One of our customers hasn’t paid; can we charge his card on file?

The charge would be considered unauthorized without his approval, which can backfire; explore other alternatives first


Charging a customer’s card on file without permission is not allowed by law and can have negative consequences for your business. When dealing with an outstanding charge, consider other options, including offering the customer a payment plan.

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Dear Your Business Credit,

My husband owns his own business, and we have a customer that knows we send out invoices and was on a 10-day payment. Ten days came and customer will not pay. He says he is waiting on funds himself.

We do have his credit card on file, and the customer was told in the beginning we keep them on file and do not charge until we have the OK. But my question is, can we legally charge his card for payment when he keeps putting us off? – Rebecca

Dear Rebecca,

It sounds like you need the money from this customer now, but, even if you are stressed out about paying your own bills, it’s important to see the bigger picture.

Ten days is not a long time to take to pay a bill. The customer has been honest with you that he is short of funds and waiting for payments to come in. It sounds like he may be a small business owner, too.

Check out all the answers from our credit card experts.

Ask Elaine a question.

See related: Inform customer before your business runs card number on file

Offer payment alternatives for outstanding charges

Assuming he has not paid you by the time this letter is published, I’d suggest reaching back out to him, explaining that you understand what it is like to have a cash flow problem, and offering him a payment plan, where he makes partial payments until he gets caught up.

Be sure to offer him a credit card payment option. Many small business owners do not like to offer credit cards, because they don’t want to pay the processing fees, but in cases like this, it is always better to get the payment, even if slightly reduced by the fees, than to not get paid at all.

Another outstanding payment solution: A collection agency

What if he won’t agree to a payment plan? As a last resort, consider using a collection agency. Collection agencies charge fees but sometimes you’re better off getting a partial payment than none at all.

Ask around among others in your industry for the name of a reputable one. You don’t want to end up working with one that uses heavy-handed tactics that will reflect poorly on your company.

Why charging without customer’s approval is not a good idea

I would not recommend charging his card without getting his permission for this specific charge, even though you have his card on file.

This is barred by the Electronic Funds Transfer Act. The charge will be considered unauthorized if you don’t get his permission.

You didn’t say what type of business you run, but to prevent this type of situation going forward, I’d recommend looking at other approaches to receiving payment from customers than invoicing for the full balance.

See related: When is a charge on a credit card unauthorized?

Explore new alternatives for payment collection

If you are part of an industry association, it might be worth attending a few meetings to see how others are collecting payments. There may be some approaches you haven’t tried that are worth exploring.

For instance, if your husband does home improvement projects, you might ask for a substantial deposit before starting a project and have the customers sign an agreement that upon completion of the job, you will charge a credit card they have put on file or send an invoice.

This approach works equally well for B2B firms in fields like marketing, where it may take a fair amount of time from the inception of the project to creation of the final product and getting paid. You don’t want to be in the position of financing a whole job yourself.

If your husband’s business performs a recurring service, such as lawn care, or does retainer work in a B2B firm, don’t keep performing it and let the amount late-paying customers owe you mount.

Give them a friendly call and say something to the effect of, “I’m sure this is an oversight – you’ve always been a great customer – but we noticed you had not paid your bill for April. Would you like to pay us by credit card now? We’ll be happy to schedule our next visit once you’re caught up.”

It’s not fun to make calls like this, but it beats having cash flow problems of you own.

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