Purchasing Card Conundrum

April 12, 2010

Banks may be cracking down on retail users of credit cards. But some corporates are using them to pay multi-million-dollar invoices. The clients doing so are looking to increase revenue share from their card companies, through negotiating discounts or cash-back deals.

Unfortunately those on the accounts receivable end have to accept an interchange fee hit of 2-3 percent. In an informal discussion at The NeuGroup’s Global Cash and Banking Group, one company said clients wanted to pay $25 million invoices with a credit card. The interchange fee consequences of such a deal: $500,000-$750,000.

Several corporates have faced the problem of having vendors request to use credit cards to settle invoices of several million dollars or more. They’ve developed a few responses.

One GCBG member said that, for contracts over $10 million, finance has to be involved in the pricing discussions. Another approach is to incorporate the fees into pricing—that is, negotiate directly with the vendor. Or try to negotiate with the card company itself, which may bear fruit, but which is often a more difficult process to undertake, GCBG members noted.

Leave a Reply

Your email address will not be published. Required fields are marked *