In this 6-minute read:
- 4 advantages (for vendors) of accepting card payments
- 5 advantages (for businesses) of paying vendors and suppliers with a credit card
- How you can pay nearly anyone using a credit card
Though consumer credit card use is growing by leaps and bounds, business-to-business credit card payments are still not as widely adopted. In fact most businesses still pay at least half of their bills using paper checks.
The reasons some vendors and suppliers don’t accept credit card payments are varied, but primarily the concern is the added fees associated with credit card processing.
Credit card processors and third-party payments facilitators generally charge between 2% and 5% to businesses that accept these payments, and for some vendors, these fees can eat up a significant portion of their profit—or all of it.
However, there are several advantages to both payer and payee when you source your business bill payments using a credit card.
Let’s go over a few perks (for the vendor) if they accept card payments, and then we’ll talk about why paying vendors and suppliers using a credit card can provide more than just convenience for you and your business.
Advantages (for vendors) of accepting digital payments
So why should vendors and suppliers consider accepting credit card payments? Here are just a few benefits:
1. Credit card payments are much faster than mailing a check
Credit card payments are reconciled nearly instantly, so vendors get their money much faster than when you mail them a check. This means they can balance their accounts faster and more accurately.
2. Credit card payments are more secure
There are multiple levels of validation and identity confirmation happening behind the scenes whenever your vendors accept a credit card, particularly if they use EMV chip validation. The risks associated with accepting a check include insufficient funds, identity fraud, etc.
Credit card processors help assume the risks (which is part of why they charge a fee), so vendors can be more confident of the funds arriving in full when they accept digital payments.
3. It can help make a vendor’s business more “legitimate”
Credit card processing companies generally have a robust underwriting process as a part of approval, so when a vendor accepts credit cards, it can give their business more legitimacy and credibility than if they only accept cash or checks. Some consumers will only do business with companies that accept credit cards, and this feeling can translate over when those consumers start businesses of their own.
Also, vendors and suppliers are in constant fear of being outbid and outperformed by their competition. If the competition is accepting credit cards and you aren’t, and prices are similar, the vendor that accepts digital payments may attract more business.
4. Accepting cards can improve cash flow and save valuable time
As we discussed above, credit card payments arrive much quicker than by check—most processors can get your funds deposited into your account within a couple of days max, versus 4-6 business days for the mail to arrive, plus a few days or even a week for the check to clear a bank. And that’s AFTER whatever delay there is in getting the payer to write and mail the check in the first place, which can take weeks.
Since your funding is available much sooner, this frees up cash flow and all the time spent preparing and sending out invoices, and processing paper checks.
You may also like: What’s the cheapest way to accept credit cards?
Advantages (to businesses) of paying vendors and suppliers via credit card rather than by check
Now let’s talk about some of the benefits to businesses who pay vendors using a credit card, rather than sending paper checks.
1. Credit card payments save time and improve cash flow for businesses
As noted in the section above, sending a check can take quite a few days or even weeks to complete the process and clear a bank. When you pay vendors using a credit card, you speed up the process and free up cash for other business expenses.
2. Increased purchasing power and business credit
Since you don’t have to pay off your card balance for at least 21 days (and often longer, if your account is in good standing), you can effectively borrow business funding at 0% (plus you get perks and rewards) to pay vendors and suppliers.
If you need to spend a little more than you currently have in your bank account to order supplies for a large order you’re working on fulfilling, a business credit card with an appropriate limit can make that easy. (Just be sure to pay it off once you sell the widgets you make using the supplies.)
In addition, as you regularly pay your credit card statement on time and use much of your available credit, you can increase the credit limit available to your business and improve your business credit rating, which can lower your interest rate for business loans and other expenses.
3. Perks, miles, rewards, cashback, discounts
Nearly all credit cards offer perks and advantages to members, and for small businesses this can be a huge asset. You might get a price break or increased cashback for using your business card to pay vendors and suppliers.
Business owners who rack up lots of airline miles using one of these cards can pay for a significant portion or even all of their business travel expenses, get discounts for business expos, enjoy free concierge service, get free car rental insurance and discounts, and much, much more.
Some businesses use their cashback bonuses to improve their business, buy equipment, pay for employee team-building events, pay for company car maintenance, or even pay utilities. The uses for rewards points/cashback bonuses are almost limitless.
4. Paying all your vendors, suppliers, and bills with one card vastly streamlines your accounting process
When you have to keep track of expenses and bills for your business, the simpler the better. If you can move all of your monthly business expenses and vendor payments to a single card, it’s much easier to keep track of, plus you get the benefit of your credit card statement to help you keep things accurate.
5. It’s more secure than writing a check
When you pay with a credit card, your issuer and processor help absorb the risk of fraud. (This is one reason they charge fees for the service.) When you mail someone a check, you are giving them your bank account (via the routing number and account number) and your signature.
Solo makes it easy to pay and get paid
Solo is not a bank, but is a financial super-app for small businesses, freelancers, sole proprietors, contractors, and more. Solo is the easy way to pay and get paid. Your customers don't have to sign up to pay you, and can use several payment methods, including Apple Pay, Google Pay, and cards. QR codes make it easy to get paid, and you can easily cashout your Solo account balance for free, or spend it using your Solo Cash Card anywhere Visa is accepted. Learn more at Solo.co.
Solo is the easiest way for small businesses to pay and get paid.
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