A seed company opens a mail-order form in January with a card number written in the box at the bottom. The order will not ship until April, when the customer’s garden can be planted. The clerk keys the card into a browser window to confirm it is valid, and the charge is taken on the ship date under card-not-present rules.
Remote Payments in the Card Networks
A card-not-present transaction is any card payment authorised while the card and the cardholder are both away from the merchant. Online checkouts, phone orders, mail orders and recurring bills all fall into this group. A May 2025 briefing from the Federal Reserve Bank of Kansas City found that card-not-present debit transactions on the Visa and Mastercard networks rose in value from $360 billion in 2011 to $1.8 trillion in 2021.
Fraud rose alongside that volume. The same briefing cited an industry study of debit issuers in which the average card-not-present fraud rate climbed from 26.1 basis points in 2019 to 41.6 basis points in 2023. In plain terms, about $4.16 of every $1,000 in remote debit spending was fraudulent by the end of that period.
Mail and Telephone Order Flags
A virtual terminal tags each keyed sale with an indicator that tells the network how the order arrived. A single phone or mail order uses one value, and a recurring or instalment charge uses another. Issuers use the indicator when deciding to approve, and the networks use it to place the sale in the right pricing category. Catalog retailers, subscription publishers and some nonprofits receive card numbers on paper order forms and key them the same way. A recurring charge sent as a one-time phone order can be declined by an issuer that sees an unexpected repeat charge, and a phone order sent as an online sale claims an authentication step that never took place.
Authorisation Now, Capture at Shipment
Phone and mail orders are often taken before the goods are ready. Card network rules treat the ship date as the transaction date for card-not-present sales, so a merchant should authorise when the order is placed and collect the money only when the order ships. A virtual credit card terminal usually offers both modes, a sale that authorises and captures at once and an authorisation that staff capture later from the transaction list.
For most card-not-present sales the hold expires after about 7 to 10 days, depending on the network and the type of merchant. A furniture maker that quotes 6 weeks for delivery should plan to authorise again close to the ship date, since capturing an expired authorisation exposes the merchant to a chargeback if the card has since been closed.
Liability for Card-Absent Fraud
Fraud losses on a keyed phone order usually stay with the merchant. When the real cardholder reports the charge, the issuer refunds the cardholder and recovers the amount from the merchant’s account through the acquirer.
Online merchants can move some of that liability back to the issuer with 3-D Secure authentication, in which the cardholder confirms the purchase in a banking app. That step normally needs the cardholder at a screen, so it is rarely used for orders taken by phone, although the current version of the standard includes a decoupled method that can cover mail and telephone orders.
The disputes that follow have their own codes. Visa files them under reason code 10.4, fraud in a card-absent environment, and Mastercard uses code 4837, no cardholder authorisation. Both require the merchant to show that the real cardholder placed or benefited from the order.
Phone Order Records for Dispute Defense
The evidence for a phone order has to be created during the call and shortly after it. Useful records include the caller’s name and callback number, the time of the call, the order details read back to the caller, and an emailed confirmation sent to an address the customer has used before. For shipped goods, a delivery confirmation with a signature is the strongest single record in a fraud dispute.
Some businesses also record order calls. State laws on recording phone calls differ, and several states require every party to consent, so a recorded disclosure at the start of the call keeps the recording lawful and adds to the evidence.
Recurring and Instalment Charges by Phone
A customer who agrees by phone to monthly or instalment billing needs a written record of what was agreed. Card network rules for stored credentials require the merchant to capture the customer’s consent, the amount or how it is calculated, and the schedule, then send a confirmation. A cancellation method that works as easily as the sign-up did reduces disputes later in the plan.
Instalment plans taken over the phone are common in medical billing and home services. A 2022 KFF Health News investigation into health care debt found that about 50 million US adults were paying off medical bills through instalment plans with hospitals or other providers. Each payment after the first is charged without the customer on the line, so the original agreement is the only proof the merchant has that later charges were expected.
Refunds and Order Changes by Phone
A refund on a phone order goes back to the card used for the purchase. A caller who asks for the refund to go to a different card, or by wire transfer, fits a known fraud pattern, since the request moves money from a card that may be stolen to an account the caller controls. A terminal that links each refund to the original sale and only allows a credit to that card removes the option entirely. The Better Business Bureau warns sellers about a related trick, overpayment scams, in which a buyer pays too much and asks for the difference back by wire. If a customer calls to raise the quantity on an order that has been authorised but not captured, staff should authorise the new amount instead of capturing more than the original approval covered.
Card-Not-Present Sales in Short
A card-not-present transaction is a card payment approved on the details a customer supplies by phone, by mail or online. A virtual terminal turns those details into a properly flagged authorisation that can be captured when the goods ship, and it keeps the record the merchant will need if the cardholder later disputes the order.
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