What Is a Card-on-File Transaction?

Card-on-file transactions let merchants charge customer credit cards for current and future purchases. Explore the benefits and find out how to get started.

Card-on-file transactions streamline the payment process for repeat transactions and recurring charges like subscriptions. This option appeals to customers who want their interactions with online brands to be as fast and easy as possible. 

In this guide, we provide the details you need to set up card-on-file transactions without putting sensitive customer payment data at risk.


What Is a Card-on-File Transaction?

Your customers can opt to securely save credit card details as their "card on file." When they make a new purchase or sign up for a recurring service such as a subscription, you can run a card on file transaction without having the physical plastic in hand. 

Customers authorize these purchases in advance for fast, convenient encounters. You can bill each month or as needed depending on the type of product or service you sell.

How Do Card-on-File Transactions Work?

The card-on-file transaction starts when you take the customer's credit card details. For the initial authorization, they can either create an account on your company website to store their payment information or swipe the physical card for an in-person transaction. Moving forward, your business can bill the card based on the agreed-upon arrangement. 

To save customer cards on file, you'll need to comply with Payment Card Industry Data Security Standards (PCI DSS)to keep their private information safe. 

Pay.com uses high-tech tokenization to swap out actual card numbers for encrypted codes called tokens. Even if someone successfully accesses customer data, they won't be able to commit fraud with stolen credit cards because they won't be able to decipher the token.

Either you or your customer can initiate a card-on-file transaction. For a customer-initiated transaction, you'll be able to authorize the payment with the chip data on the person's card or with the CVV code if they enter their credit card number online. 

Merchant-initiated transactions occur when you use the stored information to cover a customer purchase through an automated billing arrangement or recurring subscription.

The card-on-file authorization should include the following information:

  • Details about the purchase including the total amount and the products or services included
  • An abbreviated version of the person's credit card number (typically the last four numbers)
  • Your company's contact information including physical location if applicable
  • Details about how you'll use the stored card info
  • Instructions the customer can use to cancel the agreement
  • An expiration date for the authorization

Card-on-File Benefits

The main advantages of card-on-file transactions include:

  • High-level security with PCI DSS compliance, protecting both you and your customers from fraud and identity theft
  • Improved ability to manage your company's cash flow
  • Faster, more convenient transactions with options like single-click billing
  • The ability to cater to your customers' preferred ways to pay, offering them a better checkout experience that could encourage them to return
  • Support for recurring charges, subscriptions, installment plans, and past-due balances
  • Simple updates when customers need to change their card details
  • Expand the potential revenue through your business by creating new purchase opportunities with low barriers to customer conversion

Card-on-File Disadvantages

Security risks represent the primary concern for customers with card-on-file transactions. Without robust security measures, card numbers could be copied and stolen for fraud purposes. 

In addition, the large credit card networks have higher fees for card-on-file transactions than for other types of purchases. This option can become costly if your business model relies on running cards on file.

You may also experience transaction declines if the customer changes their credit card information. In this case, you'll need to reach out to continue the card-on-file agreement if the customer wants to do so. 

The Benefits of Working with Pay.com as your Payment Service Provider 

Pay.com provides a safe, easy way to offer card-on-file transactions. You can securely store tokenized customer payment details to set up subscriptions and other types of recurring payments

We comply with the highest level of PCI DSS, so you can pass peace of mind along to your audience. In fact, you can even customize your checkout page to add official security compliance badges. 

If you need to verify customer identity before moving forward with a card-on-file transaction, it's easy to do with Pay.com. We offer multi-factor authentication through 3D Secure 2.0 technology.

Click here to find out how you can get started with Pay.com.

The Bottom Line 

Card-on-file transactions can fit seamlessly into your business model whether you have a traditional retail store, service company, or ecommerce shop. They can improve your company's revenue and enhance the user experience, encouraging one-time customers to commit to repeat purchases. 

When you decide to offer this type of transaction, you need to shield stored credit card data from interception for fraudulent purposes. Pay.com provides the security measures you need through our affordable, flexible payment solutions. You can easily accept credit cards, debit cards, and a wide range of alternative payment methods.

Click here to get started now!


How can I store my customers' payment details for future use?

Pay.com provides a full-service payment infrastructure, including the ability to store customer credit card details for later purchases. We have the security to support PCI-compliant transactions, a necessity to prevent fraud and identity theft. You can easily manage customer subscriptions and recurring charges through your intuitive Pay Dashboard.

Create your Pay.com account now.

Can you charge a card on file without permission?

If your customer has authorized the card on file for future purchases, you can charge the card again without obtaining an additional authorization. However, you must abide by the terms of the agreement with your customer, such as providing a clear way to revoke authorization for card-on-file transactions.

How can I accept credit card payments on my website?

Pay.com allows you to accept credit cards as well as digital wallets, debit cards, and many other ways to pay. You can set up a secure checkout system on your website that connects directly with your Pay.com account. When you enroll, simply select the payment methods you plan to offer your customers and they'll appear in the checkout options for purchases.

Meet the author
Andrea Miller
Andrea Miller has been a writer and editor for more than two decades. Specializing in business and finance, she has written for some of the major websites in the financial sector. Outside of work, she spends most of her time with her family and enjoys hiking, yoga, and reading.
You Can Easily Save Your Customers’ Payment Information

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