A customer wants to pay overdue invoices by credit card. What are my options?

Encourage your customers to pay sooner by offering discounts for paying earlier, but think twice before banning credit cards as a payment option


Set up a policy that rewards your customers for paying early – or consider adding a credit card surcharge if your local laws allow it. But preventing your customers from paying by credit card could backfire. Consider other options first.

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Dear Your Business Credit,

We are a distributor in Texas of packaging material, and we deliver products in our own trucks to customers. We set most of our customers up on Net30.

Every once in a while, we will have a customer past due that calls in and wants to pay by credit card at that point, which of course is not how we quoted the customer. If they are set up on Net30, can we tell the customer in order for us to accept a credit card, then payment must be made the day of delivery, so once the product is shipped we invoice? Otherwise payment must be made by check? – Jeremy

Dear Jeremy,

That sounds frustrating!

Keeping in mind that the sooner you get paid, the better, I’d recommend you first set up a policy that rewards your customers for paying early.

Perhaps you could offer a small discount for paying before the 30 days and a larger discount for paying for the entire order in advance.

Check out all the answers from our credit card experts.

Ask Elaine a question.

See related: How much it really costs your business not to accept credit cards

Offer incentives to encourage early payment

You might, for instance, add a notation to the bill that says “2 percent 10 net 30” or “2/10 net 30,” which means that customers who pay within 10 days of the invoice date will get a 2 percent discount. Getting paid faster will help the cash flow in your business and lower your reliance on outside credit for your own business – which costs you money.

If you use a program such as QuickBooks or Freshbooks, it is possible to program your invoices to offer a discount for early payment, so you don’t have to enter the discount manually.

Here are instructions:

Consider putting late payment fees in writing

Another option to make your company whole is to draft your contracts with customers to say you will charge a late payment fee after a certain number of days a bill is past due, so you have the option of charging one. Usually it is a percentage of the money a customer owes you.

Late fees can leave customers with a negative feeling about your business, so think carefully about whether you truly need them. If you do, have an attorney familiar with the laws of your state draft the contract, in case there are any laws that govern billing practices that would affect the agreement.

It is possible to add a late fee to invoices automatically.

Here is how you do it:

  • QuickBooks
  • Freshbooks lets you apply late fees automatically.
  • Late Fee Manager for Xero is a paid app, which costs $49 per month for a small business.

As a merchant, you are free to negotiate payment terms with your customers, so you don’t have to accept credit cards as an option on your invoices sent after deliveries if you don’t want to.

A word of caution against banning credit cards for late payments

However, preventing customers from using credit cards may work against you. With some cash-strapped customers, you may never get paid at all if you don’t take credit cards.

Rather than prevent customers from using credit cards if they pay after 30 days, why not offer a discount to those who pay by cash or check?

Depending on your state, you may also be able to add a surcharge for credit card purchases, which may encourage customers to pay by other means. For more on this topic, see “Card surcharge ban takes another blow in California court.”

No one likes paying credit card fees but the more convenient you make it for customers to pay you, the better your cash flow. Finding a good merchant services provider by asking around in your industry can help you minimize the fees you pay.

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The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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