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What is Plastiq and How Does It Function?
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What Is Plastiq and how Does It Do Its Work?
To pay a small fee, Plastiq lets you use credit or debit cards to pay for expenses that typically don't accept cards for payment.
by Melissa Lambarena Lead Writer | Credit cards, debt Melissa Lambarena is a lead writer on the credit cards team of NerdWallet. She has been a passionate writer covering the subject of credit cards for more than six years. Her previous experiences include nine years as a content creator for several publications and websites. In her writing, she strives to assist readers in extracting value from credit cards for financial goals such as stretching their budget, building credit, traveling to dream destinations, and repaying debt. She explores these topics and others in and The Millennial Money column featured in The Associated Press. Her work has also appeared in The New York Times, Chicago Tribune, The Washington Post, USA Today and Yahoo Finance, among others. Melissa has a bachelor's degree in sociology at The University of California, Los Angeles.
Updated Feb 10, 2023 10:13AM PST
Written by Kenley Young Assigning Editor Credit scores, credit cards Kenley Young directs daily credit cards coverage for NerdWallet. Prior to that, he worked as an editor of the homepage and digital content producer at Fox Sports, and before being a front-page editor at Yahoo. He has a wealth of experience in both digital and print media, with times as a copy desk chief, a wire editor and an editor of the metro for The McClatchy Newspaper chain.
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is a service that allows businesses and individuals to make use of credit or debit cards to pay vendors that do not normally accept these payment methods.
As a way to provide this convenience, Plastiq charges you a processing fee, which could be costly -- as of December 2022 . And of course that if you're using a credit/debit card and you're unable to pay the monthly bills, you'll incur interest at whatever ongoing rate the card is charged.
However, if you require breathing room as you wait for a windfall or paycheck to arrive, Plastiq could be cheaper than a higher-interest alternative like a or -- depending on whether you are able to pay the bill off quickly and, in particular, when you have the rewards credit card which will cover the processing cost.
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Plastiq The fundamentals of Plastiq
Plastiq allows one-time or regular payments for bills such as , mortgage and utilities, day care homeowner association fees, and other expenses. You can add a debit or credit card to your Plastiq account and debit it in amounts equal to your bill and then Plastiq pays the company on your behalf through an option that the vendor will accept: or an old-fashioned paper check. (Checks can, for example, be appear to the vendor as being from you, not through Plastiq.) The recipient does not need an account with Plastiq account to make payment.
" Plastiq is a service that lets businesses and people make use of credit or debit cards to pay vendors that do not normally accept these payment methods. "
Plastiq typically will charge the 2.9 percent fee for debit and credit cards. The terms and conditions apply. The service is compatible with:
Visa.
Mastercard.
Discover.
.
However, certain credit cards are restricted in the kind of bills you can pay using Plastiq. For example, Visa cannot be used to pay mortgages through the bill pay service.
Plus, Chase recently unveiled a and it's not known what consequences could have on transactions made with the Chase card using Plastiq.
Nerdy Tip
From Feb. 10, 2023, Plastiq no longer accepts American Express.
How it works
Start by creating a free account using Plastiq and then adding your debit or credit card details. You can choose to add multiple cards and pick one as your default.
Additionally, you'll need to add recipients to your account, including the name of the vendor and their country. This information will be saved on your account for future reference.
" Checks generally take around eight days to be delivered according to the website of Plastiq, so build in some padding on the calendar to avoid paying late. "
For a transfer choose who you want to pay, how much to be paid, the recipient's preferred payment method (ACH wire transfer, wire transfer, or check) and the due date for the funds to reach them. You may also need specific details about the invoice you're paying such as, for instance, a loan amount for mortgage and a unit code for rent due for an apartment, etc. You can add more details under"memo" section "memo" section.
You can make a one-time payment or schedule them to repeat automatically. If you are a recipient who accepts checks sent by postal mail, you might be required to send the check earlier than the normal. Checks typically take eight days to reach you, according to Plastiq's website Therefore, you should include extra time on your calendar to avoid making payments late.
Plastiq offers details of fees, in terms of dollars and a percentage, on the screen for reviewing payments before you can complete the transaction. When you instruct Plastiq to make the money, you'll receive multiple email confirmations from the company throughout the process, including a confirmation of the initial transaction, as well as a notification when a check is physically mailed to the seller for payment, and a message once the beneficiary cashes it. (If for some reason your payment cannot be completed, Plastiq will notify you.)
Nerdy Tip
Certain credit cards might not be compatible with third-party bill payment services. Before making a purchase, you should go over the terms and conditions, or ask the issuer what (or what) the transaction will be handled. It could be considered an advance in cash instead of an actual purchase. Plastiq says that it notifies customers of this and blocks transactions before they are considered cash advances.
The costs
For debit cards
The benefit of using a debit card to charge Plastiq is limited. You'll be charged a 2.9% processing fee that you could avoid by simply writing your personal check directly to the seller. (Plastiq was previously charging just 1% on debit cards, however, it raised the fee to match the one on credit card transactions in the month of March.)
However, if you're not interested to order personal checks, purchase stamps, visit the post office or the post office, etc. Then Plastiq does cut those corners for you. But, you must be careful to only use the service when it doesn't risk overdrawing your account.
For credit cards.
Credit cards are a much more interesting use case because they actually Plastiq lets you pay bills before you have the actual cash on hand. And floating yourself the money by using a credit card this way can be a cheaper alternative to alternatives like cash advances.
" The option of floating your money with a credit card this way can be a cheaper alternative than other options like cash advances. However, it's definitely not without cost or risk. "
But it's definitely not without cost or risk. To begin it's a 2.9 percent processing cost might seem like a lot however in the event that you use Plastiq to make a check for $2,000 in rent that adds $58 to your final amount. Using a Rewards card which earns say, can reduce that cost, but you'll be very difficult to get rid of it in the event that you're receiving any sign-up bonuses through spending.
Secondly, if you can't afford to pay off that $2,058 charge in your credit card's billing cycle, you'll get penalized with the card's continuous interest rate. And rewards cards generally have the most high annual percentage rates of most, often with rates that exceed 20%.
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Nerdy Tip
Your credit card's can buy you a few days to avoid accumulating interest. The grace period is the period of time that runs between the close each billing cycle and the date the payment due. Grace periods aren't applicable to credit card cash advances, but they could apply with a service like Plastiq. Remember that if you carry a balance, your card issuer will end the grace period.
The most important thing is the bottom line
In the end, Plastiq is a service that is best utilized strategically. It will help you hold on to cash reserves if you need these in the short-term as well as being relatively inexpensive in comparison to other options for quick cash.
However, using it to pay bills that you cannot afford at all is costly and not sustainable after the revolving credit card's interest starts to kick in.
About the author: Melissa Lambarena is a credit cards writer at NerdWallet. Her work has been featured by The Associated Press, New York Times, Washington Post and USA Today.
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