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The best customer experiences don’t just happen at the checkout counter — they happen when payment becomes almost invisible.
Card-on-file transactions give businesses across retail, hospitality, and beyond a smarter way to serve guests and shoppers. By securely storing card details with customer consent, they speed up payments, reduce hassle, and unlock everything from faster bookings to effortless in-store purchases.
For businesses, this means more than convenience. It means stronger loyalty, fewer abandoned sales, and the ability to offer services like subscriptions, mobile ordering, and no-fuss checkouts — all while protecting against no-shows or unpaid incidentals.
What is a card-on-file transaction?
A card-on-file transaction is a payment made using stored card details, per the cardholder’s consent.
Rather than re-entering their card details every time they arrive at the checkout page, repeat customers may give businesses permission to securely store their card details for future use.
Card-on-file payments enable a speedier, more efficient online shopping experience and enable businesses to charge customers for ongoing services without constantly reentering their card details.
How does card-on-file work?
Card-on-file uses a modern encryption process called Tokenization to securely store customers’ payment card information for future purchases. The process involves two main steps.
Step 1: Obtain consent to store the card on file
There are a few different ways that a customer can provide consent to store their payment details for future use.
Typically, a customer will give consent following an initial purchase where they manually enter their card information.
During the checkout process, they will be prompted to check a box or click a button indicating that they wish to save their payment details for faster future transactions.
Other ways in which a customer may consent to card-on-file transactions include:
- when creating an online account with the business,
- via an official consent form presented at the point of sale (either online or in-person),
- when buying a subscription product where automatic, recurring payments are required.
In some cases, a business may run a zero-amount transaction first to verify the card's validity before keeping it on file.
This is common practice when signing up for subscriptions, as the business wants to ensure the card is active and can be used for future payments.
Zero-amount transactions are also routine in the hospitality field, allowing hotels to verify and store guest card details so they can be automatically charged for all fees incurred following their stay.
Step 2: Securely process card-on-file transactions
Once a customer has consented to card-on-file transactions, businesses can use the stored card information for future purchases without needing the customer to re-enter their card details. There are two main ways this can happen:
- Cardholder-initiated transactions: In these scenarios, the customer, while logged into their online account, selects their stored card as their payment method at checkout. Although they will likely need to provide some form of verification (e.g. 3D Secure), they will be able to make their purchase without needing to manually enter their card information.
- Merchant-initiated transactions: In this scenario, the business has permission from the cardholder to automatically process the card-on-file transaction according to the agreed payment schedule and/or service terms. Common examples of merchant-initiated card-on-file transactions include recurring subscription payments, hotel no-show fees, and automatic bill payments for utilities.
Most common uses
1. Retail
One of the most common uses of card-on-file payments is in the retail industry, particularly in e-commerce settings.
For the modern online shopper, a quick and efficient checkout process isn’t just nice to have; it’s essential. If the process is too lengthy and time-consuming, today’s online shoppers will abandon their carts and look elsewhere.
2. Hospitality
The hospitality industry was one of the first to adopt card-on-file payments, as they are a necessity for managing reservations, protecting against no-shows, and processing incidental charges like room service and mini-bar purchases.
Typically, hotels will get consent from guests to store their card details at the time of booking, run a zero-amount transaction to verify that the card is active, and then wait to process the payment until check-out.
3. Transportation
Ride-share services and taxi apps, as well as e-bike and e-scooter accounts, often use card-on-file transactions to provide a faster and more convenient user experience.
Transportation services are on-the-go by nature, and customers usually don’t have the time or patience to enter their payment details manually.
By consenting to having their card details stored, they can quickly and effortlessly pay for their rides or rentals in just a few seconds.
4. Food delivery
Convenience is already the main motivator behind most food delivery orders. Rather than shopping for, preparing, and cooking a meal themselves, when a person orders food for delivery, their priority is saving time and effort.
It makes sense, therefore, that the process of paying for their orders should be just as quick and efficient. This is why so many popular food delivery apps allow customers to store their card details, ensuring that future orders can be placed quickly and easily with just a few taps.
5. Subscriptions
From magazines to meal kits to TV streaming services, any modern subscription-based business model likely relies on card-on-file technology to operate.
When signing up for a subscription service, customers usually must consent to having their card details stored and used in accordance with an agreed-upon payment schedule. This allows the merchant to initiate a payment on a recurring basis (e.g., weekly, monthly, annually, etc.) without needing any additional input from the customer.
6. Memberships
Another common use for card-on-file transactions is for clubs and membership-based services, such as gyms, fitness classes, golf clubs, business groups, and coworking spaces.
These memberships, often billed monthly, give customers ongoing access to facilities and/or services by taking recurring payments according to an agreed schedule.
Card-on-file makes it possible for customers to access their member benefits without needing to manually pay their membership fees each month.
Not only does this allow for a better member experience, but it dramatically improves operations for the business that would otherwise have to manage payments—including chasing late payments—for every single member, every single month.
7. Billing
Card-on-file transactions are also commonly used for bill payments, such as those from utility companies, phone service providers, and insurance companies.
Although some consumers still prefer to pay bills manually, many will happily consent to having their card details stored in exchange for the convenience and peace of mind that comes with automatic payments.
This setup allows customers to pay bills on time without the fear of missed payments and late fees. For merchants, it helps improve cash flow and reduces the amount of time and resources spent on chasing late payments.
Card-on-file & Tokenization
Card-on-file payments rely on Tokenization to keep sensitive card data secure and maintain compliance with payment industry standards, such as PCI DSS.
Without Tokenization, stored card details would be at risk of theft, exposing customers to fraud and leaving businesses liable for data breaches and financial losses.
What is Tokenization?
Tokenization is a process used to protect data from unauthorised access and usage. In the context of payment card security, the data it’s protecting is sensitive card details, such as the card number, expiration date, and CVV code.
Tokenization works by replacing the actual card data with a unique identifier or “token.” These tokens can be used to process card payments securely without exposing the underlying card information.
Tokenization differs from other encryption methods in that it doesn’t just use a specific algorithm to disguise card data but instead fully replaces it with a substitute value that’s otherwise meaningless and cannot be decoded or traced back to the original data. It’s a preferred security tool for the payment card industry because it prevents merchants from storing and processing sensitive card data in its original form.
Although Tokenization itself may be a sophisticated and complex technology, integrating it into your payment processing system is as simple as partnering with a payment service provider that offers it as standard.
What does Tokenization mean for PCI DSS compliance?
One of the huge benefits of Tokenization for businesses is how it simplifies and reduces the scope of PCI DSS compliance.
Since Tokenization ensures that cardholder data is never stored and processed in its original form, it significantly lowers the risk associated with handling sensitive card information.
Merchants that utilise Tokenization for payment processing, including for card-on-file transactions, must adhere to much fewer PCI DSS requirements than merchants that use other, more traditional encryption methods to store and process payments.
Getting started with card-on-file payments
Card-on-file has become a critical tool for creating faster, more reliable payment experiences — whether that’s a hotel ensuring smooth check-out and managing incidentals, or a retailer making repeat purchases simple for loyal customers.
Beyond convenience, it helps businesses strengthen customer relationships, protect against missed payments, and support flexible services like subscriptions and memberships.
With integrated solutions like those offered by Planet, hoteliers and retailers can securely store payment details, reduce operational headaches, and create experiences that keep customers coming back — all while staying ahead of evolving expectations.
Enable speedier, more efficient payments today
FAQs
How safe is it for businesses to keep customer cards on file?
If done properly, using Tokenization and the secure infrastructure of an established payment service provider, processing card-on-file transactions is extremely secure. This is because, in deploying Tokenization, sensitive cardholder data is never actually stored by the merchant and therefore cannot be breached and stolen.
However, even with modern safeguards and payment security tools available, many businesses continue to improperly store customer card details, placing their customers at risk of fraud and their business liable for compliance breaches and financial penalties.
It’s important for businesses of all sizes to understand that, no matter how “offline” their business may be or how small their customer base, storing card details without encryption tools like Tokenization, is a significant risk and a direct violation of the Payment Card Industry Data Security Standard (PCI DSS).
What happens when a card on file expires?
If a customer’s card on file expires, some payment providers are able to automatically update the card details if the cardholder’s bank supports that feature. This ensures there’s no disruption in payments and services like subscriptions can proceed without interruption.
However, in the event that this isn’t possible, the system usually prompts the cardholder (via email or mobile app notification) to log in and update their information. These prompts may be done in advance of the card expiring, or following a failed transaction after the card has already expired.
How can a customer remove or update their card on file?
If a customer has an online account, updating their card on file is as easy as logging in, removing their old card, and adding a new one. For some non-e-commerce businesses, cardholders may need to contact the merchant via phone in order to remove or update their card on file.
What happens if a customer wants to switch or upgrade their subscription?
If a customer wants to change to a different subscription product, for example, upgrading to a premium plan or downgrading to a basic plan, then they will need to re-enter their card details manually and consent again to having their card details stored. In this scenario, the terms of service have changed and therefore new consent is required.
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