QuickBooks Merchant Services: Keyed vs. Swiped: What's the difference?

Choosing how to process credit card payments in QuickBooks Merchant Services boils down to one simple question: is the credit card physically in front of you? If yes, you'll use a swiped transaction, which offers lower fees and better security. If not, you'll use a keyed transaction, which provides the flexibility to accept payments remotely but at a higher cost due to increased risk.

What is a Keyed Payment?

A "keyed" payment, also known as a card-not-present (CNP) transaction, is any payment where you manually type the customer's credit card information into a terminal, virtual terminal, or software interface. This method is used when the customer and their physical card are not present, such as when taking payment over the phone, by mail, or through a submitted form.

In the QuickBooks ecosystem, you would perform a keyed entry directly within the QuickBooks Desktop or Online software, or through the mobile app, by typing in the card number, expiration date, CVV code, and billing zip code. Because the physical card and its security features (like the EMV chip) cannot be verified, card issuers and processors consider these transactions to have a higher risk of fraud, which results in higher processing fees.

What is a Swiped Payment?

A "swiped" payment is a card-present (CP) transaction where a customer's credit card is physically processed using a hardware device connected to your point-of-sale (POS) system or mobile device. The term originated from swiping the card's magnetic stripe, but today it broadly includes inserting an EMV chip card or tapping a contactless card or digital wallet (like Apple Pay).

To process a swiped transaction with QuickBooks, you need a compatible card reader. When the card is swiped, inserted, or tapped, the encrypted data is sent directly from the card to the processor. This physical verification dramatically reduces the risk of fraud, so processors reward merchants with significantly lower transaction rates compared to keyed payments.

Comparing Keyed vs. Swiped Payments

While both methods result in a successful payment, their underlying mechanics, costs, and security profiles are fundamentally different. Understanding these differences allows you to optimize your payment processing strategy to save money and protect your business.

Feature

Keyed Payments

Swiped Payments

Transaction Method

Manual data entry of card details into a virtual terminal or form.

Physical card processed via stripe, EMV chip, or contactless tap.

Common Use Cases

Phone orders, mail orders, accepting payments for invoiced services.

In-person retail, mobile point-of-sale, service calls at a client's site.

Typical Fees

Higher (e.g., typically 2.9% + 30¢) due to increased fraud risk.

Lower (e.g., typically 1.6% - 2.7% + 10-30¢) due to lower fraud risk.

Hardware Required

None. Can be done on any computer or mobile device with QuickBooks.

A compatible card reader (magnetic stripe, EMV, contactless).

Key Advantage

Flexibility to accept payment from anywhere, anytime, without a card reader.

Lower cost, enhanced security, and faster checkout experience.

Primary Disadvantage

Higher transaction costs and increased exposure to fraud and chargebacks.

Requires a hardware investment and can only be done when the card is present.

Pricing and Transaction Fees

The most significant difference between keyed and swiped payments is the cost. Card processors price transactions based on an assessment of risk. A card-present (swiped) transaction is considered low-risk because the EMV chip creates a unique transaction code, and the business can visually verify that the cardholder is present. In contrast, a card-not-present (keyed) transaction is high-risk. There's no way to confirm that the person providing the information is the legitimate cardholder, making it a common method for fraudulent activities.

• Typical Keyed Rate in QuickBooks: Starts around 2.9% + 30¢ per transaction.
• Typical Swiped Rate in QuickBooks: Starts around 2.4% + 30¢, though using an EMV chip reader can often secure even better rates.

On a $1,000 transaction, this difference is substantial. A keyed payment would cost $29.30, while a swiped transaction would cost $24.30. Over hundreds of transactions, these savings add up to a significant amount annually.

Hardware and Setup

Your ability to accept swiped payments depends on having the right hardware. QuickBooks supports several mobile and countertop card readers that are compatible with their software.

• Keyed Payments: Require zero hardware. You can start accepting keyed payments immediately through your QuickBooks Online account or desktop software. This makes it an accessible option for businesses that are just starting or only process occasional remote payments.
• Swiped Payments: Require an investment in a QuickBooks-compatible card reader. Options range from simple mobile magstripe readers to more advanced EMV and contactless (NFC) readers. While there's an upfront cost (typically $50 - $200), the device usually pays for itself quickly through the savings on transaction fees.

Security and Compliance

Security is another area where swiped and keyed payments differ greatly. Manually handling cardholder information instantly increases your business's responsibility to protect that data.

• Keyed Payments: Increase your PCI (Payment Card Industry) compliance burden. Because your staff or systems are directly exposed to sensitive card data, you must implement strict security controls to protect how that information is entered, transmitted, and stored. Human error during data entry can also lead to declined transactions or security issues.
• Swiped Payments: Reduce your PCI compliance scope. Modern EMV and contactless readers use end-to-end encryption and tokenization, meaning the sensitive account data is encrypted the moment it's read and never touches your POS system or network. This minimizes your liability in the event of a data breach and simplifies PCI compliance assessments. Using an EMV chip reader also protects you from liability for certain types of chargebacks involving counterfeit cards.

Processing Speed and Customer Experience

The speed and convenience of the checkout process can have a direct effect on customer satisfaction.

• Keyed Payments: This method is inherently slower. The process involves collecting the information from the customer, manually entering it, and double-checking for accuracy. This can create friction in a busy environment or a longer hold time for phone orders.
• Swiped Payments: Transactions are considerably faster. A customer can dip or tap their card in a matter of seconds. This speed is vital in retail or service settings where efficiency helps manage customer flow and improve the overall purchasing experience.

Which One Should You Choose?

The right choice isn't about one method being universally "better" but about matching the method to the specific transaction scenario. Most businesses will find they need a combination of both to operate effectively.

You should choose swiped payments in these situations:

• Brick-and-Mortar Retail: If customers pay in person, you're losing money on every transaction you manually key in. An EMV or contactless card reader is a must-have. It's faster for your customers, more secure, and will lower your processing fees.
• Mobile Services (e.g., Plumbers, Contractors, Food Trucks): When you perform work at a client's location, a mobile POS setup with a QuickBooks card reader is the ideal solution. You can accept secure payment immediately upon completion of the job, which improves cash flow and reduces the friction of sending an invoice later.
• Events and Markets: For processing payments at farmers' markets, trade shows, or craft fairs, a mobile card reader allows you to capture sales on the spot quickly and at a lower cost than manually entering every card.

You should choose keyed payments in these situations:

• Taking Orders Over the Phone: The only way to process a payment from a customer who calls you is to manually key in their card information. This is standard practice for takeout restaurants, service-based businesses that schedule appointments, or mail-order companies.
• Processing Invoiced Payments: When a B2B client wishes to pay an invoice with a credit card instead of ACH, you or they can key in the card details through the payment link or a virtual terminal.
• As a Backup Method: Technology can fail. If your card reader malfunctions, internet connection drops, or a customer's card has a damaged chip/stripe, a keyed entry transaction serves as a necessary backup to ensure you can still make the sale. However, you should still be aware that this will incur a higher processing fee.

Final Thoughts

In short, swiped (card-present) payments are the preferred method for any in-person transaction due to lower costs, superior security, and speed. Keyed (card-not-present) payments serve as a flexible but more expensive alternative, essential for accepting payments when the customer and their card are not physically present.

Optimizing your payment methods saves you real money on processing fees. In a similar way, having the right tools for complex financial research can simplify your tax and accounting work, saving you valuable time. If you run into intricate tax questions while managing your finances—like determining sales tax obligations from remote sales or understanding the fine print on business expense deductions—turning to the right resources can make all the difference. Instant verification and answers to state-specific tax laws can easily be found with tools like Feather AI to ensure your decisions are backed by current tax codes and IRS guidance.