In the past, payments to freight forwarders were mostly handled via a Letter of Credit, involving a lot of paperwork and banking bureaucracies. Nowadays, the three most common ways to pay your freight forwarders are: wire transfer, 15 or 30 day credit, and credit cards. Let’s take a quick look at each one of these payment methods.
This payment method is almost like cash-in-hand. You will need to make a wire transfer to your forwarder’s bank before they can confirm a shipping order. This means that you will have to pay for your shipping before your merchandise has departed from origin, or before the release of your merchandise after the arrival at destination.
Wire transfers are not so popular for shipping payments because they usually affect the payer’s cash flow. However, it might be the only option with some forwarders that do not offer credit terms or credit card options.
Furthermore, some forwarders have payment policies which indicate that new customers have to pay in advanced before a shipping order is placed, since new customers might not be able to qualify for credit terms immediately. If you are a new customer who has applied for credit terms that are still unconfirmed but you have an urgent shipping order to place, you might as well pay with a wire transfer before the credit terms are confirmed.
15 or 30 day credit terms
Just like the name says it, you have 15 or 30 days to pay for your shipping order. Most of the time, you receive the invoice for shipping services the same that the cargo is delivered to its final destination. From that date, the 15 or 30 days of credit start running. With this method, you do not need to pay in advance and interrupt your cash flow. Once the credit terms end you need to pay and late fees will apply. If you take more than the allotted time, you will be assessed a 2% - 5% interest fine, depending on the freight forwarder.
These credit terms are offered by most forwarders, but the speed with which they approve them after application varies. You might find that, with some of them, your credit application is approved within 1 day, and with others it is approved within weeks. Keep this in mind when you become a new customer and have an urgent cargo to ship.
Depending on your credit card cycle and payment dates, credit card payments can be as convenient as using credit terms directly with your forwarder. The main difference in benefits relies on your payment capabilities. If you pay your credit cards bill late, your interest rate will probably be much higher than the interest rate you would pay to your forwarder when your invoices are paid late.
This payment method is not available with most freight forwarders, since freight forwarding is considered as high-risk business by many banks. If it is, you should check as well if you can pay online, as it is more convenient than going to your forwarder’s location for a live payment with a Point-of-Sale system (POS).
Is there the 4th way?
Above are the 3 ways you can pay your freight forwarders. The payment itself, as you may have experienced, can be lengthy and time consuming. It is almost impossible to do it online, rather you will need to physically go to the bank to make a wire-transfer regardless if you pay before or after the delivery.
Is there a 4th (easier) way to pay your freight forwarders? Fleet offers you a new way to do it: now you can pay for your shipment 100% online, even with credit cards. Your payment will be held in escrow with Fleet until you confirm that the shipment is delivered, this way you're guaranteed there would be no surprise charge and freight forwarders are encouraged to provide you with their best customer service. This method has been favored by many shippers as well as freight forwarders. Check out Fleet and try it yourself!