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What is a P Card?|Definition, Benefits and Acceptance Tips

by | Nov 18, 2019

P Cards Defined

Commercial charge cards issued to organizations to purchase goods and services are called P cards or purchasing cards.  The organization distributes the P cards to employees.  Banks and financial institutions issue the cards which carry a major bankcard brand (Visa, MasterCard, American Express, etc). All transactions then process through the existing brand networks. 

Organizations that use P cards are considered end users and individuals issued the cards are cardholders.  Different than consumer credit cards,  these are charge cards and transactions are paid in full monthly not allowing for carried debt.  In addition, the end user is liable for all charges – not the cardholder. 

Issuers and end users collaborate to develop regimented P card use policies and training.    A thorough, initial spend analysis with demonstrative savings as well as examination of current procure to pay processes initiate most P card programs.

Benefits for Buyers

Typical end users to date have come from the government, educational and large corporate sector but use is trickling down.  SMB’s within the private sector now recognize the overwhelming benefits of P card use including:

  • Spending control and limits
  • Tracking tools
  • Fraud prevention
  • Increased efficiencies
  • And importantly, cash rebates based on volume

Benefits are not limited to end users.  P card programs also benefit suppliers.  To date supplier acceptance has been one of reluctance due primarily to the cost of payment acceptance.  However in recent years, with the explosion of transaction volume, and wholesale processing costs available for B2B, attitudes are changing.

Consider the following Benefits for Suppliers

  1. Eliminate slow payments.  Increase efficiency and cash flow.
  2. Transactional volume increases year over year create a hefty opportunity for new revenues for savvy suppliers.  Consider just one renowned buyer – the US government. The US is the largest buyer in the world with 85% of purchases under $2,500 and made via purchasing card.  Because these transactions eliminate invoice requirements/processes, cardholders are free to purchase from preferred vendors. The same goes for state and local government entities and an endless array of buyers within the corporate, health, and educational sectors.  Manufacturers and distributors are getting in on the P card action also.
  3. P card programs drive spend to suppliers that accept the card.  This creates preferred relationship opportunities.  Product and service demand aggregates, creating further revenue growth.

How to Process P Cards at the Lowest Cost Point

Finally, suppliers who process these cards can easily overcome the cost objection of acceptance. 

All credit and charge card transactions have several cost components – with interchange (perecentage of the transaction paid to the card issuing bank) by far the largest.  Because of the unique benefits and rewards associated with these cards for end users, they trigger high interchange rates. 

P card payment processing done right however, substantially lowers the interchange rate.  This specialized level 3 payment processing is realized only when suppliers are underwritten as B2B merchants and use specific payment gateways. 

Suppliers accepting these cards should work with experienced B2B payment processors, market their willingness to accept P cards and become super suppliers.