Card-Present vs. Card-Not-Present Transactions

Do you really know the difference between card-present and card-not-present transactions? Like, really know? They may seem like self-explanatory terms, but new payment technologies have muddled and confused what might otherwise seem straightforward.

Modern payments have created an environment in which the physical location of a card being used to make a purchase does not determine whether it’s a card-present or card-not-present transaction. The key difference between these two terms now lies with how the card’s information is processed.

Does knowing the difference between these two terms matter? The answer is a resounding yes!

Let’s face it, you’ve probably overlooked card transaction fees as a major business expense at some point or another. But these costs — along with card fraud and other potential risks — can cut into profit margins.

Understanding the difference between card-present and card-not-present, and when to use these types of transactions, can help minimize risks and maximize profit.


A card-present transaction occurs when electronic data is captured at the point-of-sale. This data is captured by swiping a mag-stripe card, dipping a chip card, or tapping a mobile device loaded with a digital wallet (such as using Apple Pay or Google Pay).

You can capture card-present transactions with:

  • Countertop card terminals
  • Point-of-sale systems
  • Contactless-enabled terminals
  • Mobile card readers (paired with smartphones or tablets)

The key to this type of transaction is that a card must interact in a way that its data is electronically scanned during the transaction, ultimately proving that the card was present during the purchase. The significance of this proof lies in the fact that simply knowing a card number was enough to make fraudulent charges online or by phone in the past.


Any type of payment other than those listed above is considered a card-not-present transaction, even if the card is physically present at the time of the transaction. 

Data can be captured via:

  • Online shopping cart
  • Electronic billing
  • Recurring or subscription billing
  • Payment apps that don’t use a card reader
  • Any situation in which card information is manually keyed in

Essentially, card-not-present transactions leave no way to definitively prove that the card was physically there and authorized to make that purchase. Fortunately, credit card companies have invested in technological improvements to prevent card-not-present fraud, such as requiring a CVV code (located only on the physical card) to verify a cardholder.

Risk and cost

What does the difference between card-present and card-not-present transactions actually mean for your business? Simply put, card-present transactions are generally less risky than card-not-present transactions, which also makes the former more cost-effective to process.

A 2018 study found that card-not-present fraud is a whopping 81% more likely to occur than card-present fraud. And your business could be liable for fraudulent charges and chargebacks, particularly if you haven’t switched over to EMV-compliant terminals yet.

Credit card companies take risk into account when determining which interchange category a transaction falls under, which affects the processing fees. Generally speaking, card-present transactions cost less to process than card-not-present transactions.

Your business can help keep processing costs down by utilizing card-present transactions whenever possible. For instance, you can use a card reader (countertop device, full POS system, or mobile reader) to capture data rather than keying in card information. As a bonus, this also promotes more secure transactions.

Is card-present or card-not-present better?

Though there are undeniable perks to making use of card-present transactions, it would be unwise to ignore card-not-present transactions. 

After all, eCommerce purchases are considered card-not-present and without expanding into digital markets, you’d be missing out on a large chunk of potential revenue. Even though the card-not-present fees are slightly higher, the additional options and flexibility helps offset the cost.

Your business might also make use of card-not-present to collect recurring payments for subscription services, memberships, or automated billing.

Both card-present and card-not-present transactions have a place in today’s payments landscape. Using a well-thought combination of the two helps reduce your processing costs, while improving the customer experience.

And of course, when customers are given more convenient payment options and the ability to pay anywhere and anytime, your business can benefit from shorter collection times and better cash flow.

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