Paying with credit cards is handy, especially in the modern world. Whipping out a credit card can also come with other perks — like points for purchases — and these bits of plastic can help smooth out a business’ cash flow. Unfortunately, many suppliers and merchants don’t take credit cards for bill payments, potentially causing you and your business unnecessary headaches.
That’s where Plastiq comes in. This service allows you to make payments that would otherwise require checks or bank transfers with a credit card. All told, this can help simplify your accounting while letting you take advantage of the benefits a credit card provides. There is a catch, however; Plastiq charges a 2.5% fee on each payment, meaning that this service may or may not work for your bottom line.
Is Plastiq right for your business? Keep on scrolling to find the answer.
What Is Plastiq?
Plastiq was founded in Boston in 2012 to help users pay bills with credit cards. While the company first aimed its sights on consumers, it has since pivoted towards focusing on helping small businesses use credit cards to pay off bills that might otherwise be difficult to pay.
“At first we thought consumers were the most likely to use Plastiq to pay off bills, but over time we saw that many of our customers were entrepreneurs and business owners, and changed our focus,” Plastiq’s chief operating officer Sameer Gulati told PaymentsSource in April 2020.
Plastiq, now based in San Francisco, has a simple service: If you want to pay a bill or invoice that usually would require you to initiate a bank transfer or write a check, you can pay Plastiq with a credit card instead. Plastiq will then directly pay the merchant or supplier to whom you owe money. Plastiq charges a flat fee of 2.5% of the payment amount for making the payment on your behalf. If you use a debit card, the fee drops to 1%; payments made to Canadian recipients incur a 2.85% fee.
You’ll be able to choose from three methods by which Plastiq can pay your bill:
- Paper Check: Plastiq will cut a paper check and mail it to the recipient.
- ACH Bank Transfer: Plastiq will deposit funds directly into the recipient’s bank account.
- Wire Transfer: Plastiq can wire funds to both domestic and international recipients.
Plastiq can be used for a range of bills, from rent to payroll to taxes. It cannot be used for paying off commercial mortgages or other types of business loans. You can also set up automatic, timed payments or pay bills manually.
Those comfortable with mobile banking should note that Plastiq does not offer apps for Android or iOS at the time of writing. If you prefer handling financials on your phone, a lack of a mobile app may make Plastiq more difficult to use.
How Plastiq Can Help Small Businesses
The most obvious way Plastiq can help your small business is by optimizing cash flow. For most bills, you’ll need cash on hand in order to make the payment. With Plastiq, you’ll be able to put those payments on your credit card. This means you won’t have to pay for bills until your credit card’s due date. On top of that, if you sign up for a 0% introductory APR credit card alongside putting payments on Plastiq, you’ll even be able to carry a balance on your card for several months without needing to worry about paying interest.
Using Plastiq can simplify your business’ accounting as well. Instead of having to deal with multiple ways of paying your suppliers, you’ll simply need to pay Plastiq. Depending on your situation, this relief might be worth the 2.5% fee Plastiq charges.
In some cases, Plastiq can also be used to earn credit card points or trigger welcome offers. Note that Plastiq won’t be cost-effective for general point-earning unless your rewards rate is higher than 2.5% of your purchases. If you are merely trying to spend enough to hit a welcome offer’s minimum spending threshold, however, using Plastiq for purchases you would be paying for anyway could be a worthwhile tactic.
How To Use Plastiq For Business Expenses
Plastiq is a simple service that’s easy to use. Here’s a step-by-step guide to getting your business started with Plastiq:
1. Sign Up For A Free Account
To sign up for Plastiq, all you need to do is head over to the service’s sign-up page. Account creation is free — there’s no upfront charge to using Plastiq. To create an account, you’ll need to enter your name, phone number, who you’ll be making payments for (yourself, your business, or both), and your monthly expenses. If you select that you’ll be making payments for your company, you’ll also be asked your business’s name, industry, and zip code.
2. Add Credit Cards
Once you’ve created your account and are brought to the Plastiq dashboard, you can start adding your credit cards. Plastiq makes this part easy too — you’ll simply need to click on the “Add your first Card” box near the top of the screen and then fill out the relevant info.
While you can add as many credit cards as you like, we recommend that you only enter the cards you know you’ll be using with Plastiq. Doing so will limit the opportunities fraudsters have to steal your credit card information.
3. Make Payments
After you’ve added a credit card to your Plastiq account, you’ll be able to make payments. Just like the above two steps, there’s not much of a hassle here. You’ll just need to click “Add a Recipient” and then enter the recipient’s name and country, how you’d like Plastiq to pay the recipient (paper check, ACH bank transfer, or wire transfer), and the recipient’s address, phone number, and services provided. Before you make your first payment to a recipient, Plastiq will verify the information you entered by contacting the recipient. Once you’ve made that first payment to a recipient, you can set up recurring payments as well as manually make additional payments.
Plastiq will charge your credit card the cost of the transaction plus the 2.5% fee (or 2.85% if paying to Canada, or 1% if using a debit card). Plastiq then sends the payment to the recipient using your preferred method — all without the recipient needing to sign up for a Plastiq account.
Is Plastiq Right For Your Small Business?
Plastiq will fit a very specific niche of business, while most won’t find much worth in the service. If you like hunting down credit card welcome offers, Plastiq may offer a boon by allowing you to put more money towards your minimum spend amount. Businesses that struggle with consistent cash flow may also find value in Plastiq. However, most shouldn’t feel the need to plunk down the 2.5% fee Plastiq asks. Plus, your credit card may include a hefty interest rate — potentially minimizing the effect Plastiq might have on a business’ cash flow.
Give Plastiq a try ifâ¦
- Your business has cash flow problems
- You need to simplify your bill-paying process
- You’re wanting to hit the minimum spend requirement for a credit card welcome offer
Skip Plastiq ifâ¦
- You can’t afford Plastiq’s 2.5% fee
- Your credit card has a high interest rate
- You won’t benefit from paying bills with a credit card
Final Thoughts On Plastiq For Businesses
Plastiq can be beneficial for businesses needing a simple cash flow solution or for those wanting to maximize their credit card welcome offers. However, the service’s 2.5% fee should mean the most businesses will want to use Plastiq sparingly.
Wanting more options that can help your business’ cash flow? Check out our guide to improving cash flow. We also have an in-depth look at the best cash flow loans. If you’re curious about credit card welcome offers for small businesses, visit Merchant Maverick’s article on the topic.
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