Guide to Manually Keyed Transactions Credit Card Processing

All credit card processing transactions are not created equally. The way a card gets processed can impact your credit card processing rates as well as your liability.

For example, let’s say a customer has a $100 transaction. Your cost to process that transaction will depend on whether the card is processed online, over the phone, or in person. Even the in-person rates will differ if the card is swiped, dipped, or tapped vs. keyed. 

Manually keyed transactions are almost always more expensive, which is why I created this manually keyed transactions credit card processing guide. Continue below to learn everything you need to know about using manually keyed credit card processing transactions. 

What is a Manually Keyed Transaction?

A keyed transaction occurs when the debit or credit card information is manually entered into a physical card terminal. 

For example, let’s say the card reader at your retail storefront doesn’t process a particular credit card. Maybe there’s a problem with the card itself, such as a damaged chip or magstripe. If the sales associate at the register takes that card and physically types the number, expiration date, security code, and other details into the terminal, it gets processed as a keyed credit card processing transaction. 

This scenario above is one of the most common reasons why keyed transactions occur. But it’s not the only one.

Some merchants write down credit card information on a piece of paper (not recommended) if they’re doing work in a customer’s house. Then the card information is manually entered into a credit card terminal when they get back to the office.

Other merchants accept credit card payments over the phone and process those payments by manually keying the transactions, instead of using a virtual terminal. 

How to Manually Key in Credit Card Payments

The exact process required for keyed in transactions will depending on your payment processing hardware. But at some point, you’re obviously going to manually enter the card details. But here’s a general overview of the manual entry steps to process payments:

1. Go to your card terminal with the customers card information (usually with a physical card present).
2. Manually enter card details.
3. Enter the expiration date and card verification code.
4. Enter the amount to be charged.
5. Click charge (or similar button on your hardware).

These are just the basics, but that’s how you manually enter credit card numbers on a machine. To reduce risk of fraudulent use, you should obtain additional information as well. I’m referring to things like the billing zip code, cardholder’s name, and more. You can also benefit from collecting a remote signature for phone charges. If the customer is available in person, make sure they sign the receipt.

This process should be the same regardless of the card being used (whether it’s Visa, Mastercard, Amex, Discover, Wells Fargo bank card, etc.).

Reasons to Use Keyed Transactions

When should you use manually keyed transactions? In a perfect world, it’s always best to avoid these. But the occasional manually keyed transaction won’t kill you.

The number one reason to use a manually keyed transaction is customer convenience. If a customer’s card isn’t being read properly though a dip, swipe, or tap method, you can still process credit card transaction by manually entering the card details through the physical terminal or virtual terminal also know as a payment gateway. 

As a merchant, you’ll still be able to get paid for the transaction. 

This method for processing payments is reliable. As long as the card being used is active, the credit card processing payment will process as a keyed transaction. Again, there are times when this is acceptable. If you’re a small business owner and a regular customer is having problems with their card, you could always just manually enter the card information. 

Common Scenarios When Merchants Need to Use Manually Keyed Transactions

• When you’re accepting payments over the phone
• When a field service worker or technician takes a mobile payment using equipment that requires manual entry
• If a customer writes down their credit card information on a form
• If credit card details are provided on a paper invoice that’s mailed or faxed
• If the credit card or POS hardware fails, and won’t read a swipe, dip, or tap

Disadvantages of Manually Keyed Credit Card Processing Transactions

When it comes to manually keyed transactions, the drawbacks significantly outweigh the positives. These are the two main reasons why you shouldn’t use manually keyed transactions—cost and liability. I’ll discuss each of these in greater detail below.

It’s More Expensive to Process Manually Keyed Credit Cards

The number one reason to avoid manually keyed transactions is the credit card processing costs. Regardless of your processor or the card being used, manually keyed transactions will typically cost more money.

Here’s why.

For starters, there’s no way for the credit card processor to verify that the card being used is actually present at the time of the sale. All manually keyed transactions are classified as “card-not-present” even if the card is physically there. This increases the chances of a fraudulent transaction.

As a result, processors and card networks charge more to cover the costs associated with credit card fraud and chargebacks. That increase is then passed along to the merchants processing the transaction.

Let’s take a look at Square, one of the most popular processors on the market. (**Note: We do not endorse Square. We’re simply relaying information we see in the payments market).

A swipe, dip, or tap transaction costs 2.6% + $0.10. Manually keyed transactions cost 3.5% + $0.15 per transaction. 

That’s a nearly 1% increase in your credit card processing fees. Once in a while is fine, but at scale, this is a ton of money. For every $1 million processed per year. An extra 0.9% would cost you $9,000 more in credit card processing fees. 

This is just one example. You can check the rates with your existing processor as well, and I’m sure you’ll find something similar—manually keyed transactions are more expensive. 

Merchants Have More Liability When Credit Card Numbers Are Manually Entered Into Machines

Most of you are probably familiar with the concept of EMV compliance. By updating your credit card hardware and software to accept EMV chip cards, it eases your liability for fraudulent transactions and chargebacks. 

But if you manually key a credit card number, the liability shifts back to the merchant if a chargeback is filed or the cardholder claims fraud. 

This means that you’ll be held responsible for the amount of the sale, the cost of goods sold, and any additional fees or penalties associated with the chargeback. 

One of the reasons why a card might not be readable though the swipe, dip, or tap is if it’s counterfeit. A fraudster can make a fake card using real information. So if you force the transaction by keying it manually, you’ll be liable for these costs.

How to Avoid Manually Keyed Transactions

These are our top tips and best practices for avoiding manually keyed transactions:

• Train your staff to ask for another form of payment from customers if the swipe, dip, or tap isn’t working.
• Only use manually entered transactions as a last resort.
• Use a virtual terminal for phone orders.
• Make sure your equipment is up to date. Sometimes the problem could be your terminal, not the customer’s card. 
• Use a mobile card reader for field service workers or collecting credit card payments on the go.

By following these tips, it will help you keep costs low and reduce your liability exposure to fraudulent transactions. 

Final Thoughts on Manually Keyed Card Payments

Should you manually enter payments? Avoid manually keyed transactions whenever possible. Doing this occasionally won’t kill your business, but it comes with a fair share of drawbacks, including higher fees. 

Manually keyed transactions are more expensive to process. Furthermore, merchants will be held responsible for any keyed transactions flagged as fraud or a chargeback. So there’s less risk if you can stay away from them altogether. 

Avoiding manually keyed transactions is not the only way to save money on credit card processing. Contact our team of experts here at Merchant Cost Consulting to find out how much money your business can save. I hope you found this article helpful!