A Quick Guide to Keyed Card Transactions

Credit and debit cards make it easy for customers to complete a purchase, whether in person or online. They’re incredibly popular. Statista reports that in 2021, the latest year for which full data is available, there were more than 180 credit card transactions per person in the US.

Card payment technology has grown at a rapid pace in recent years. Businesses now offer a wide range of options, such as contactless payment systems, EMV chip cards used for “dipping” style payments at a terminal, and more.

Swiping a credit or debit card is an older system to complete a card payment, but is still an option. There are also credit card transactions keyed manually into a point-of-sale system and, more commonly, by customers to complete a purchase online.

Keyed card transactions are time-consuming compared to other methods of card payments.  However, they remain a useful option when other, more efficient payment options experience technical difficulties or are unavailable.

Keep reading to learn more about keyed card transactions and how they can impact your business.

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What are Keyed Card Transactions?

Keyed credit card transactions involve entering the card details manually into a POS system or an online platform rather than swiping the card through a reader. This is typical in instances where the customer’s credit or debit card cannot be physically presented, such as with purchases made over the internet, via telephone, or by mail order. For example, during phone orders, when customers provide their payment information vocally, merchants process these payments using manual entry for keyed credit card transactions.

Merchants often opt for keyed in transactions if there are issues rendering a physical swipe impossible due to damaged magnetic stripes or chips on cards. This method of processing payments facilitates business continuity by allowing remote sales despite customers not being able to present their cards directly.

It’s important to note that while keyed-in transaction processes offer comparable protection against fraud and similar safeguards like other types of credit and debit card charges do—given that no physical interaction with the actual plastic occurs—these sorts of transactions carry more risk than those where cards are read directly by machines (card-present transactions).

To effectively navigate today’s varied landscape of financial exchange systems, understanding both how and why businesses use manually entered keyed-credit-card data as opposed to automated machine-read data from present-transactions remains essential.

Benefits of Keyed Card Transactions

Keyed transactions offer several benefits, particularly for businesses that rely on remote sales. These transactions enable companies to accept payments over the phone or through the mail, providing flexibility when other methods fail or are not available.

• Convenience: Keyed transactions allow businesses to continue processing payments even when a card’s magnetic stripe or chip is damaged.
• Increased Reach: They enable businesses to accept remote payments, expanding their customer base.
• Business Continuity: In scenarios where technical difficulties prevent card-present transactions, keyed transactions ensure that sales can still be completed.

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Drawbacks of Keyed Card Transactions

Despite their advantages, keyed transactions have several drawbacks that merchants must consider:

• Higher Processing Fees: Keyed transactions often come with elevated processing fees because of the increased risk of fraud. Payment processors charge more for these transactions to account for this risk.
• Increased Fraud Risk: The lack of physical card verification makes keyed transactions more susceptible to fraudulent activity. Fraudsters can exploit this by using stolen card information.
• Liability Concerns: In card-present situations, where the card cannot be swiped, tapped, or dipped, many financial institutions place the responsibility for preventing fraud on the merchant. This liability does not apply to approved online, phone, or mail orders, but it’s a significant concern for physical businesses.

How to Perform a Keyed Transaction

Conducting a keyed transaction requires careful attention to detail:

1. Verify the Card: Ensure the customer’s credit card is active and has not expired.
2. Manual Entry: Input the card number, expiration date, name on the card, and security code into the payment system.
3. Double-Check: Review all entered information for accuracy to avoid errors that could lead to disputes.
4. Process the Payment: Once all details are confirmed, proceed with processing the transaction.

Common Scenarios for Keyed Transactions

Keyed transactions are frequently used in various buying contexts:

• Online Shopping: Customers manually enter their card details during checkout.
• Phone Orders: Businesses take payment information over the phone for remote transactions.
• Mail Orders: Customers provide card information via mail when placing orders through catalogs or advertisements.

Risks Associated with Keyed Transactions

The primary risk associated with keyed transactions is fraud:

• Fraud Potential: Without physical card verification, these transactions are more vulnerable to fraud. Merchants are also at higher risk for chargebacks and other fraudulent activities.
• Human Error: The manual entry process increases the likelihood of mistakes, which can lead to disputes and financial losses.

Reducing Fraud in Keyed Transactions

Merchants can implement several strategies to mitigate the risks associated with keyed transactions:

• Fraud Detection Tools: Utilize advanced fraud detection systems to identify and prevent fraudulent transactions.
• Additional Verification: Request extra information from customers, such as billing zip codes, to enhance security.
• Employee Training: Educate staff on recognizing suspicious activities and processing keyed transactions accurately.

Comparing Keyed Transactions to Other Payment Methods

When compared to other payment methods, keyed transactions offer distinct advantages and disadvantages:

• Card-Present Transactions: These are generally more secure and come with lower processing fees.
• Mobile and Contactless Payments: Offer enhanced convenience and security, but may not be viable in all situations.
• Check Payments: Slower and less efficient than keyed transactions, especially for remote sales.

Best Practices for Merchants

To handle keyed transactions effectively, merchants should:

• Limit Usage: Reduce the number of keyed transactions to lower fraud risk and processing costs.
• Implement Security Measures: Require additional authentication, such as signatures, for keyed transactions.
• Choose the Right Payment Processor: Opt for a processor that supports keyed transactions and offers robust security protocols.

Understanding Credit Card Processing Fees for Keyed Transactions

Keyed transactions typically incur higher processing fees due to the increased risk of fraud. For instance, while swipe transactions might have fees around 2.6% plus $0.10, keyed transactions can cost about 3.5% plus $0.10.

Merchants should carefully review and compare the rates offered by different payment processors to find the most affordable option.

Choosing the Right Payment Processing Company

When selecting a payment processor, consider the following:

• Cost: Evaluate the fees associated with keyed transactions.
• Features: Ensure the processor supports various transaction modes and integrates with your existing systems.
• Security: Choose a processor that offers strong security measures to protect sensitive customer information.
• Customer Support: Opt for a processor with responsive and reliable customer service to quickly resolve any issues.

Optimizing Payments with Swipesum

When card-not-present payments and keyed transactions can be avoided, they should be. For businesses that rely on card-not-present transactions, the additional cost is often seen as an unavoidable part of operations. No matter what industry your company operates in or how it accepts card payments, Swipesum is here to help. Our industry knowledge and expertise helps us:

• Find the best possible combination of tech, tools, and providers for your unique business needs.
• Support and guide your business as it integrates those new systems into your current structure and tools.
• Take the lead in negotiations, helping you reduce costs. Even if your company has to pay more for card-not-present transactions, there are many other opportunities to negotiate fees down or eliminate them completely.
• Monitor the health of your accounts going forward.

Ready to transform your approach to card payments for the better? Schedule a free consultation today!