Whether you’re a customer looking for ways to pay bills using a credit card or a small business exploring client and contractor payment options, you may be considering using Plastiq. Here’s how it works, how much it costs and everything else you need to know, including restrictions and security.
Plastiq wants to be the place small businesses turn for short-term credit. But is the online paying service right for you?
Whether you are a customer interested in paying bills or a small-business owner looking for options to pay suppliers or receive payments from clients, here’s everything you need to know about Plastiq.
See related: Best reward cards for paying monthly bills
A 12-step guide to Plastiq
- What is Plastiq?
- How much does Plastiq cost?
- What bills can you pay using Plastiq?
- How Plastiq works
- What cards does Plastiq accept?
- Are there some restrictions when using Plastiq?
- Is Plastiq safe?
- Who pays the fees for using Plastiq?
- What do small-business owners considering Plastiq need to know?
- Small businesses are now Plastiq’s core business
- Plastiq to pay vendors? Consider fees, interest rates first
- Alternatives to Plastiq for small-business owners
What is Plastiq?
Plastiq allows customers to pay just about anything with a credit card – from vendors to rent to a handyman.
How much does Plastiq cost?
In return for letting you use your credit card, Plastiq charges up to a 2.85 percent fee on each transaction.
What bills can you pay using Plastiq?
- Auto loans
- Auto leases
- Club fees
- Legal services
How Plastiq works
- Customers give Plastiq the name of the person or business they want to pay, the amount of the payment and the recipient’s address or direct deposit details. The recipient does not have to sign up with the service.
- Plastiq charges the customer’s credit card for the payment, plus the up to 2.85 percent transaction fee
- Then Plastiq pays the recipient, either by check, wire transfer or ACH.
What cards does Plastiq accept?
Plastiq works with most major credit cards:
- American Express
- Diners Club
Are there some restrictions when using Plastiq?
- American Express will only permit the use of Plastiq for payments to government, utilities, education, residential rent and club fees and memberships (that’s the U.S. list; the Canadian list is slightly different).
- Visa will not permit the use of Plastiq to make mortgage payments.
Is Plastiq safe?
Plastiq does store credit card info directly, and because of that it adheres to the highest standard of industry security, known as PCI (Payment Card Industry) Compliance Level 1, said Plastiq co-founder Eliot Buchanan. PCI Level 1 involves annual assessments by outside assessors, in addition to other security measures.
Who pays the fees for using Plastiq?
Plastiq can be used as an online payment option for customers. Similar to PayPal’s consumer payment service, a business offers the Plastiq payment option on its website, no merchant account necessary.
But where PayPal charges the merchant a transaction fee, Plastiq passes it along to customers, charging them an extra 2.85 percent to pay by credit card via the service.
For a merchant reluctant for whatever reason to take credit card payments, this could be a viable alternative, said Gene Marks, a columnist and small business expert.
What do small-business owners considering Plastiq need to know?
For some businesses temporarily short on cash flow, Plastiq could be a boon. But, some budget experts warn, it could tempt others down a path of debt they can ill-afford.
“This is a more convenient way to pay, and that could be a good thing for someone who has good financial controls,” said Lynnette Khalfani-Cox, who blogs at AskTheMoneyCoach. However, she said, “people often have the very best of intentions, and entrepreneurs are no different.”
Small business owners need to take the 2.85 percent surcharge seriously, she said, and ask themselves some tough questions. “Are you really just adding to your cost?” she said. “You certainly have the potential to maximize your credit card rewards, but are you really doing so?”
For Sherman Chang, Plastiq has made paying overseas vendors both simpler and faster – and sometimes cheaper, as well. Chang is a founder of Trekology, a Portland, Oregon-based online manufacturer and retailer of camping equipment and other outdoor gear. About 95 percent of the company’s vendors are in China, he said.
Banks, he noted, charge a similar fee to wire money overseas. In addition, if the total is below a certain threshold, financial institutions also slap on a wiring fee. Then it takes two to three days for the payment to arrive.
With Plastiq, there’s no wiring fee no matter how small the transaction. And the money arrives quickly.
“We pay our China vendors, say, on Monday,” Chang said. “The next day they wake up and the payment is there. My vendors are happy.”
Chang uses a Bank of America® Travel Rewards credit card for as many of these transactions as he can, because as a Platinum Honors Preferred Rewards member, he effectively earns 2.625 points per dollar spent. When that taps out, he’s got a Capital One Spark Cash for Business card waiting in the wings. Trekology uses the points it racks up to cover airline flights when its employees travel on business.
The only regret he has? “For large amount of inventory payments,” he said, “my credit limit is not enough.”
Small businesses are now Plastiq’s core business
Chang discovered Plastiq as a consumer in dogged search of more reward points. And in fact, when the business launched in 2012, the main target was consumers. Co-founder Buchanan was then a recent graduate of Harvard University. A Canadian, he lacked U.S. credit and thought he could build some by paying part of his tuition with his new, secured credit card. But Harvard said no, it would not accept tuition payments by credit card.
“And I thought, ‘Why can’t I pay the way I want?’” he said.
The initial business plan was to target consumers like himself, and indeed he and his co-founder, Dan Choi, discovered an eager cohort of customers – those so consumed with chasing credit card points that the extra fees didn’t faze them. There were about a couple million of those folks “and we basically soon acquired the entire market,” he said. Then they asked themselves, what’s next?
The answer turned out to be small businesses. Last year alone, the company saw triple-digit growth, Choi said, and most of that was from small businesses, which now account for nearly 9 out of every 10 Plastiq customers.
“On the business-to-business side,” he said, “the math makes incredible sense.”
Plastiq to pay vendors? Consider fees, interest rates first
Ramon Ray isn’t so sure. The author and entrepreneur said he’s had to use credit cards when his business has run low on cash. In that situation, it’s possible, he said, that “Plastiq can save your business.” But it could also drive you into ruin, he warned.
For instance, suppose you decide to put payroll on Plastiq, and then you are unable to pay off your credit card on time. “Be sure that the $10,000 you are paying your employees, that you’re not every month paying $12,000” in combined credit card and Plastiq fees, he said. “Then in a year, you look back and you realize you should have borrowed [the money] from a bank.”
Alternatives to Plastiq for small-business owners
Plastiq’s closest competitor in the field is American Express, which offers its business credit card customers a service called American Express Working Capital Terms.
In this model, your business gives Amex a vendor’s name and bank information. Amex then pays the vendor via ACH. In return, you take out an Amex loan for the amount owed the vendor, over a term of 30-90 days, with fixed fees of 0.6 to 1.8 percent. Amex deducts the loan amount plus fees incurred from your bank account at the end of the term.
However, the Amex loans are only available for U.S. vendors and need up to two days to be approved. They are also, as Buchanan points out, a new loan rather than a simple charge on your credit card, and you do not earn credit rewards points for the loan.
There are other online lenders for small businesses, to be sure, including Square, Kabbage and PayPal Working Capital. Each offer loans with interest that accrues and compounds over time, and the offers may be higher than what’s available at a traditional bank.
Unlike these lenders, Plastiq issues a one-time fee per transaction and is focused on accounts payable, or business expenditure, borrowing, rather than on borrowing against accounts receivable, or the business’ receipts.
The Bank of America content was last updated on March 3, 2020.