With multiple invoice payment methods available it may take some research and experience to identify which approach is most effective for your company. In this article, we focus on paying vendor bills with credit cards and attempt to answer the question, “When is it better to pay vendors with credit cards?”
When You Can Pay Off The Credit Card Balance In Full Every Month
If you want to avoid unnecessary charges, fees and interest payments it’s essential to pay off the credit card balance in full by the payment due date each month. Without this ability your company will be responsible for extra charges which are calculated according to the outstanding balance and when it’s paid. For a company that consistently relies on credit cards for bill payments there may be underlying cash flow issues which should be rectified rather than relying on credit card payments.
When You Need Temporary Access To Cash Flow
Unpaid accounts receivable can adversely affect a company’s cash flow and make it difficult to handle its own accounts payable. At times like this, credit cards can give a business access to an immediate source of cash flow allowing its bills to be paid. A credit card grants a grace period which gives a company time to accumulate funds while still allowing it to repay its own bills.
When You Have Access To A Rewards Program
A rewards program is a very good reason to pay as many bills as possible by credit card. When using a credit card results in cash back benefits or points that can be used towards business expenses, the more money spent on the card will produce greater rewards.
When The Vendor Doesn’t Charge Convenience Fees
Some businesses may charge a convenience fee of a few percentage points to cover their merchant fees if you attempt to pay their bill with a credit card. You’ll need to assess whether these fees are worth paying depending on your rewards program or cash flow situation. In cases of exorbitant convenience fees it may be cheaper to pay by an alternative method.
When You Don’t Have a Dedicated Accounts Payable Department
With small businesses that have few or no employees, it’s possible that a single person is taking care of many business functions at once. In this case, using a credit card to pay bills will create an automatic paper trail in the form of statements that can be used as a record for accounting purposes.