Credit Card on File Policy: Here’s What You Need to Know

Securely storing a customer’s credit card information can be a very smart decision for certain businesses, but can a merchant store this information without explicit permission? That’s true regardless of their size or industry.

Business models that rely on subscriptions or recurring charges are good candidates to keep customer credit cards on file. That’s true for companies ranging from large national wireless carriers to the smallest service providers and retailers. It applies to many businesses in between those extremes as well.

Subscription box services, gyms, even utility companies — the potential use cases are broad. If your business makes an agreement with customers for ongoing service or deliveries, recurring payments make sense.

Why waste valuable time and resources hunting down payments each month when the process can be automated?

Of course, credit card information is sensitive information. It’s governed by the Payment Card Industry Data Security Standards (PCI-DSS). Businesses that keep card information on file have to protect that data, the PCI Security Standards Council explains.

A variety of state and federal laws and regulations also influence how and when businesses can retain this data. Credit card payment information is sensitive and valuable to hackers and cybercriminals, after all.

Merchant account providers generally offer PCI-DSS compliance services. This is an added cost in the form of an additional merchant fee. However, it can also provide real value by supporting compliance in your business. On a practical level, strong compliance helps to avoid non-compliance fees.

Swipesum helps businesses just like yours by putting expert payments consultants and negotiators on your side. We can help you find the right approach to payment processing and avoid unnecessary costs. We’ll also provide helpful information on PCI compliance that supports a more secure business.

Ready to find opportunities for savings and optimize your payment processing workflow? Schedule a free consultation to learn more.

Want to learn more about credit card on file agreements and credit card on file policies for small businesses? Keep reading for a deeper dive into this important topic.

Understanding Credit Card on File Policies for Storing Credit Card Information

Storing credit card payment details correctly, compliantly, and securely can help both businesses and customers, but it is crucial to understand how to store credit card information properly.

On the business side, this decision makes it easier to capture payment for a recurring or regular service. If a customer agrees to recurring purchases, credit card on file transactions simplify collecting earned revenue.

Wireless network providers, streaming services, and gyms are three common examples. It may also be useful for retailers and similar merchants if customers regularly make purchases over long periods.

Your company won’t have to regularly request payment and the related card information for each billing cycle. Instead, it can simply charge the card on file across the length of the agreement or each time a customer makes a purchase.

For customers, keeping a card on file can offer convenience and ensure continuity of service. They don’t have to worry about remembering to pay their bill each month.

Why a Policy for Keeping Credit Cards on File is Important to Protect Customer Data

Businesses can’t simply choose to keep customers’ credit card information on file because they feel like it. Having a legitimate business purpose to store the information is a good start. However, there are crucial considerations beyond that operational need.

Laws and regulations related to storing card information are especially complex. Industry standards and legislation both play important roles in detailing and limiting how such information should be stored.

Violating both industry regulations and actual laws can lead to negative consequences. Legal action, fines, penalties, and more may be on the table. Violating these regulations can also expose businesses to financial transaction card fraud, which can have severe legal and financial repercussions.

So, what should a credit card on file policy look like? What are credit card on file policy examples of best practices?

Aligning with PCI standards for data storage is a great place to start. These foundational needs, based on the overarching requirement to protect customer data, include:

• Ensuring payment applications and card terminals comply with applicable security standards.
• Using digital and physical security measures, like cryptography tools and locked server rooms, to make stored data more secure.
• Limiting access to sensitive credit card data to those who truly need to access and use it.
• Only storing such information as long as there is a legitimate business purpose behind it. Credit card data should be deleted once that purpose is no longer valid.
• Only storing the primary account number, cardholder name, service code, and expiration date. Do not store information such as the card security code or complete magnetic stripe or chip data.

Ensuring customer consent for card data storage is especially important for a credit card on file policy. Every business must receive active consent from each customer to store and use this information. As Bankrate explains in a consumer-focused article, businesses may violate a variety of laws and regulations by not receiving such permission.

It’s also a good idea to gain consent to store card information from a customer relationship perspective. Few people, if any at all, want businesses to store such sensitive data without their consent. A data breach or other issue could lead to especially serious reputational damage if customers find out details they never consented to share were stored and then stolen.

Even in the big picture, keeping credit cards on file is especially complex. That doesn’t mean businesses should avoid doing so, however. Building a strong card on file policy that includes data security and actively gaining consent from customers can certainly be worth the time and effort.

Security and Compliance

Ensuring Data Protection and Legal Adherence

Storing credit card details requires a high level of security and compliance with industry regulations. The Payment Card Industry Security Standards Council (PCI SSC) sets the standards for protecting cardholder data and preventing unauthorized use. Merchants must adhere to these standards to ensure the secure storage and transmission of credit card information.

To ensure data protection and legal adherence, merchants should implement the following measures:

• Use Encryption: Encrypt sensitive information, such as primary account numbers and expiration dates, to protect it from unauthorized access.
• Implement Access Controls: Limit access to stored credit card information to only those employees who need it for business or legal purposes.
• Regular Monitoring and Testing: Continuously monitor and test systems for vulnerabilities and weaknesses to prevent potential breaches.
• Compliance with PCI DSS: Follow the guidelines set by the PCI Security Standards Council to ensure the secure storage and transmission of credit card information.

By implementing these measures, merchants can ensure the secure storage and transmission of credit card information and protect their customers’ sensitive data.

Storing Credit Card Details

Methods and Technologies for Secure Storage

There are several methods and technologies that merchants can use to securely store credit card details. These include:

• Tokenization: Replace sensitive credit card information with a unique token or identifier that cannot be used outside the specific transaction context.
• Encryption: Convert sensitive credit card information into an unreadable format that can only be decrypted with the correct key.
• Hashing: Permanently transform sensitive credit card information into a unique index data element, making it impossible to reverse-engineer the original data.
• Truncation: Remove all but the first six and last four digits of the primary account number (PAN), reducing the risk of exposure.

Merchants can also use secure storage solutions, such as:

• Secure Sockets Layer (SSL) Certificates: Encrypt data in transit to protect it from interception.
• Hardware Security Modules (HSMs): Securely store and manage encryption keys, ensuring that sensitive data remains protected.
• Cloud-Based Storage Solutions: Utilize cloud services that meet industry security standards to store credit card details securely.

By using these methods and technologies, merchants can securely store credit card details and protect their customers’ sensitive data.

Benefits and Risks

Evaluating the Pros and Cons of Credit Card on File Policies

Credit card on file policies can offer several benefits to merchants and customers, including:

• Convenience: Customers do not have to re-enter their credit card information for future purchases, making the checkout process faster and more convenient.
• Increased Sales: Merchants can offer recurring payments and subscription-based services, leading to more consistent revenue streams.
• Improved Customer Experience: Customers can enjoy a seamless and hassle-free payment experience, enhancing their overall satisfaction.

However, there are also risks associated with credit card on file policies, including:

• Data Breaches: Sensitive credit card information can be compromised if not stored securely, leading to potential financial and reputational damage.
• Credit Card Fraud: Merchants can be liable for fraudulent transactions if they do not implement adequate security measures to protect stored credit card information.
• Non-Compliance: Merchants can face fines and penalties if they do not comply with industry regulations, such as the PCI DSS.

To mitigate these risks, merchants should implement robust security measures, such as encryption and access controls, and ensure compliance with industry regulations. By evaluating the pros and cons of credit card on file policies, merchants can make informed decisions about how to store and manage credit card information.

Finding a Secure, Effective, and Compliant Payments Solution with PCI Security Standards Council Guidelines

Swipesum is dedicated to finding the best possible payments solutions for businesses. Our industry knowledge, expertise, and proprietary tools are all focused on helping your enterprise find the right service provider for managing payment transactions.

We can take the lead in identifying the right tools and providers, negotiating lower fees, and delivering efficient and cost-effective payment processing solutions. We’ll offer support for PCI-DSS compliance throughout the process, too.

Ready to see how Swipesum can transform your company’s approach to payment processing? Schedule a free consultation today.