Essential Virtual Terminal Credit Card Processing Information

We often speak to business owners who seem to confuse virtual terminals with payment gateways. We also still get information requests mostly from very small merchants that take payments by telephone or in the mail and still ask for a merchant account solution based on a physical processing terminal. They would manually enter payment information into the terminal, they tell us.

Our history clearly shows that we haven’t explained well enough what virtual terminals are and what exactly they do. This post is my attempt to make amends.

Virtual Terminal Basics

Virtual terminal is an online service that allows users to process credit and debit card payments by manually entering the payment information directly into their processor’s payment back end.

Once the credit card processing service is set up, the user receives a direct access to the processor’s back end. She can access it from anywhere web connection is present and use the service to not only accept bank card payments, but also to issue refunds, as well as simply request authorization approvals, without actually sending payments for settlement.

Virtual Terminal vs. Payment Gateways

Payment gateways link e-commerce websites with acquiring banks, allowing the two systems to talk to each other, communicating transaction data, authorization requests and any other information that needs to be exchanged. Gateways gather data that are already submitted by the customer and is organized within the website’s shopping cart. This is where the difference between the two services is to be found. While payment gateways solely facilitate the exchange of already provided transaction information, virtual terminals allow users to manually enter it into the acquirer’s system.

Web-based businesses usually get these two services as a package when setting up a credit card processing service. The reason is that each gateway includes a virtual terminal. The most prominent one is the Authorize.Net suite of payment gateway and virtual terminal.

Should You Be Using a Virtual Terminal?

Yes, you should and the reason is convenience. If you accept payments by telephone or in the mail, there just isn’t an easier way to process them. All you have to do is manually input the information into a payment form within a browser and hit submit.

Before virtual terminal first appeared as a viable merchant account option, card acceptors had two main options for processing payment information received by telephone or in the mail. They could either call it into the processor’s payment system or manually enter it using a physical credit card machine. I guess the reason some businesses still use one of these these options is habit. There is nothing wrong with them, it's just that they are inconvenient.