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Invoice Processing: Best Practices for Eliminating Costly Errors

Posted by Michael Noble - 15 August, 2022

Evolving Credit and Terms

Topics: Finance, Credit, Management

The world of credit is constantly evolving, and incrementally as technology continues to improve. From what started as trading goods for services, offering monthly account tabs, and handing out credit coins and charge plates to loyal customers has since changed into Diner’s Club cards, further matured into American Express charge cards, and finally into credit cards.

Where It All Began

John Biggins of Biggin’s Bank, introduced the first bank card in 1946 in Brooklyn, NY. The caveat was that these “Charg-It” cards were only useful for local purchases by customers that held an account at Biggin’s Bank. “When a customer used it for a purchase, the bill was forwarded to Biggins' bank. The bank reimbursed the merchant and obtained payment from the customer.”

The Diner’s Club card was the next type of charge card on the scene, offering an alternative payment for travel and entertainment. In 1949 the Diner’s club card was born and created on a piece of cardboard, and in the next three years, had developed over 20,000 card holders. At the end of a 10 year span, Diner’s Club cards were handed out in plastic form as a charge card where all accrued expenses during a billing cycle had to be paid in full. In the same span of time American Express launched into the credit for travel and entertainment scene and is credited as being the first plastic card to the market in 1959. Both AMEX and Diner’s Club cards were created on a closed-loop system, where card holders had to pay off their balance in full at the end of their billing cycle.

In 1966 an open-loop credit card was introduced, according to MasterCard. This offered card holders the flexibility to open more cash flow by maintaining their card balance from month to month, and not having to pay off their statement in full. However, this would incur users with a monthly interest rate that was added to their bill based on their total purchase amount. By 1987 more banking institutions joined the party to offer their own custom-branded credit card.

Current Credit Issues

With the wide availability of credit cards comes fees for both merchants and consumers. On average, a merchant accepting a card will incur a 2-5% fee based on each consumer’s purchase, whereas the consumer will incur fees if they do not pay their bill in full at the end of the billing cycle. A similar scenario is in effect for bank loans, however the interest rate is wrapped into the duration of the loan, and a monthly billing cycle is set with terms and late charges may be applied if not paid on a timely basis. Merchants work similarly when they offer a revolving line of credit to their customers and ultimately become a bank to offer financing for each customer account.

Offering Credit Helps:

• Allow customers to spend more money (increased profit)

• Build relationships and retention

• Increase focus on product, and less on price

There is a solution that still allows the benefits of offering credit terms to your customers, with the advantage of not being a bank for them at the same time. Apruve, an online credit management solution, takes away the burden of becoming a bank for your customers by offering Corporate Accounts on your company’s behalf. The terms stay the same, but the merchant is paid once the sale goes through, instead of waiting around for a month to recoup the financial loss.

Net terms accounts receivable


Apruve enables large enterprises to automate long-tail credit and A/R so you can stop spending 80% of your time and resources on 20% of your revenue. We partner with each of our customers to solve their unique credit, payment, and accounts receivable challenges and build the right credit solutions for your markets, customers, and goals. 

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