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Card Present vs Card Not Present Rates

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Last editedApr 20222 min read

As a small business owner, you’ve likely come across the terms card-present (CP) and card-not-present (CNP). The difference in meaning between these two card payment methods may seem obvious. However, thanks to the rise of alternative payment channels, the terms actually signify a little more than simply whether a payment was physically present during a transaction or not. Indeed, they also have different implications when it comes to fraud risk and processing costs.

In this post, we’ll guide you through exactly what these two terms mean, as well as the impact both transaction types have on processing rates.

Card present vs card not present meaning

The differences between card-present and card-not-present transactions may seem, at a glance, fairly self-evident. And indeed, in basic terms, CP transactions occur in person while CNP do not. However, the key differences between the two relate to how the card is processed, and not merely the physical location of the card.

A transaction is typically thought of as card-present when it’s carried out by the following methods:

  • By swiping the card’s magnetic strip into a card-reading device

  • By inserting the card into a card-reading device

  • By tapping the card on a card reader for contactless payments

Meanwhile, a transaction is thought of as card-not-present when it’s made by one of these methods:

  • Entering card details onto an online payment page

  • Completing a payment form with card information and sending by mail

  • Giving card information over the phone to a business or individual for payment

A payment would still be considered card-not-present even if a customer is physically present and hands you their card for you to type in the information needed. For a payment to be card-present, a card-reader must be used. This is because it can capture electronic data which serves as proof that a card was used and authorized to make a payment.

Card-present vs card-not-present rates

Card-present vs card-not-present also impacts the process rate owed on transactions. In general, card-present-not-transaction fees are higher than card-present. However, the slightly elevated rate of card-not-present transaction fees is worth the additional convenience for clients who can pay wherever they like and are not obligated to come in-store to make a purchase. This convenience can obviously vastly increase sales, countering the extra cost of the transaction fees. When clients pay online, you can also benefit from the added security of letting them enter their card information into a secure portal, meaning you do not store any sensitive customer information in your business.

A way to lower the rates for CNP transactions is to take the customer’s address at payment. This allows the payment provider to instantly verify the client’s address against the card they’re using to pay. When an address is authenticated, the transaction is considered to pose less risks, therefore decreasing the processing fee for the transaction.

When it comes to choosing your payment processor, you will find they each come with different costs and bundles. If you anticipate taking mostly card-not present payments, make sure you opt for a provider that will offer you the best rates.

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