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What is Plastiq and How Does It Function?
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What Is Plastiq and How Does It Work?
For a cost, Plastiq lets you use debit or credit cards to pay for expenses that don't typically accept cards for payment.
by Melissa Lambarena Lead Writer | Credit cards and the debt Melissa Lambarena is a lead writer for the credit card team at NerdWallet. She has been a passionate writer covering credit card-related topics for over six years. Her prior experience includes nine years of experience as an author for various publications and websites. With her efforts, she strives to help readers extract benefits from credit cards in order to help them achieve financial goals such as stretching their budget, building credit, traveling to their dream destinations, and paying off debt. She explores these topics and others in and The Millennial Money column featured in The Associated Press. Her work has also been published in The New York Times, Chicago Tribune, The Washington Post, USA Today and Yahoo Finance, among others. Melissa holds a bachelor's degree in sociology at the University of California, Los Angeles.
Updated February 10, 2023 at 10:13 AM PST.
Written by Kenley Young, the Assigning Editor Credit scores, credit cards Kenley Young directs daily coverage of credit cards for NerdWallet. Previously, he was an editor on the homepage as well as a digital content producer for Fox Sports, and before being a front-page editor for Yahoo. He has years of experience in digital and print media, including times as a copy desk chief as well as a wire editor as well as a metro editor for the McClatchy newspapers chain.
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It is a service that lets individuals and businesses use credit or debit cards to pay for vendors who don't otherwise accept those payment methods.
As a way to provide this convenience, Plastiq charges you a processing fee that can be expensive at the time of writing, December 2022 . And of course, if you're using a credit/debit card and aren't able to pay your charges each month, you'll incur interest depending on the current rate your card charges.
However, if you require relaxation while you wait for your paycheck or windfall to come in, Plastiq could be cheaper than a high-interest option such as a loan or depending on whether you are able to pay off the debt quickly and in particular when you have an rewards credit card that will pay for the processing fees.
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Plastiq The fundamentals of Plastiq
Plastiq offers one-time or recurring payments for bills such as mortgage or other loans, utility bills, daycare homeowners association fees and other charges. You add a debit or credit/debit card in your Plastiq account and debit to the value of your bill and Plastiq pays the company on your behalf via the method the vendor accepts: , or a paper check. (Checks are, for example, appear to the vendor as coming from you, and not coming from Plastiq.) The recipient does not need an account with Plastiq account to accept payment.
" Plastiq is a service that allows businesses and individuals to make use of credit or debit cards to pay merchants that aren't able to accept other payment methods. "
Plastiq generally will charge an average of 2.9 percent fee for credit and debit cards. Conditions apply. The service is compatible with:
Visa.
Mastercard.
Discover.
.
However, some credit cards are restricted in the kind of bills that you can pay through Plastiq. For instance, Visa cannot be used to make mortgage payments through the bill pay service.
Additionally, Chase recently unveiled a and it's not known what consequences that may have for transactions that are processed using the Chase card through Plastiq.
Nerdy Tip
As of February. 10, 2023, Plastiq will no longer take American Express.
How does it work
Begin by creating a free account on Plastiq and then adding your debit or credit card information. You can add multiple cards and pick one as your default.
You'll also need to add recipients, including the name of the vendor and their country. The information you provide will be stored in your account for future reference.
" Checks typically take around eight days to be delivered according to the website of Plastiq, so build in some time on your calendar to avoid making payments late. "
To make a payment choose the recipient, the amount to be paid, the recipient's preferred payment method (ACH wire transfer, wire transfer, or check) and the due date for the money to be received. It is also possible that you need specific details regarding the bill you're paying, like, for example, a loan number for the mortgage, a unit number for rent due on an apartment, and so on. You can add more details in the "memo" area.
It is possible to make a one-time payment, or set them up to run automatically. If you are a recipient who accepts cheques via snail mail, you may be required to send the check sooner than normal. Checks generally take 8 days to arrive, according to Plastiq's website So, make sure to include some extra time on your calendar to avoid having to pay in the late hours.
Plastiq gives an explanation of the charges, which are in the form of dollars as well as a percentage, on the payment review screen prior to completing the transaction. When you instruct Plastiq to send the payment, you'll receive multiple email confirmations from the company along the way, such as an acknowledgement of the initial transaction, an email when a check is delivered physically to the merchant for the payment and a confirmation when the recipient has deposited it. (If there is a reason why your payment cannot be processed, Plastiq will notify you.)
Nerdy Tip
Certain credit cards might not work with third-party bill payment services. Before using one, review the terms and conditions, or inquire from the issuer on how (or what) the payment will be processed. It might be treated as a cash advance instead of a purchase. Plastiq states that it alerts clients and blocks payments prior to when they are considered cash advances.
The costs
For debit cards
The helpfulness of charging a debit card via Plastiq isn't that great. The charges will be a 2.9 percent processing cost, which you'd otherwise avoid by simply writing your personal check directly to the seller. (Plastiq was previously charging just 1% on debit cards, but it increased the fees to match that on credit cards in March 2022.)
But if you don't care to order personal checks, get stamps, visit the post office or the post office, etc. If so, Plastiq can cut these corners for you. However, be sure to use the service only when it doesn't expose you to the risk of overdrawing your account.
For credit cards
Credit cards have a more interesting use case because, in effect, Plastiq lets you pay off bills prior to having the actual cash available. Then, floating your money using a credit card in this way is a potentially more affordable alternative to alternatives like cash advances.
" The option of floating your money using credit cards this way could be a less costly alternative to other options such as cash advances. But it's certainly not without risk or expense. "
But it's definitely not without cost or risk. To begin the 2.9 percent processing cost might not seem like much, but if you're using Plastiq to cut a $2,000 rent check and you add $58 to your final total. A rewards card that earns, for instance, a lower cost, but you'll hard-pressed to dodge it entirely unless you are collecting a sign-up bonus via the spending.
If you are unable to afford to pay off the $2,058 amount in your credit card's billing cycle, you'll get hit with the card's ongoing interest rate -- and rewards cards tend to have the most high annual percentage rates of all, many over 20%.
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Nerdy Tip
Credit card transactions can give you some time to save interest costs. Grace periods are the time period between the conclusion of your billing cycle until the time your due date for payment arrives. Grace periods do not apply to cash advances made by credit cards however, they may be applicable to a payment service such as Plastiq. Keep in mind, however, that if you have an outstanding balance, your card issuer will eliminate your grace period.
The most important thing is the bottom line
In short, Plastiq is a service which is best employed in a strategic manner. It can help you hang on to cash reserves if you need these in the short-term as well as being relatively inexpensive when compared to other options for cash in a hurry.
However, using it to pay bills you can't afford initially will be expensive and insufficent after the revolving credit card's interest kicks in.
The author's bio: Melissa Lambarena is a credit cards writer at NerdWallet. She has had her work featured on The Associated Press, New York Times, Washington Post and USA Today.
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