Card-on-File – Top 5 Things Merchants Must Know

“Card-on-file” (CoF) refers to the practice of storing a customer’s payment details electronically for future or recurring payments. At a time of seamless checkouts and subscription-based services, this stored payment information can then be used for quick, easy, and seamless transactions for the customer and the company.

To store a customer’s payment details, the company needs the customer’s consent. However, in subscription business models, it is also in the customer’s best interests to have their payment details on file so that recurring payments are processed automatically. Businesses that offer card-on-file transactions must be PCI-compliant and store their clients’ data securely and responsibly.

1. Card-On-File Transactions Are Appealing to Customers

Storing credit card details on your website means that customers don’t need to enter these details every time they make a purchase. This enables one-click checkouts, making purchases faster and more convenient.

It’s easy for customers to save their payment information. Typically, they enter their card number, expiration date, and security code. They are then asked if they want to store the details for use at a later date.

2. Card-on-File Transactions Are Beneficial for Businesses

Businesses that use online payment processing to process card-on-file transactions will enjoy the following benefits:

• Storing payment credentials increases the likelihood of repeat business because the customer will remember that the payment process was quick and easy.
• Customers who have their card details on file are more likely to complete their transactions, reducing cart abandonment.
• An automated payment process helps to reduce manual-entry errors and subsequently lowers the risk of chargebacks resulting from merchant error.
• Modern CoF systems use tokenisation that replaces card numbers with “tokens.” If the merchant system is breached, the stolen information is useless.

3. Additional Use Cases for Card-on-File Transactions

As your business grows, your CoF needs may change or expand. These are some of the additional use cases for card-on-file transactions:

• Resubmission: If a transaction using a customer’s stored credit card details fails, the system can resubmit the card-on-file transaction automatically through the merchant’s payment gateway. The process may fail because the card has expired or because the customer has insufficient funds to cover the payment. A retailer who receives the notification that a payment has failed can make another attempt.
• Reauthorisation: Businesses using card-on-file payments can configure their settings to require reauthorisation for future online purchases. This makes the payment process more secure for your business.
• Recurring payments and subscriptions: A subscription business model is an excellent way to improve cash flow and ensure repeat business. The ability to store payment details electronically is a necessary prerequisite. When customers sign up for a subscription, their payment details are typically stored so that they don’t miss any payments. Recurring card-on-file transactions are also known as “merchant-initiated transactions” because they are initiated by the merchant rather than the customer.
• One-click transactions: Companies such as Amazon use one-click checkouts that allow customers to complete a transaction in a single click. This is convenient for the customer and also drastically reduces cart abandonment rates.
• AI-fraud detection: Modern tools allow card-on-file transactions to be monitored by AI-powered algorithms that detect suspicious activity, flagging fraudulent behaviour even before transactions are completed.

4. Merchants Must Ensure Secure Payment Credentials

PCI compliance is a non-negotiable aspect of card-on-file payments. Businesses that use them must process transactions through a PCI-compliant payment gateway and stay up to date with modern standards.

5. Reputable Payment Processing Companies Mitigate Risks

The biggest risk facing companies that use card-on-file transactions is a data breach that allows criminals to steal their customers’ data. A good payment processing company that offers merchant services will provide the necessary security to keep your stored data as safe as possible. Trusted providers reduce fraud and chargebacks while ensuring you handle consent properly.

Companies must also be diligent about securing their customers’ consent for card-on-file transactions. For example:

• Always get consent from the cardholder to store their payment information.
• Clearly state how and when customers’ stored payment credentials will be used.
• Notify the customer about any changes to the terms and conditions.
• Make it easy for customers to change or remove their stored card details from your system and to unsubscribe from subscription products or services at any time.

Best Practices for Secure Card-on-File Payments

Companies should implement all of the necessary protections for their customers’ card numbers, security codes, and billing addresses.

Best practices for data security include:

• Prioritise Tokenisation: Never store raw card data and use a gateway that provides secure tokens.
• Secure Socket Layer (SSL) certificate: This ensures data transmitted between a web server and a web browser stays private.
• Secure Access: Use Two-Factor Authentication (2FA) and limit access to customer card information to as few employees as possible.
• Ensure Updates and Monitoring: Updated software and security measures, such as AI-powered fraud prevention tools, protect sensitive information and prevent unauthorised access to customer data.

It is the merchant’s responsibility to guarantee that consumers’ data is kept safe and secure. Failure to do so will damage the company’s reputation and may lead to fines and/or legal problems.

Security and Compliance

Compliance is a legal requirement that will help your company protect its reputation and ensure quality service. Storing a customer’s card on file makes the merchant legally responsible for the card data. Tokenisation is often the preferred solution to these responsibilities. The following standards apply to merchants in Europe:

• PCI DSS 4.0.1: This is the global manual for card data safety and is mandatory since March 1st 2025.
• PSD2 and PSD3 (EU): These European regulations require Strong Customer Authentication (SCA) for electronic payments to reduce fraud.
• GDPR: European data protection and privacy rights require that personal data storage methods comply.

Card-on-File FAQ

1. What is the difference between a one-time payment and a card on file?A one-time payment requires that the customer enter card details for a single purchase. Card on file stores those card details (often via tokenisaton) for use in future transactions without requiring re-entry.
2. Is it safe to store credit card information?Yes. As long as the merchant is PCI-compliant and uses high security tools such as tokenisation and AI-fraud detection to protect the data.
3. Do I need a customer’s consent to store their card data?Yes. Explicit customer consent must be obtained before saving any personal information or payment credentials for future use.

Ensure Secure Card-On-File Payments

According to the European Central Bank, card payments accounted for 57 per cent of all non-cash payment transactions in the Euro area in the second half of 2024. Making the processing of card payments as easy as possible is beneficial to both businesses and customers.

Whether your business provides products or services that require recurring payments, or you want to make things easier for repeat customers, integrating a payment processing system that collects payments automatically could revolutionise your business.

If you decide to store customers’ payment details on your website, make sure that your website and payment gateway are PCI-compliant, use modern AI tools for security, and communicate clearly with your customers regarding the storage and use of their card details.

These best practices foster trust and will help to ensure that this payment method ends up being a huge net positive for your business.

Published: June 23, 2023
Last updated: February 2, 2026