Insights into How Credit Card Payments Work From the CEO of Plastiq

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Bill payment service Plastiq charges your credit card and then pays the bills you ask them to. That way you can earn credit card rewards for bills you might otherwise pay by check (currently only Mastercards allowed for mortgages), and benefit from convenience and float, charging something at the beginning of a credit card billing cycle and paying it off at the due date weeks after the end of the cycle.

Since they charge 2.5% most of the time and for most payments, this isn’t necessarily worthwhile for earning everyday rewards (1 point per dollar) but is certainly helpful when hitting a target amount of spend has benefits. And for businesses the fees are usually going to be deductible, so it probably is worth it even at one point per dollar.

Their CEO did an AMA on Reddit and offered some interesting insights into payments and their business plans.

  • Expect some credit cards to offer Plastiq payments as a benefit soon either as a bonus points-earning category or a certain amount of free bill payment.

    In terms of our own actual [co-brand] card, it’s something we have discussed with a few potential partners.

    One thing we do expect in the (relatively near) future is select card issuers to “include” Plastiq as “part of their card”. This could mean that signing up for that card comes with $X in free or reduced Plastiq processing, or even that spend on Plastiq results in bonus rewards. Look out for something this fall as we expect to have our first bank launch in the US with something along these lines.

  • They pay over 2.4% for Chase Sapphire Reserve payments.

    The most expensive cards to accept, generally speaking, are business cards (our fastest growing segment), premium rewards cards (CSR and similar), and also international cards (also a focus for us, given people overseas paying tuition here in US through Plastiq…).

    People have asked us before if we lose money on some cards. The answer is yes, we do. We set the 2.5% based on our card mix. Over time this could change although we try to keep this base price fixed and give offers in the form of promotions instead

    .. for example, the CSR card costs well over 2.4% to accept and there is no “negotiation” that comes with this cost even at scale.

  • American Express no longer costs more than premium Visa cards to process it’s just that Visa is cheaper on average because they have more non-rewards cards out there and those cost less.

    At this point, most amex cards aren’t more expensive than the similar Visa cards.

    It’s just that there are lots of visas that are cheaper from being cards with absolutely 0 benefits or rewards.

  • Plastiq may let you add an invoice when submitting a payment soon. One frustration is that they go to great lengths to audit or verify some transactions, both to protect themselves from fraud and to satisfy payment networks that you’re really paying bills (and not paying yourself, or paying debt with debt).

    This won’t mean sending a copy of the invoice or bill with the check, but would speed things up if you proactively gave them what they might have to come asking for.

    We are working on adding a feature to allow you to add invoice as part of your payment. This will allow us to review and approve payments more quickly and should be a better customer experience. However, this is different than having that actual invoice (or some payment stub) being sent as PART of the actual check.

  • Will the Chase Ink Business Preferred Card continue earning 3 points per dollar with Plastiq?

    If you look at past discussions by Chase, including their public earnings calls/transcripts, they have mentioned several times how they were intentionally aggressive with, say, the CSR card and its bonus when it came out. This was despite analysts asking them about the huge cost, which Chase more/less summarized as “not a big expense” for their longer term goal of retaining the customers as part of the overall bank (i.e. card is just an entry vehicle to relationship with Chase banking).

    Point is, these bonuses are a rounding error as part of a broader strategy. I can also confirm that Plastiq is 100% following VISA and Chase rules in how we are processing these payments, so there are no surprises to anyone. Of course, as we have seen in the past, many issuers change their offers/bonuses from time to time.

  • A Plastiq loyalty program is coming

    We do have plans for some type of loyalty program where you could earn FFDs (or similar) for continued use of Plastiq. Likely next few quarters.

  • Why Plastiq isn’t working with some Visa prepaid cards

    This was an unfortunate side effect of the general changes we had to make to VISA consumer cards. Turns out that the MCC we now must process under for VISA consumer (6051) is outright blocked by many prepaid programs. Separating Plastiq’s use case, this kind of makes sense as for risk/fraud reasons many prepaid issuers don’t want to have their prepaid cards used for account funding/loading reasons (the definition of 6051) – it could be a prime use case for money laundering, etc.

    Obviously in our case the use cases are quite legitimate (paying bills). Hopefully as we work with VISA to change this MCC overall (see other question), prepaid issue will also be solved. Stay tuned.

Plastiq

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. Really fascinating stuff and kudos to the CEO for being frank about the numbers they do.

    I try to check BoardingArea every day but I missed that Plastiq is currently having issues with VISA regarding how much you of a payment you can make. At the moment you can only do 20% of your credit limit for most VISA payments. This is a really important note. If your credit limit for the card you’re trying to hit your bonus spend is $5000, you can only process transactions for $1000 at a time for the moment for most VISA cards. Also, you can’t process another payment until you’ve paid down that 20% limit (most credit card’s cash advance limit is 20% of the credit limit). This means making multiple payments during the month to my credit card rather than waiting for the end of the billing cycle to make the full payment.

    It’s been a minor inconvenience to manage but in the end, as long as you’re conscious of this 20% limit and are paying it down before you process another payment, the process is relatively smooth. Plastiq is “working on resolving this issue” for what it’s worth so hopefully soon, we can go back to the old days where you didn’t have to worry about this 20% rule.

    My referral code is 656912, and using it gives you 500 fee-free dollars on your first transaction.

  2. “Plastiq may let you add an invoice when submitting a payment soon.”

    I’ve been making vendor payments of $10K+ for a couple of months (ACH), and they always ask me to attach an invoice.

  3. I had an Ink Plus which I downgraded to an Ink Cash. Am I still eligible for the bonus? Is this card subject to 5/24? It’s worth it to me for the 3x Plastiq but I worry that would go away.

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