What should you do if your vendor doesn’t accept credit cards?

For small-business owners, making vendor payments is a regular task. Even if these bills aren't part of credit card rewards categories, using a flat-rate card can still help you earn double rewards, which is better than missing out on rewards entirely. Those points and miles will accumulate over time.

While many vendors now accept credit cards, not all do. Some may accept them but impose hefty processing fees. So, what are your alternatives?

American Express offers a payment solution for vendors, and certain third-party services allow credit card payments even at establishments that typically don’t accept them. Are these options suitable for your small business, and are they worth the effort?

Amex Vendor Pay

American Express has teamed up with Bill.com to introduce a payment solution known as Vendor Pay. This service streamlines the accounts-payable process for businesses, enabling eligible cardholders to automate their vendor payments using their Amex card.

Bill.com processes vendor payments through a virtual account number, allowing you to earn rewards on your transactions. The basic plan included with your card membership is limited to one cardholder, but you can opt for more comprehensive plans for a fee if necessary.

When this feature first launched, it appeared to be an excellent choice, but it requires vendors to accept credit cards for it to function. While Bill.com offers wire transfers and other payment options, your Amex won't be charged, and you won't earn rewards if credit card payments are unavailable.

Plastiq

Plastiq is a third-party service that enables individuals and small businesses to pay their bills using a credit card.

You enter your billing and recipient information into Plastiq. They handle the payment to the vendor via check, wire transfer, or Automated Clearing House transfer, while your credit card gets charged accordingly. However, be aware that Plastiq imposes a 2.9% fee, which can significantly diminish or even eliminate any rewards you might earn from using your card.

For many cardholders, the service fee charged by Plastiq may outweigh the advantages of using it. Still, if you need to use a credit card to manage cash flow, it can be a useful option for vendors that don’t accept cards or impose steep fees for credit card transactions.

Venmo

Originally a peer-to-peer payment platform for sending money to friends, Venmo has since evolved to include Venmo for Business, which allows businesses to accept payments from a variety of sources.

When you pay a vendor using a Venmo business account with a credit card, you won’t incur the usual 3% fee that Venmo charges for credit card transactions.

However, if your vendor uses a personal Venmo account and you choose to pay with a credit card, a 3% surcharge will apply to your payment. Additionally, your transaction may be categorized as a cash-like transaction.

Cash-like transactions are treated as cash advances, which often come with a lower limit than your overall credit line and have their own annual percentage rate and stricter repayment conditions.

Cash App

Cash App is a peer-to-peer payment app akin to Venmo. Cash App Business accounts accept various payment methods, including debit, credit, and some prepaid cards.

If your vendor operates a Cash App Business account, you won’t have to pay the 3% fee on credit card transactions. However, if they have a personal Cash App account, it's advisable to pay them using a linked checking account instead.

Unlike Venmo, transactions made with credit cards on Cash App are not classified as cash-like transactions that would be treated as cash advances. However, there may be restrictions on which credit cards can be used with Cash App.

According to online sources, Capital One credit cards do not appear to be compatible with Cash App for payments.

Which cards are best for vendor payments?

Some vendors may categorize transactions in ways that qualify for bonus rewards. However, many vendor payments might not earn these bonuses, making a flat-rate small-business credit card your optimal choice.

The Capital One Spark Cash Plus and the Capital One Spark Miles for Business provide 2% cash back or at least 2 miles per dollar on all purchases, regardless of category. However, some TPG readers have reported difficulties linking Spark cards to Plastiq.

For businesses with tighter budgets, the American Express Blue Business Cash™ Card is a solid alternative. You can earn 2% back on the first $50,000 spent each calendar year, after which you earn 1% cash back, which is automatically applied to your statement.

Conclusion

If you engage with vendors that accept credit cards, choosing the right card can help you accumulate rewards. However, there's no ideal solution for vendors who either do not accept cards or impose steep processing fees. It's generally best to steer clear of the fees charged by vendors or third-party services like Plastiq.