What Is a Virtual Terminal

A virtual terminal is a web-based application that allows businesses to accept and process credit card payments without needing a physical point-of-sale (POS) machine. Instead of swiping or inserting a card, merchants manually enter a customer's payment information—such as credit card number, expiration date, and billing address—directly into a secure online form. 

Virtual terminals are typically accessed through a computer, tablet, or smartphone with an internet connection, offering incredible flexibility for businesses that take orders over the phone, through email, or even by mail. 

They are especially popular among service-based businesses, remote vendors, freelance professionals, and organizations that operate outside of traditional retail environments. Most virtual terminal services include features like recurring billing options, invoicing capabilities, the ability to store customer information securely for future transactions (often using tokenization), and the generation of detailed transaction reports. 

Because they operate through a browser, virtual terminals usually require minimal setup—no special hardware beyond the device you already own—and are often integrated into a business’s existing payment gateway or merchant account.

How Does a Virtual Terminal Work

A virtual terminal works by turning any internet-connected device—like a computer, smartphone, or tablet—into a secure payment processing tool. Instead of using a physical card reader, the merchant manually enters the customer's credit or debit card details into a secure online form provided by their payment processor. Here's a step-by-step breakdown:

1. Merchant Login:
The business owner or employee logs into the virtual terminal via a secure web portal, typically provided by their payment processor or merchant account provider.

2. Customer Information Entry:
The merchant manually inputs the customer's payment information, including:

• Card number
• Expiration date
• CVV security code
• Billing address (if required for verification)

3. Transaction Submission:
Once the details are entered, the merchant clicks to submit the transaction. The virtual terminal securely sends the information to the payment processor.

4. Authorization:
The payment processor communicates with the customer’s bank or credit card network to authorize the transaction. This step checks if the card is valid and whether sufficient funds or credit are available.

5. Confirmation:
The merchant receives an instant confirmation if the payment is approved. If declined, an error message appears explaining why (e.g., insufficient funds, wrong card number).

6. Payment Settlement:
After approval, the funds are captured and will be transferred to the merchant’s bank account, usually within 1–2 business days, depending on the processor's policies.

7. Optional Features:
Some virtual terminals allow merchants to:

• Email receipts to customers
• Save customer profiles for faster future transactions
• Set up recurring payments
• Generate transaction reports for accounting and bookkeeping

During this entire process, the virtual terminal uses encryption and security protocols (like PCI DSS compliance) to protect sensitive information from fraud and data breaches. Additional tools like address verification (AVS) and fraud filters may be automatically applied.

Virtual Terminal vs Physical POS Terminal

When it comes to accepting payments, both virtual terminals and physical POS terminals offer secure solutions, but they serve different needs. 

A virtual terminal is a web-based tool that allows businesses to manually enter customer card details without needing physical card swiping equipment. It’s perfect for remote, phone, or online sales where the customer and card are not physically present. 

In contrast, a physical POS terminal is a hardware device used in face-to-face transactions, where the customer swipes, taps, or inserts their card on-site. Physical terminals are commonly found in retail stores, restaurants, and any business with a physical checkout counter. 

Virtual terminals are more flexible and require only an internet-connected device, while physical POS terminals usually need to be installed and maintained at a specific location. Security is critical for both, but virtual terminals focus heavily on encryption and PCI compliance to compensate for the higher fraud risks associated with card-not-present transactions.

Types of Businesses that Benefit from Using Virtual Terminals

Many different types of businesses can benefit from using a virtual terminal, especially those that handle remote transactions or work outside traditional storefronts. Here’s a structured look at the main categories:

1. Service-Based Businesses

• Consulting firms, law offices, accounting services, marketing agencies
• Use virtual terminals to securely collect payments over the phone, by email, or after providing services remotely.

2. Healthcare Providers

• Dentists, therapists, medical clinics, telehealth providers
• Accept payments from patients remotely after appointments, or bill for online consultations.

3. Freelancers and Independent Contractors

• Graphic designers, writers, web developers, coaches
• Invoice clients and collect payments without meeting in person, offering flexibility for global work.

4. Nonprofits and Charitable Organizations

• Fundraisers, donation campaigns, event organizers
• Use virtual terminals to process donations collected during phone drives, online events, or mailed pledges.

5. Hospitality and Event Services

• Boutique hotels, bed-and-breakfasts, event planners
• Accept deposits, reservation fees, and final payments remotely, making booking and billing more convenient for customers.

6. Home Service Providers

• Plumbers, electricians, landscapers, cleaning services
• Bill customers after completing services, without needing physical card readers at job sites.

Any business that operates remotely, accepts payments without direct customer interaction, or needs a flexible and secure payment method can significantly benefit from using a virtual terminal.