What Is Virtual Terminal Payment Processing?

Virtual terminal payment processing offers a centralised way to process debit and credit card payments anytime, anywhere. They function online, eliminating the need to purchase additional software and hardware to accept payments, even in a brick-and-mortar store.

If you regularly process mail orders and telephone orders, or simply want a backup in case your regular system fails, understanding how virtual terminal payments work and the additional features that they offer will help you decide whether this payment processing tool is right for you.

What Is a Virtual Terminal?

A virtual terminal is a payment processing terminal that operates online rather than via a physical point-of-sale system that’s hardwired to the landline telephone network.

To use a virtual terminal:

1. Sign in to your payment processing account.
2. Manually key in the customer’s credit card information or bank account details and the payment amount into the form.
3. Click on the payment button to process the transaction.

The terminal will then encrypt this information and send it through a secure global payment gateway to the card and banking networks for authorisation.

If desired, you can also connect a card reader to your computer, tablet, or mobile device so that customers can swipe, dip, or tap their cards. When the reader is used, you won’t need to enter the customer’s card details manually. This will then allow you to qualify for lower card-present transaction fees.

Other Capabilities of a Virtual Terminal

In addition to processing credit card transactions from your computer or mobile device, virtual terminals enable you to:

• Register payments by cash and cheque
• Process electronic bank transfers and other alternative payment methods
• Utilise CVV, AVS, and two-factor authentication to verify customers’ cards
• Generate text, e-mail, and print receipts
• Set up recurring payments from regular customers
• Issue refunds for items that have been returned
• Feed transaction data into your accounting software program
• View a given customer’s purchase history
• Generate sales reports
• Gather customer contact details for SMS and e-mail marketing (remember to give customers the choice to opt out)

Additional Competitive Features Include:

• Tokenisation: replaces sensitive card data with secure, random tokens to protect customer information during transactions.
  
• End-to-End Encryption (E2EE): encrypts payment data from the moment it’s entered until it reaches the payment processor, ensuring full protection throughout the payment flow.
• Level 2 and Level 3 Processing: enables detailed transaction data for B2B or government payments, helping businesses qualify for lower interchange rates and enhanced compliance.
• Fraud Management Tools: combine automated monitoring, AI-driven transaction scoring, and chargeback prevention systems to detect and stop fraudulent activity in real time.

How Much Does a Virtual Terminal Cost?

While you might pay a monthly fee for merchant services or a payment gateway plan, you typically won’t pay for the software itself, since it’s hosted online.

Some advanced features, such as tokenisation, recurring billing, and detailed reporting of multi-user access, might also bring about additional costs. Check exactly what is included in a “free” terminal, including any minimum payment volumes or other services.

Transaction Fees When Using a Virtual Terminal

Processing credit card and debit card payments through a virtual terminal typically comes with higher per-transaction fees than using a card reader. Keyed-in payments are considered card-not-present transactions (CNP transactions), which are less secure and present a higher level of risk.

For example, Stripe’s EU card-present transaction fees are 1.4% + €0.10, whereas their card-not-present transaction fees are 1.5% + €0.25. Cross-border transactions (cards issued outside the EEA), premium/rewards cards, and buy-now-pay-later transactions often have significantly higher fees. (Check country-specific pricing pages to get the latest rates.)

If you need to accept remote payments due to the nature of your work, the higher processing fees for CNP credit card processing may be worthwhile compared to waiting for a cheque in the mail or risking the loss of the sale.

The following are some prime use cases:

• Delivery and curbside pick-up businesses can use a virtual terminal to charge customers over the phone before the goods are dispatched—eliminating the risk of not being paid upon delivery.
• Automotive garages can charge clients over the phone during business hours, giving the customer the flexibility to pick up their vehicle in the evening after the garage’s administrative staff have gone home.
• Freelancers who work remotely can charge clients over the phone and receive payment in one or two days rather than waiting to receive a cheque.
• Door-to-door salespeople, multi-level-marketing consultants, and people who sell merchandise at conferences and events can accept payments then and there rather than risk losing the sale.

Takeaway: If you often charge via telephone, fax, or mail order, a virtual terminal will boost your sales compared to relying on paper cheques, and allow you to reduce delays. However, if you plan to use a virtual terminal as your regular point-of-sale system in a physical store, consider purchasing a card reader to connect to the virtual terminal. This allows you to take advantage of card-present rates and lower your processing costs.

Pros and Cons of Virtual Terminals

Like any technology or tool, virtual terminals have advantages and disadvantages, and will be more suitable for some merchants than others.

Advantages

• Virtual terminals have a low upfront cost.
• Using a cloud-based terminal to register all of your transactions centralises payment processing for a complete data set.
• You can accept credit and debit cards anywhere that you have an internet connection.
• You can process returns on the spot.
• You can set up recurring billing quickly and easily.
• You’ll save time by not having to manually enter transaction data into your accounting system.
• A virtual terminal can be paired with a card reader for in-person payments.
• Tokenisation and end-to-end encryption provide enhanced security.
• Built-in fraud management tools monitor transactions and manage risks.
• Level 2 and 3 processing support business transactions.

Cons

• A stable internet connection is required when using a virtual terminal.
• Card-not-present transactions come with higher fees.
• You’ll still need a cash register if you accept payments in cash or by cheque.
• A cloud-based system makes transaction data visible to hackers (although customers’ card details are generally tokenised).

To work around these limitations, have a manual backup system for payments, such as the systems we recommend in our article on how to handle a credit card processing outage. Regularly download transaction data onto your hard drive as a backup in case the internet is down.

Account Security Best Practices

Making sure that your payment system is safe and secure is crucial. The following payment security measures will not only keep your clients’ information safe, but also protect your business from data breaches and fraud:

• Use strong and unique passwords that you update regularly.
• Limit employee access to payment and checkout functions.
• Choose only PCI DSS-compliant providers.
• Tokenise card details and encrypt payment data (according to Visa, tokenisation reduces the rate of fraud by up to 60% compared to traditional card data usage).
• Enable multi-factor authentication.
• Monitor transactions for suspicious activity.

What to Look For When Choosing a Virtual Terminal Provider

When you’re searching for the best virtual terminal merchant account for your needs, look for a provider that:

• Is PCI-DSS compliant
• Securely encrypts transaction data using data protocols like SHA-256 encryption
• Tokenises card details before sending them through the payment gateway
• Offers fraud and chargeback prevention tools
• Supports a wide variety of payment methods
• Has a highly responsive customer service team
• Provides sales reports and financial analytics to help you grow your business

FAQ About Virtual Terminals

Q1: Are virtual terminals safe for my business?

Yes, virtual terminals are a safe option for your business if you choose a PCI DSS-compliant provider and utilise tokenisation, encryption, and fraud management tools.

Q2: Can I accept remote payments from customers?

Yes, virtual terminals are a great solution for online payments, mail, and phone orders.

Q3: Are virtual terminals suitable for small businesses or freelancers?

Yes, virtual terminals allow businesses of all sizes to accept payments quickly and efficiently.

Q4: Do card-not-present transactions cost more?

Yes, card-not-present transactions generally carry higher fees than card-present transactions.

Q5: What are Level 2 & 3 processing features?

Level 2 and Level 3 processing features allow businesses to include additional transaction details (tax, purchase order number, and itemised data) to qualify for lower interchange rates. These are primarily for business-to-business (B2B) or government transactions.

Increase Your Sales With Virtual Terminal Payment Processing

Virtual terminal payment processing is a flexible and cost-efficient solution for businesses of all sizes. It allows you to receive payments from anywhere in the world rapidly and securely.

Whether you use a virtual terminal as your main payment processing tool or have it as a backup in case your point-of-sale hardware system malfunctions, you should find that it’s easy to use, doesn’t add much (if anything) to your payment processing bill, and allows you to do everything you need to do.

If you need more information about virtual terminals and how they compare to other payment systems, talk with a few different merchant account providers and clients who have used these providers’ systems. This will give you a better idea about the pros and cons of virtual terminals and help you work out which system is best for you.

Published: March 23, 2023
Last updated: December 22, 2025