Where Credit Cards Don't Work
Our benchmarking survey on credit cards explored reasons why some trade credit professionals do NOT accept credit cards. The primary reason cited by most firms that do not accept credit cards is that the invoices they generated were large and thus the associated fees were therefore too large. Also mentioned are the liabilities that payment by credit cards can pose. If your company generates a significant number of returns or payment disputes, the requirements stipulated by the card companies can be burdensome. Here are the comments we received on this issue: "We have never established this as a payment option. Most of our sales are very high dollar transactions and not conducive to credit card acceptance."
- Kathryn Marsh, Director of Credit, Mitsui & Co. (USA), Inc. "Too few customers want to pay that way. And for larger amounts it is too expensive."
- Ben Boelens, National Credit Manager, Lanxess, Inc. "No need at this point. Invoices are too large. Terms are constrictive."
- Scott Rader, Director of Corporate Credit, Dairy Farmers of America, Inc. "Procedurally infeasible as most invoices are very large, averaging greater than $10K."
- Thom Beaupre, Corporate Credit Manager, Metal One America. "Management does not want to deal with liabilities and costs,"
- Daryl Lawson, Billing, Credit & Collections Manager, Squire Sanders & Dempsey LLP. "Fees associated with cards erode profit margins."
- Byron Beck, Controller, BWA It also matters where your customer is located. Many companies use credit cards to collect from foreign customers, especially those located in Asia. If your customer is located in Canada, however, there are major regulatory difference regarding how cards can be used in commercial transactions. "It is illegal in Canada to use credit cards to pay bills, other than for a C.O.D. order. This is primarily due to significant differences in Canadian bankruptcy legislation that would see a credit card payment of another supplier's account as a fraudulent preference that would hoist your bill onto the credit card companies. We have solid legal advice on this issue, which I note is a significant difference from US law. Secondly, the MasterCard/Visa organizations, as part of their agreements, forbid their merchants from using their credit cards for anything but C.O.D. sales and could charge back any on account payments. As better than 99 percent of our sales are on charge, the cost of being setup as a merchant, end of day proceedings, fees, etc. associated with the few C.O.D. sales we make would not justify the service."
- M. Paul Cook, National Credit Manager, Toyo Tire Canada, Inc.
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