website. Write to Anna G at feedback@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.


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