In payments, a Card-On-File (COF) transaction refers to a payment arrangement where a customer authorizes a merchant or service provider to securely store their payment card information for future use. This allows subsequent transactions to be processed without the need for the customer to manually provide their card details for each purchase. COF transactions are commonly used for recurring payments or for streamlining the checkout process in e-commerce environments.

Here’s how Card-On-File transactions typically work:

  1. Initial Authorization: During the initial transaction or account setup, the customer provides their payment card information to the merchant. This can be done by entering the card details online, providing them over the phone, or through other secure means.
  2. Card Data Storage: The merchant securely stores the customer’s card information in their system or with a trusted third-party payment service provider. The storage is done in compliance with industry security standards, such as Payment Card Industry Data Security Standard (PCI DSS), to protect the cardholder’s data.
  3. Subsequent Transactions: In subsequent transactions, when the customer wishes to make a purchase or payment, the merchant uses the stored card information to initiate the transaction. The customer may need to provide additional authentication, such as a password, biometric verification, or a one-time security code, depending on the payment provider’s requirements.
  4. Authorization Request: The merchant’s payment system or payment gateway sends an authorization request to the acquiring bank or payment processor, including the stored card details and transaction information (e.g., purchase amount, merchant identification).
  5. Authorization and Transaction Completion: The acquiring bank or payment processor verifies the transaction details and forwards the authorization request to the card network. The card network routes the request to the cardholder’s issuing bank for approval. If the transaction is approved, the merchant proceeds with completing the sale or processing the payment.
  6. Settlement and Clearing: Once the transaction is authorized, the settlement process begins. The funds are transferred from the cardholder’s issuing bank to the merchant’s acquiring bank through the usual clearing and settlement procedures.

Card-On-File transactions simplify subsequent purchases for customers, as they eliminate the need for manual card entry during each transaction. This can provide a smoother and more efficient checkout experience, particularly for recurring payments, subscriptions, or when customers frequently make purchases from the same merchant.

Card-On-File (COF) transactions offer several benefits but also come with certain considerations. Here are the pros and cons of Card-On-File transactions:


  1. Convenience: COF transactions provide convenience for customers by eliminating the need to repeatedly enter payment card details for each purchase. This can streamline the checkout process, especially for recurring payments or frequent purchases from the same merchant.
  2. Improved User Experience: By simplifying the payment process, COF transactions can enhance the overall user experience, reducing friction and potential cart abandonment. Customers can make purchases quickly and easily, resulting in higher customer satisfaction and potentially increased sales.
  3. Automatic Payments: COF transactions are often used for recurring payments, such as subscriptions or membership fees. They allow for automated billing, ensuring timely and hassle-free payments for both the customer and the merchant. This can contribute to improved cash flow management for businesses.
  4. Increased Conversion Rates: With a smoother checkout process and reduced manual entry, COF transactions can lead to higher conversion rates. Customers are more likely to complete purchases when the payment process is convenient and frictionless, resulting in improved sales for merchants.


  1. Security Risks: Storing card information introduces security considerations. Merchants must implement robust security measures and adhere to industry standards, such as PCI DSS compliance, to protect cardholder data from unauthorized access or breaches. Any data breaches can result in financial loss, reputational damage, and legal implications.
  2. Liability: In the event of fraudulent transactions or unauthorized use of stored card information, liability can be a concern. Merchants must ensure they have appropriate fraud prevention measures in place and understand their liability responsibilities in case of fraudulent activity.
  3. Customer Trust and Data Privacy: Storing card information requires customers to trust the merchant or service provider with their sensitive financial data. Merchants must prioritize data privacy, provide transparent information about their data handling practices, and obtain proper consent from customers to build and maintain trust.
  4. Card Expiration or Changes: Over time, customers may experience card expiration, reissuance due to loss or theft, or updates to their card information. Merchants need to implement processes to handle such changes, ensuring a seamless experience for customers and avoiding payment disruptions.

However, it’s important to consider the security implications of storing card information. Merchants must prioritize data security and adhere to industry best practices to protect cardholder data from unauthorized access or breaches. They should use secure data storage methods, employ encryption techniques, and comply with PCI DSS requirements to safeguard sensitive card information.

Customers should also be cautious when authorizing Card-On-File arrangements, ensuring they trust the merchant or service provider and regularly monitor their payment card statements for any unauthorized transactions.