Card on file
A card the customer has agreed may be charged again later, stored as a token rather than as a number. It is what sits behind a saved payment method, a subscription and a "charge my card on collection" arrangement. What makes it legitimate is the agreement: the customer has to have consented to the later charge, and the record of that consent is what answers a dispute about it.
Why it matters to a merchant
The technical part is easy and the consent is what actually matters. A charge the customer does not remember agreeing to is a dispute you will lose regardless of how the card was stored — so the thing to get right is the record: what they agreed to, when, and in what words. Businesses that keep that as a matter of course rarely have this argument twice.
Related terms
In this section: How a payment moves