Pay Vendors with Credit Card: A Guide for US Small Businesses

Small businesses in the US need simple ways to pay vendors which don’t involve excessive administration, and which can help to smooth out cash flow over the month. Choosing to pay vendors with a credit card can be a neat solution, allowing you to extend your payment terms automatically and still earn any cash back or rewards your card provider offers.

This guide looks into how to pay vendors with credit card in the US and abroad, including providers to select, and the fees to watch out for.

Why Pay Vendors with a Credit Card?

Paying vendors with a business credit card can help small business owners looking to reduce administration and improve cash flow, while accessing secure and reliable payment methods to make sure their vendors are paid on time, every time.

The Benefits of Using Credit Cards for Vendor Payments

One key benefit of using credit cards for vendor payments is that you can automatically get an extended grace period on your payment. Many business credit cards offer a 30 - 60 day no interest period before the billing cycle ends, which means you can pay your vendor securely at the start of the billing cycle and then settle your obligation to the credit card company later. This helps with cash flow management and planning.

Another key benefit of paying vendors with a credit card is that you continue to get any rewards or cash back your business credit card offers. Let’s say your card has a 2% cash back offer on spending - this cash back can apply on vendor payments, reducing your overall costs in some cases.

Finally, you may find that some credit card costs can be written off for tax purposes. You’ll need to talk to your CPA (Certified Public Accountant) before you transact to see if this is the case for your specific business, and what percentage deduction may apply.

It’s important to weigh up the costs and benefits carefully before you choose to pay a vendor by credit card, as there can also be some fees involved, from the credit card provider as well as from any third party you work with to process your transfer. We’ll look at that in more detail later - but bear in mind that card processing fees from a third party, as well as international payment costs if you’re sending money to an international vendor, may outweigh the cash back you can earn.

Understanding Credit Card Limits and Vendor Acceptance

As we’ll see in this guide, you may be able to pay your vendor directly with a credit card if they support this type of payment - or you can use a third party provider like Zil Money, BILL or Plastiq which we’ll look at later.

Generally if you’re paying a vendor with a credit card, this should be your business credit card rather than a personal card - this is mandatory for third party companies like Zil¹. You can pay with your credit card only up to the limit on the card, so you’ll need to ensure your remaining credit limit on your business credit card exceeds the value of vendor bills you need to pay before you proceed. If you exceed your credit limit your card may refuse the payment or charge you additional fees.

How to Pay Vendors with Your Credit Card

Let’s move on to the practicalities of paying your vendors by credit card - either directly or with the support of a third party payment processing service.

Option 1: Direct Vendor Payments (When Available)

Some vendors are able to accept customer credit card payments directly. In this case you’re likely to find that a credit card payment link is included in your vendor invoice. You can then simply click the link to pay with your business credit card, just like if you were shopping online.

If your vendor doesn’t include a credit card link in their invoice, it’s still worth checking if they have any means of accepting payments this way - or you can use a third party provider to pay using a card instead.

Option 2: Using Third-Party Payment Services

Using a third party payment service allows you to pay a vendor with a credit card even if they can not accept credit card payments directly. In this case, you’ll pay the third party with your credit card, and they’ll then pass the agreed payment amount to the vendor using your chosen payment method, such as a paper check, ACH or wire.

This method gives you flexibility to pay using your card and continue earning card rewards or cash back, as well as getting fast or even same day payment delivery in some cases. Fees do apply though, which we’ll examine in a moment.

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Save Time and Money On Overseas Payments With Wise Business

Wise Business can help you save big time on international payments.

Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. The Wise Business account is designed with international business in mind, and makes it easy to send, hold, and manage business funds in currencies.

Signing up to Wise Business allows access to BatchTransfer which you can use to pay up to 1000 invoices in one go. This is perfect for small businesses that are managing a global team, saving a ton of time and hassle when making payments.

Some key features of Wise Business include:

• Mid-market rate: Get the mid-market exchange rate with no hidden fees on international transfers

• Global Account: Send money to countries and hold multiple currencies, all in one place. You can also get major currency account details for a one-off fee to receive overseas payments like a local

• Access to BatchTransfer: Pay up to 1000 invoices in one click. Save time, money, and stress when you make 1000 payments in one click with BatchTransfer payments. Access to BatchTransfer is free with a Wise Business account

• Auto-conversions: Don't like the current currency exchange rate? Set your desired rate, and Wise sends the transfer the moment the rate is met

• Free invoicing tool: Generate and send professional invoices

• No minimum balance requirements or monthly fees: US-based businesses can open an account for free. Learn more about fees here

Use Wise Business >>

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Popular Platforms for Paying Vendors with Credit Cards

If you decide to pay vendors with credit cards through a third party service, there are several popular options for small businesses in the US. Let’s explore a few so you can see if any suit your own transaction needs.

Plastiq

Plastiq² is a payment platform for US businesses looking to pay vendors with a credit card, both locally and overseas. They also offer additional services such as short term credit, ways to get paid by customers, and business to business payment solutions.

If you sign up to Plastiq to pay your vendors using a credit card there’s no subscription or ongoing fee to pay. You can pay using the card of your choice, and Plastiq will then pay your vendor using a paper check, ACH, or a local or overseas wire transfer. There are some fees involved when you pay a vendor with a credit card through Plastiq, but you’ll still earn any cash back or rewards your credit card provider offers you when you transact.

Plastiq’s credit card processing fee is 2.99%³, and there’s then a delivery fee depending on how you want the vendor to receive their money. This is for an 0.99 USD ACH, 1.49 USD for a paper check, and 8.99 USD for a local wire in the US. Additional percentage fees apply if you need an expedited payment.

If you’re sending a wire overseas, fees are higher, and can include a 39 USD transfer fee, 1% cross border fee, and costs involved in currency exchange⁴.

BILL

BILL⁵ has over 8 million network members and reports that users save on average 12 hours monthly on administration by using their services. You can use BILL to pay vendors with a credit card, including Mastercard, Visa, American Express, or Discover cards, and then BILL will pass your payment to the vendor using ACH, check, or virtual card⁶.

With BILL there’s a monthly fee to pay⁷, which depends on the plan you select. All plans offer many features aside from credit card payments to vendors, so you can review the options and decide which is best for you. When it comes time to pay a vendor using a card, there’s a standard fee of 2.9% for all pay out methods, with additional fees if you need an expedited check service.

If you’re paying international vendors there may also be a charge included in the exchange rate used to convert your dollar payment to the currency needed to pay the vendor. This is included in the rate you’re quoted when you pay.

Zil Money

Zil Money⁸ works with over 1 million businesses and offers a range of handy payment services including ways to pay vendors with your credit card. There’s a no monthly fee plan and also business and enterprise level packages which offer custom pricing so you can design the package you require based on your transaction types.

Once you’ve paid Zil using your credit card, they’ll pass the transfer to your vendor using ACH, wire or a virtual card. There’s a 2.9% processing fee for all transactions using a card⁸, and you can then choose your payment method. Sending the transfer on a pay as you go plan as ACH costs 0.2% up to 12 USD maximum, while a wire is 10 USD. There’s no fee to send to a virtual card.

If you’re paying a vendor abroad you’ll get the Zil Money FX rate to convert your payment, which might include a markup - a fee.

Understanding Third-Party Service Fees and Costs

Third party services for paying a vendor by credit card are likely to have a range of fees you may need to pay. Each service is different so it’s important to review the costs of your preferred provider. Look out for these costs in particular:

• Monthly fees - some providers have pay-as-you-go or subscription plans depending on your preferences
• Credit card proceeding fees - these apply to all the providers featured in this guide, at around 2.9%
• Pay out method fees - different costs may apply depending on whether you want the vendor to receive their money by check, ACH or wire
• Expedited payment fees - many providers can speed up payments to vendors - but costs may apply for this service
• International costs - if your vendor is not in the US you may need to pay a cross border fee and an exchange rate cost, as well as a higher wire fee to the third party service

Key Considerations When Paying Vendors with Credit Cards

Before you start to pay vendors using your business credit card you’ll need to ensure this is the best option for your unique business. Here are a few things to consider while you decide.

Understanding Transaction Fees and Potential Markups

Before you transact, read the terms and conditions for both your card and any third party service you decide to use very carefully. Credit card fees may apply to both direct and third party payments, such as interest or penalties if you don’t repay your bills in time, every time. Third party processing fees can also mount up, particularly the percentage processing fee which usually sits at around 2.9%.

Paying international vendors with a credit card can mean running into additional costs on top of this, including cross border and currency exchange fees.

Maximizing Credit Card Rewards and Benefits

One of the major benefits of using a credit card to pay your vendors is that you could get rewards or cash back from your card provider as you transact. Check the options available from your card issuer, and consider changing if there’s a better card on the market which could help you earn more as you spend.

Managing Cash Flow with Credit Card Payments

If you pay your vendors using credit card at the start of your credit card billing cycle you may have anything from 30 - 60 days to settle your card bill, depending on the specific business credit card you have.

This means less of your capital is tied up, smoothing out your cash flow and allowing for better cash management - but do make sure you’re able to pay your card bills promptly to avoid additional penalties or interest costs creeping in unnecessarily.

Security and Fraud Prevention

Credit card payments are generally very secure, and third party providers also have their own strong safety measures in place to offer peace of mind. Zil Money for example has military grade encryption, multi-factor authentication, 24/7 fraud monitoring and is independently audited for security measures and effectiveness.

Frequently Asked Questions About Paying Vendors with Credit Cards

Can I pay any vendor with a credit card?

You can pay some vendors directly with a credit card - or you can use a third party service to pay pretty much any vendor locally or internationally with a card instead.

What are the typical fees for paying vendors with a credit card?

Some fees are set by your card provider itself, and you may also pay a processing fee of around 2.9% if you use a third party to pay your vendor using a credit card.

How can I pay a vendor who doesn't accept credit cards directly?

You can pay a vendor who doesn't accept credit cards directly with a third party provider like BILL, Plastiq or Zil Money.

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Sources:

1. Zil Money terms and conditions
2. Plastiq
3. Plastiq pricing
4. Plastiq FAQ - international transfers
5. BILL
6. BILL pay by card
7. BILL pricing
8. Zil Money
9. Zil Money pricing