Essential Facts About Credit Cards: Myths, Fees, and B2B Alternatives

Table of Contents

1. Interesting facts about credit cards
2. 5 advantages of credit cards
3. Facts and myths about credit cards
4. What are 3 pros and 3 cons of credit cards?
5. The better B2B payment solution: Paystand vs. credit cards

Key Takeaways

• Credit cards are widely used in business but have complex systems and fees that can be costly for B2B transactions
• Credit cards offer convenience, rewards, fraud protection, credit-building, and emergency cash access but are less ideal for B2B payments
• Credit card fees are significant expenses that undermine business profits and present reconciliation challenges
• Credit card payments are prone to delays, chargebacks, and fraud, leading to inefficiencies in B2B transactions
• Alternatives like digital wallets and direct bank payments are increasingly favored for B2B transactions due to lower fees and streamlined processes
• Paystand offers a payment infrastructure that eliminates credit card networks, reduces costs, and enhances security and efficiency in B2B payment

Credit cards have become an essential payment method in our business world, but how well do we understand their complex systems and fees? Are there alternatives to credit cards for digital payments and B2B transactions? Here are some facts about credit cards to further explain.

Interesting Facts About Credit Cards

Credit cards have become an essential part of our daily lives, offering convenience, security, and the ability to purchase with just a swipe or tap. However, there are several lesser-known facts about credit cards that might surprise you.

1. Early credit cards, introduced in the 1940s, were made of metal or cardboard. Plastic credit cards became popular in the 1950s.
2. IBM created the magnetic stripe for credit cards in the 1960s. It initially stored the account number but later included more data, such as the cardholder's name and expiration date.
3. The CVV code on credit cards is not "Card Verification Value."It's generated using an algorithm considering account number and expiration date factors.

5 Advantages of Credit Cards

1. Convenience: Credit cards provide a convenient payment method for purchases, eliminating the need to carry cash or a checkbook. This is particularly useful for online shopping and large purchases.

2. Rewards: Credit cards provide rewards programs for points or cash back, redeemable for travel, merchandise, or statement credits. Some cards offer perks like airport lounge access or car rental discounts.

3. Protection: Credit cards provide fraud protection. If lost or stolen, you can report it to the company for cancellation and a replacement—there is no liability for unauthorized purchases.

4. Credit-building: Responsible credit card use builds your credit score, leading to better loan and credit terms.

5. Emergency access to cash: Credit cards offer quick access to cash for unexpected expenses or large purchases.

Facts and Myths About Credit Cards

Myth: Credit Cards are the Best Option for B2B Payments

Fact: Credit card fees are a significant and growing expense for businesses, potentially costing companies anywhere from $30,000 to nearly $2 million annually.

These fees, which include processor, interchange, assessment, and authorization fees, can add up quickly and undermine profits. Additionally, credit card fees present challenges related to month-end close, such as applying or passing the fee and reconciling transactions.

While ERPs can help manage credit card fees, they may not handle all aspects, such as collecting transaction information, and often require manual data entry.

Myth: Credit Card Payments are the Most Efficient

Fact: Credit card payments are prone to delays, chargebacks, and fraud due to the multiple channels they're routed through.

Automated digital options are replacing traditional payment methods in the rapidly evolving B2B payments landscape. Customers increasingly expect B2B transactions to be as convenient and secure as B2C payments. In 2022, 45% of B2B transactions were digital, and Gartner predicts an 80% increase by 2025.

Customers want intuitive interfaces, simple account setup, real-time processing, transparent transactions, and mobile compatibility, which credit cards lack. B2B payments must evolve to meet these expectations.

Myth: Credit Card Fees Don’t Affect Business Revenue

Fact: Credit card fees can significantly impact businesses, particularly B2B transactions.

Fees range from 1.29% to 3.3% per transaction, and even small shifts of 0.1% can cause substantial savings or losses. The more credit cards are used, the higher the processing fees become, leading to reconciliation challenges that hinder scalability.

To mitigate these costs, businesses should consider alternative payment options that minimize fees and streamline reconciliation processes.

Myth: There Aren’t Better Alternatives to Credit Cards

Fact: Digital payment options, such as digital wallets, direct bank payments, and integrated B2B payment platforms, offer many advantages over traditional payment methods.

These zero-touch digital payment options streamline the payment process, reduce fees, and minimize manual data entry. User-friendly features, like automatic email invoicing with embedded payment links, enhance customer convenience and simplify reconciliation for accounts receivable teams. These digital payment solutions can lead to significant time savings, reduced phone calls related to payments, and a shorter month-end closing process.

Myth: There’s Nothing to be Done About Credit Card’s Drawbacks and Inconveniences

Fact: Paystand is revolutionizing payments with a groundbreaking payment infrastructure that eliminates business transactions and convenience fees.

The Paystand Bank Network connects businesses and financial institutions directly, eliminating the need for intermediaries such as credit card networks. This direct connection enables faster, safer, and lower-cost payments.

What Are 3 Pros and 3 Cons of Credit Cards?

The Better B2B Payment Solution: Paystand vs. Credit Cards

While credit cards offer certain conveniences and rewards, their associated fees, processing delays, and fraud risks make them less than ideal for B2B transactions. The Paystand B2B Network eliminates the need to rely on traditional credit card networks by reducing transaction costs, speeding up payment processing, and enhancing security by directly connecting businesses and financial institutions.

As B2B payments evolve towards more efficient and transparent systems, the Paystand B2B Network stands out as a that addresses credit card payment drawbacks and empowers businesses to streamline their financial operations for greater scalability and success.