| 8 min read

The Problem with Monthly Payment Cycles for Advertisers

Successful advertisers are dedicated to finding places where it makes sense to spend more to make more. Which means they watch the algorithms on the digital platforms where their customers are and watch for when the ad is converting and the algorithm favors ramping up. Unfortunately, the weakest link in the chain is usually their credit card.

What’s wrong with my credit card?

“What’s wrong with my credit card?” is a fair question. Afterall, it works the way it should for all kinds of other business expenses, right? For the most part, it seamlessly pays for business expenses like gasoline, hotel rooms, airline flights, and even purchasing inventory. Unfortunately, paying for advertising on Facebook, Google, or one of the other social media platforms is different from your typical business expense.

For starters, although they recognize that online advertisers can be great cardholders or bank customers, they don’t understand what advertisers need in a credit or charge card. They try to treat them like every other small business customer with a monthly payment cycle, unrealistic credit limits, and the inability to respond when opportunities arise to ramp up ad spend to take advantage of more profit potential.

The standard credit model used by most banks and credit card providers means they can’t facilitate the ramp in spend and instead throw on the brakes by turning off your card and subsequently shutting down all your active campaigns.

Unrealistic spending limits and a monthly payment cycle

Unlike your typical small business counterparts, advertisers often spend more on a daily basis—a lot more relative to their business size. The average credit card provider simply can’t wrap their heads around how to underwrite your credit card business. Let me share a little inside baseball to help make the point.

Let’s say your successful brand is spending $50,000 or more a day (which is a conservative estimate, there are brands that spend ten or twenty times that everyday). A monthly billing cycle would mean you would require a spending limit of $1.5 million dollars just to get through the month. Spending $10,000 per day, you’d be spending $300,000 every month, which would be in excess of most credit card company’s typical maximum spending limits for even the most creditworthy small businesses.

Some advertisers use multiple credit cards in an attempt to overcome these limitations.

“I know people who are trying to use something like 12 AMEX Gold Cards to keep up with daily ad spend, that’s far too complicated for us,” says Sean Frank at the online brand RidgeWallet. “And some of the cards designed to help small businesses are even predatory. They charge 50% APR and take their money first, before anyone else gets paid, so you can’t prioritize a payment.”

Using multiple cards and making daily payments to keep them alive can be a challenge for any brand, which is why most of the time a traditional credit card just doesn’t work for advertisers.

What does work?

Traditional credit cards set your spending limit based on how they evaluate your creditworthiness so to keep spending you need to “push” your payment to whoever the card provider may be before you go over the limit. This is considered a “push” because you are pushing your payment to the card provider before you exceed your limit.

This is often problematic because there are times, weekends and holidays, when the provider is closed and unable to accept your payment. Not a big deal, right? It becomes a big deal if your ramp in ad spend tends to happen on the weekends and during holidays when people tend to be shopping. Think Black Friday. In order for the “push” to work, you need to be very good at forecasting so you can anticipate when to send a payment and wait for it to be credited to your account so you can continue to advertise successfully on those busy weekends and holidays.

This is how traditional credit cards work and how they can unintentionally handicap ad performance. Because some advertisers might be bumping up against their spending limit every day or two, this can cause a big problem for a lot of advertisers. Even if they’re paying down their card every day, it takes another day or two (sometimes longer) for that payment to post to the account in addition to however long the card provider holds the payment before they authorize the card again.

The solution is a card provider that doesn’t evaluate spending limits by the calendar month or rely on the “push” approach. A card designed for advertisers uses individualized payment cycles based on the advertisers revenue cycle and ad spend. The statement cycle for an advertiser doing $50,000 or more on a daily basis might be two or three days. And, to ensure that ads keep running 24/7 without a card failure, the payment is seamlessly “pulled” from the bank account before the limit is ever exceeded.

For those brands that are regularly pushing up against their spending limit, are making daily credit card payments, or using multiple cards to keep their advertising running smoothly, the “pull” approach could be the answer.

Multiple ways to get the spending limit you need

Although your credit history, annual revenue, and other traditional underwriting factors are all important when evaluating and establishing a spending limit, there are other things like your revenue cycle, the amount of ad spend, and other factors that are folded into how a spending limit should be calculated.

If you’re interested in learning more about dash.fi, would like to pay 0% interest, get up to 3% cash back, and would like to evaluate whether it’s a good fit for your brand, speak to one of our experts to see if it’s right for you. Answer a few simple questions and we’ll be able to help you determine if dash.fi is a good fit.

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