Accepting Credit Card Payments Can Spell Disaster For A Business, Here’s Why

 In Debtor Finance, Invoice Finance

Do we accept credit card payments from our clients customers?

The short answer is no. But not without good reason.

In this video we outline the issues (in our experience) with accepting credit cards as payment.

Perhaps after this you too will consider not to allow credit cards in your business.

But first let’s dig into what exactly a credit card is. You may not realise this, but it’s actually another form of Debtor Finance.

Let’s find out more about this in the video below.

For an appointment with a Product Specialist call the office on 1300 652 158.


Hi, I’m Daniel from AR Cash Flow. Today’s topic is: Do we accept credit
card payments from our client’s customers? The straight answer to this is
no we don’t. Now I’ve got four key points that I want to talk to you about
today on this topic, and they’re the reasons why you, as a client, should
also think about why you shouldn’t take credit card payments from your
customers as well.

The first point I want to look at here is: What exactly is a credit card?
Well, a credit card, if you think about it, there are three parties in the
transaction. There’s you, the supplier, there’s the customer at the end,
and there’s the bank in the middle. The customer walks into your shop, they
buy something, they give you your credit card, you get payment from the
bank the next day, and the customer doesn’t have to pay their bill to the
credit card company for somewhere between 30 and maybe even 60 days.

So if that sounds familiar, it sounds kind of like debtor finance, that’s
because in reality that’s how they operate. They’re very similar. The only
difference being is credit cards are usually used in a retail environment.
So that’s the first thing to think about.

The second thing to think about, and it’s really a reason why you don’t
want to accept credit card payments and why we don’t is because when you
sign an agreement or trading terms with your customer, you agree on trading
terms, and those trading terms are usually set out as 30 days, end of
month, or 60 days, whatever you like, but it’s an agreement upfront. What
usually happens is you get to the end of those trading terms and the
customer turns around and spins you a story and says, “Hey, I want to put
it on my credit card. Do you accept credit cards?” That’s not really the
original agreement.

What it can say to you is a number of things, but what I think it says is
usually that the customer doesn’t have the cash or the ability to pay you
and in fact has to re-discount or re-factor or refinance your debt for
another 60 days. So it’s an indication of the credit quality of your
customer. So we don’t like financing clients who can’t pay their bills on
time, and I think that it’s something you should think about not doing as

The third issue here is fraud and offsets. So in debtor finance, one of the
biggest issue obviously with invoices and financing them is when there’s
fraud involved, it’s very difficult to get paid, or when there are offsets
or dilutions on the invoices. When you put something on credit card as a
merchant or a seller of the goods, you still carry that risk, and sometimes
you can carry that risk for more than 90 days or past when that customer’s
meant to have paid out that debt with the bank or that credit card bill.

So as a debtor financier, we want to take that risk for 90 days with that
customer. We don’t want to then be carrying that risk or that risk of
offset, on our balance sheet or our receivable ledger, past the 90 days. If
we had a credit card at the end, we’d be carrying that debt longer than
that as well. So that’s another reason we don’t do it.

The fourth and probably final reason and the main reason behind why we
don’t do it is because of security. These days, when you have a merchant
facility, the bank asks you for security. I know when I’ve spoken to our
bank about potentially putting it in place, they’ve said, “Well, you need
to put up a security bond.” So we’re going to be providing security
effectively on your behalf as a client. We don’t really want to be doing
that. We give you the cash. We think that’s enough. Not only that,
sometimes banks don’t ask for security, but what they do ask for from the
merchant is a guarantee that the credit card receipts that go through the
system are good and proper and will be paid without offsets, subject to the
customer going out of business.

So that’s really the four key points I want to cover off in this topic. If
you would like to know more information about it, please give me a call on
my 1300 number or our 1300 number, or like us on the Facebook page or
subscribe to our YouTube channel. Thanks very much for watching.

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