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What is a Virtual Terminal?

Stephen Hart

Stephen Hart

Founder - Cardswitcher

Former - Chief Financial Officer @ Worldpay

The way we pay for goods and services has changed dramatically over the last few decades.

Good old fashioned cash is rapidly approaching death’s door in the UK. Those old £1 coins hidden down the side of the couch are now rendered useless, and it’s not too far-fetched to think that all physical cash will soon be worthless too.

In fact, it’s never been easier to spend. Most cards are already contactless, letting you make a purchase in seconds. Even that’s being replaced by simpler methods, like Apple/Google Pay.

So, in this fast-moving age of instant payments, it’s safe to say we’re all familiar with card terminals - but what on earth is a virtual terminal?

While you might not know the term, you’ve most definitely used one. Ever placed an order over the phone or through a mail order system? A virtual terminal is what allows the person on the other end to input your card details and address.

In this article we’re going to fill you in on exactly what a virtual terminal is and the advantages and disadvantages of having one.


So what is a virtual terminal?

A virtual terminal is a payment form that allows you to process card payments from your web browser. No card reader required!

It’s a little different from a payment gateway, however, in that the person entering the details will usually work for the company.


How do virtual terminals work?

Think of it as a ‘virtual’ method of credit card processing, using software instead of a physical credit card terminal. While your customers will obviously need to know their credit card information, they don’t need to have the physical Visa or Mastercard in their hands. This is what’s known as a cardholder or card not present transaction.

All you need is the customer’s card number, card expiration date, CVV number and billing address to process payments. The virtual terminal will use AVS security (Address Verification System) to check that the customer using the debit or credit card is the owner and is not conducting a fraudulent transaction.

For businesses that operate exclusively online, a virtual terminal is an absolute necessity. Even for merchants that only occasionally process online/phone payments, it might still be worth getting one.


What are the advantages/disadvantages of getting a virtual terminal?

Don’t get it twisted - a virtual terminal isn’t necessarily worth it for every business. If you process the vast majority of transactions in-store, or you don’t want to offer online payment, a virtual terminal probably isn’t worth it for you.

For instance, if you own a small business, like a cafe, you’re probably never going to need to accept virtual payments, as all of your customers will be paying in-store. While you’ll want a physical card terminal for debit card and credit card transactions, you don’t need a virtual terminal.

But different types of businesses have different needs. What if you run a business selling personalised pillows and you distribute them to customers via mail order? You don’t have a physical store, so you’re going to need a virtual terminal to let customers all around the world buy from you.

Here are the main advantages and disadvantages:


  • Quick payments. You can take payments really quickly without the customer needing to swing by.
  • More customers. It may open your business up to new customer demographics, such as those who do not have an internet connection and therefore cannot access your eCommerce site.
  • No hardware. For many businesses who only take transactions online, it saves them having to pay up for an expensive physical card machine.
  • Transactions can be made from anywhere and at any time (as long as you have an internet connection). Your customers can make a transaction when they’re in the back of a taxi, or back at home on their laptop. The easier it is for a customer to buy from you, the more likely they will!



  • Increased risk of fraud. It’s generally a riskier way to process transactions compared to debit or credit card payments made with the actual card. If someone’s paying on a physical terminal, the customer has to enter their personal PIN. On a virtual terminal, anyone could have found the customer’s card payment details and used them to bag themselves a new TV. This increases your chances of being issued chargebacks - meaning you could have your funds taken right back out of your bank account.
  • More effort. In-person, a customer can easily make an impulse purchase by merely tapping their contactless card, or smartphone, at the point of sale. Too easy. With virtual terminal payments, there’s a little bit more time involved, as your customer stumbles around the house looking for their wallet, trying to find the right card, remember their security questions… and so on. More time to change their mind!
  • Higher fees. The customer isn’t present, so there’s a higher risk of fraud which means higher fees for you.


woman handing over card to make payment

What should I look for in a Virtual Terminal?

The market is positively inundated with merchant terminal providers, so it can be quite the challenge to find the right one for your business. It can be difficult to research the necessary fees and contractual obligations as providers are not typically transparent about these.

You’ll need to make sure that the virtual terminal is PCI compliant. This means that customer’s data is stored securely and if there is a breach, then the blame shifts away from your business.


How much does a virtual terminal cost?

Many credit card processors, such as Square, offer a free virtual terminal as part of their payment solutions packages. Others, like PayPal, may charge a monthly fee if you want to make use of their virtual terminal. It’s therefore important that you consider your business needs and whether a virtual terminal will play a significant part in processing transactions.

Payments made using a virtual terminal will usually attract slightly higher fees as it will cost more to process and presents a much higher risk.



A virtual terminal is essential if you want to open up your business to the rest of the world. They allow you to accept payments from customers, no matter where they are.

If you operate a brick and mortar store, such as a restaurant, you might not need a virtual terminal. For the vast majority of businesses though, we’d recommend you look into a merchant account that offers a virtual terminal, as the more ways customers can pay, the better!

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Written by:
Stephen Hart

Stephen Hart

Founder - Cardswitcher

Former - Chief Financial Officer @ Worldpay

Stephen brings a wealth of experience honed through years in the financial sector, particularly in the card processing payments industry. His illustrious career spans key roles at PwC, Natwest, and the role of CFO at WorldPay, before going on to found card processing comparison site, CardSwitcher. He is passionate about helping growing businesses to understand the card processing landscape so they can make savvy financial decisions.