Credit Card on File Policy: Here’s What You Need to Know

Securely storing a customer’s credit card information can be a very smart decision for certain businesses. That’s true regardless of their size or industry.

Business models that rely on subscriptions or recurring charges are good candidates to keep customer credit cards on file. That’s true for companies ranging from large national wireless carriers to the smallest service providers and retailers. It applies to many businesses in between those extremes as well.

Subscription box services, gyms, even utility companies — the potential use cases are broad. If your business makes an agreement with customers for ongoing service or deliveries, recurring payments make sense.

Why waste valuable time and resources hunting down payments each month when the process can be automated?

Of course, credit card information is sensitive information. It’s governed by the Payment Card Industry Data Security Standards (PCI-DSS). Businesses that keep card information on file have to protect that data, the PCI Security Standards Council explains.

A variety of state and federal laws and regulations also influence how and when businesses can retain this data. Credit card payment information is sensitive and valuable to hackers and cybercriminals, after all.

Merchant account providers generally offer PCI-DSS compliance services. This is an added cost in the form of an additional merchant fee. However, it can also provide real value by supporting compliance in your business. On a practical level, strong compliance helps to avoid non-compliance fees.

Swipesum helps businesses just like yours by putting expert payments consultants and negotiators on your side. We can help you find the right approach to payment processing and avoid unnecessary costs. We’ll also provide helpful information on PCI compliance that supports a more secure business.

Ready to find opportunities for savings and optimize your payment processing workflow? Schedule a free consultation to learn more.

Want to learn more about credit card on file agreements and credit card on file policies for small businesses? Keep reading for a deeper dive into this important topic.

What is Credit Card on File (CCOF)?

Credit Card on File (CCOF) policies outline how a business securely stores a customer's payment information for future transactions. These policies are increasingly used by merchants across industries, from e-commerce to service-based businesses, where repeat customers or recurring transactions are common. CCOF allows businesses to store card information with the customer’s consent, enabling faster checkout, seamless billing, and enhanced customer convenience.

Key Components of Credit Card on File Policies

1. Customer Consent and Transparency
   CCOF policies start with explicit consent from the customer. Merchants must disclose to the customer that their card information will be stored, explain how it will be used, and outline the terms for recurring or future payments. Clear communication not only builds trust but also ensures compliance with industry regulations.
2. Data Security and Compliance
   Card data storage must comply with the Payment Card Industry Data Security Standard (PCI DSS). Merchants should ensure that their payment processors follow stringent security protocols, including encryption, tokenization, and access control, to protect stored data from breaches or unauthorized access.
3. Tokenization and Payment Security
   Tokenization is a process where sensitive card details are replaced with a unique identifier or “token.” This token can only be decrypted by the payment processor, adding an extra layer of security that helps mitigate the risks associated with storing customer card information.
4. Clear Billing Terms
   The billing terms under a CCOF policy should specify how frequently charges will occur, what they entail, and the process for updating or canceling stored information. This transparency can help minimize customer disputes and reduce chargeback risks.
5. Authorization and Verification Processes
   Periodic verification, such as sending a reminder before a charge or requiring re-authorization if a card expires, demonstrates that the merchant values security and adheres to best practices. Regular verifications can also minimize declines, improving the overall customer experience.
6. Policy for Card Updates and Customer Communication
   Merchants should also have a policy for updating expired or compromised card information and maintain open communication channels to assist customers in managing their payment information securely.
7. Customer Opt-Out and Data Removal
   Allowing customers the option to remove their card information gives them control over their stored data. Merchants should also be clear on how quickly the data will be removed and any steps the customer must take to complete the process.

Why Credit Card on File Policies Matter

Having a well-defined CCOF policy not only protects businesses legally but also builds customer confidence. As merchants, complying with industry standards, maintaining transparency, and prioritizing data security can help avoid disputes, streamline recurring billing, and ultimately enhance the customer relationship.

Understanding Credit Card on File Policies

Storing credit card payment details correctly, compliantly, and securely can help both businesses and customers.

On the business side, this decision makes it easier to capture payment for a recurring or regular service. If a customer agrees to recurring purchases, credit card on file transactions simplify collecting earned revenue.

Wireless network providers, streaming services, and gyms are three common examples. It may also be useful for retailers and similar merchants if customers regularly make purchases over long periods.

Your company won’t have to regularly request payment and the related card information for each billing cycle. Instead, it can simply charge the card on file across the length of the agreement or each time a customer makes a purchase.

For customers, keeping a card on file can offer convenience and ensure continuity of service. They don’t have to worry about remembering to pay their bill each month.

Why a Policy for Keeping Credit Cards on File is Important

Businesses can’t simply choose to keep customers’ credit card information on file because they feel like it. Having a legitimate business purpose to store the information is a good start. However, there are crucial considerations beyond that operational need.

Laws and regulations related to storing card information are especially complex. Industry standards and legislation both play important roles in detailing and limiting how such information should be stored.

Violating both industry regulations and actual laws can lead to negative consequences. Legal action, fines, penalties, and more may be on the table.

So, what should a credit card on file policy look like? What are credit card on file policy examples of best practices?

Aligning with PCI standards for data storage is a great place to start. These foundational needs, based on the overarching requirement to protect customer data, include:

• Ensuring payment applications and card terminals comply with applicable security standards.
• Using digital and physical security measures, like cryptography tools and locked server rooms, to make stored data more secure.
• Limiting access to sensitive credit card data to those who truly need to access and use it.
• Only storing such information as long as there is a legitimate business purpose behind it. Credit card data should be deleted once that purpose is no longer valid.
• Only storing the primary account number, cardholder name, service code, and expiration date. Do not store information such as the card security code or complete magnetic stripe or chip data.

Ensuring customer consent for card data storage is especially important for a credit card on file policy. Every business must receive active consent from each customer to store and use this information. As Bankrate explains in a consumer-focused article, businesses may violate a variety of laws and regulations by not receiving such permission.

It’s also a good idea to gain consent to store card information from a customer relationship perspective. Few people, if any at all, want businesses to store such sensitive data without their consent. A data breach or other issue could lead to especially serious reputational damage if customers find out details they never consented to share were stored and then stolen.

Even in the big picture, keeping credit cards on file is especially complex. That doesn’t mean businesses should avoid doing so, however. Building a strong card on file policy that includes data security and actively gaining consent from customers can certainly be worth the time and effort.

Finding a Secure, Effective, and Compliant Payments Solution

Swipesum is dedicated to finding the best possible payments solutions for businesses. Our industry knowledge, expertise, and proprietary tools are all focused on helping your enterprise.

We can take the lead in identifying the right tools and providers, negotiating lower fees, and delivering efficient and cost-effective payment processing solutions. We’ll offer support for PCI-DSS compliance throughout the process, too.

Ready to see how Swipesum can transform your company’s approach to payment processing? Schedule a free consultation today.