Invoices must be paid on time for the good of business and there are tons of methods to clear them. These include Bank transfers, cash payments, cheques, and credit cards amongst others. Each of these methods has a fair share of benefits and shortcomings. That said, credit cards still remain one of the most convenient options to clear the payments on time. This guide explains why buyers should prefer credit cards for invoice payments. So, let’s dive right into it.
Credit Cards Vs Debit Cards – What Are The Differences?
Credit and Debit cards look identical, with a 16-digit code, expiration date, and EMV chips. You can use either of them to make invoice payments from the comfort of your home. However, the fundamentals of their operations are in complete contrast. A debit card uses the funds that are available in the bank account. Credit cards, on the other hand, operate independently of that and can be used despite the lack of funds in bank accounts.
Furthermore, credit cards typically offer better consumer protection against scams compared to debit cards. Users also get rewards in the form of travel points, discounts on certain retail stores, and even cash backs on some credit cards. That said, the fee of credit cards is usually higher than debit cards and it also carries the risk of debt accumulation.
Benefits of Using Credit Cards For Invoice Payments
Banks are offering several sorts of credit cards that are specialized in a specific niche. You should pick the credit card based on a complete picture of finances and the nature of the business. That said, there are some benefits that all credit cards share and these include:
Sign-up Bonuses
Apart from a few, all credit cards offer to sign up bonuses to their users. Individuals with excellent credit scores can get up to $150 or even more in exchange for spending a few hundred dollars in the first few months. Businesses with pending invoices can achieve the target within the first month and get the sign-up bonus. You can use the bonus to clear the upcoming payments and save a decent capital for the business.
Furthermore, users that are not interested in cash bonuses can get cards that offer bonuses in the form of travel points and retail discounts. However, we recommend cash bonuses because it is more beneficial for businesses compared to other rewards.
Clear Invoices on Credit
It is not uncommon for businesses to run out of cash and it is not necessarily a bad thing. Companies take such risks while investing in an asset that can deliver a high return on investment. Established businesses can request a loan from the bank while they wait for the profit to run their operations and clear invoices. Unfortunately, banks do not offer similar services to small businesses and this is where credit cards come in.
You can use the credit card to clear invoices within the deadline to avoid penalties for late payments. Furthermore, users can even take discounts on early payments despite lacking the funds. The best part? Unlike those bank loans, there are no extra charges or interest on these payments. It is the part of the package that you signed up for.
Rewards
Using a credit card can reward the users in the form of cashback, travel points, and retail discounts. You have to spend a specific amount using the card to get these rewards. Furthermore, there are specialized credit cards that are designed to maximize the rewards for users. That said, the fees of such cards are usually higher than standard ones.
When businesses use credit cards for invoice payments, it is very likely that the target of rewards would be achieved. Hence, it is better to get cash back credit cards as it can save a decent amount for the business.
Most Accepted Form of Payment
Credit cards are the most accepted form of payment around the world. Your payee would not have any issue with this form of payment. Furthermore, even if the invoice is to be paid to the company or individual across the country there would not be a problem. All the freelancing websites including Fiverr and Upwork accept credit card payments.
Best part? You can release the invoice payments even when you are abroad. Not only that, the card can also be used in hotels, airlines, restaurants, and in retail even in foreign land.
Improves The Credit Score
Credit card issuers track the users in terms of their spending and how quickly the charges are cleared. Users that clear dues within the same month without carrying an amount into the next month have better credit scores. Such individuals use their good standing credit scores to request loans and make strategic investments.
Holds Payment If Payee Violates Contract
Payments made via debit cards, cheques, and wire transfers are immediately deposited into the payee account. Whereas payments made via credit card take some time which can be great for business. You can use that time to analyze the delivered product or service and hold payment if there is a problem. Furthermore, sellers also understand it and hence deliver the right product and services.
With other forms of payments, you would have to indulge in legal actions which are not taxing but also drain funds.
Disadvantages of Using Credit Cards For Invoice Payments
Credit cards offer tons of benefits which are discussed earlier but there are also some problems with this form of payment. Let’s take a look at it.
High Fees
Credit cards fees are usually higher than that of debit cards and other forms of payment. It is not the ideal trade-off for individuals with small businesses as the fee is higher than the potential benefits.
Reduce Credit Score
As explained earlier, making credit card payments on time can improve the credit score. But individuals that fail to make the full payment within the same month can reduce their credit scores as well. Thus, only those businesses that have enough finances to clear bills in full should prefer this form of payment.
Debt Can Pile Up
You are essentially taking a debt from the credit card issuers while making the payment from the card. Users who understand their credit limits and are aware of their funds in other banks use the card responsibly. In contrast, users that are unaware of credit limits and funds have the tendency to use it irresponsibly. This can pile up the debt and increase the interest payment when the users fail to clear the dues within the deadline. So, it is a big risk for users that are not great at tracking their expenses.
How To Use Credit Cards For Invoice Payments?
Using a credit card to clear an invoice is a simple and straightforward process. You can log in to the portal of the credit card issuer and enter the credentials of the payee to make the payment. These include card number, pin code, expiration date, and one time pin code in some cases.
Furthermore, Fiver, Upwork, and other freelancing websites accept credit cards as a form of payment. You have to log into the account and purchase the balance using the credit card.
Most of the credit card portals are advanced enough to record all the necessary details. You can write the invoice number, name of the payee, and contact number and also attach the invoice document to the transaction. Best part? There is no need to keep the record in the form of hard copies. You can always log into the account and find the document if any conflict arises.
Furthermore, if the transactions are old and the portal does not have its records, you can always request credit card issuers to release the details.
What Bills Can You Pay With Credit Cards?
Almost all bills can be paid via credit cards. These include invoices, rents, mortgages, tuitions, taxes, insurance fees, cell phones, and student loans amongst others. You can also use the credit card for payment of services rendered by lawyers, accountants, contractors, and landscapers. So, essentially there is nothing that cannot be purchased via a credit card.
Payoneer Vs Credit Cards – The Better Option For Invoice Payment
Credit cards are easier to carry, convenient to use, and offer dozens of other aforementioned benefits but Payoneer is even better. For starters, it is all digital which means there are no cards to carry consequently eradicating the risk of liability associated with theft or loss. Furthermore, it is just as convenient to use and even more in some cases. You can practically pay all sorts of bills with just a simple log-in from the laptop or even a smart device.
Furthermore, the Payoneer is quicker and operates in almost the entire world. Hence, even in the countries where your transactions are restricted via card issuers, the Payoneer works. It literally sees no border and connects you to all types of clients and sellers. Best part? As simple as it is to operate, the security on the platform is very advanced. Each transaction is monitored and is heavily guarded via firewalls and anti-hacking techniques.
Probably the biggest advantage of credit cards is that one can clear invoices without actually having the capital at hand. But Payooner offers the same service and it is even better in some aspects. You can request advance payment from the capital advance on future payments and use that to avail of early discounts. It is better because the company offers only that amount which is to be delivered to you in the upcoming weeks. Hence, the risk of piling up the debt also gets minimized.
Final Thoughts
Credit cards offer convenience, allow you to clear invoices despite the lack of funds, and reward you for using them. All of it sounds appealing and it is but one should be aware of risks as well. You are risking debt and your credit score. The point is, that users who trust themselves to be responsible would find credit cards the best payment options. Whereas those that are irresponsible might find it fun at first but would regret it later on. So, use the credit card for invoice payments but use it wisely and responsibly. We hope this piece has been helpful. Thank you!