What paying by invoice actually means

Paying by invoice means the goods reach you first and you pay afterwards. Instead of paying at checkout by card or PayPal, you choose the invoice option, receive your parcel as usual and also get a payment document, either in the parcel or by email, with the bank details for the transfer.

For you, little changes when you place the order; the only difference is when you pay. It is exactly this delayed payment that makes the method especially practical in some situations, and at the same time riskier for the retailer than immediate payment.

How it works behind the scenes

Unlike paying in advance, paying by invoice often involves a specialist payment provider that takes on the risk and the handling for the retailer. This provider pays the retailer the amount up front and collects it from you later, so the retailer does not have to wait for your money until the invoice is actually settled. For you, this means your payment may not go directly to the shop but to this provider, which is stated on the invoice itself.

Why not every order is approved for it

Before an order on invoice is confirmed, the payment provider briefly checks your creditworthiness in the background, usually automatically and without you noticing much of it. If this check comes back negative, or the basket goes over an amount set by the provider, the option is either not offered at checkout at all or removed again after the check, and you have to switch to another payment method. This does not only affect people with a poor payment history: new customers who have not ordered from the shop before are sometimes rated more cautiously at first too.

The advantage when trying things on and making partial returns

The real advantage of paying by invoice shows mainly when you are not sure you will keep everything in an order. Say you order three jumpers at 45 euros each, 135 euros in total. Two of them fit and you keep them, one goes back. When you pay by invoice, you only transfer the money once it is clear what you are keeping, so just 90 euros for the two remaining jumpers.

Had you paid in advance by card instead, you would first have been charged the full 135 euros and then had to wait for the refund of 45 euros for the returned item until the return reached the retailer and was processed. So the difference is not in the total you pay in the end, but in whose money is tied up in the meantime.

Where the limits lie

The payment deadline stated on the invoice is binding, even if a return is still on its way. If you do not pay at all, the provider will first send a reminder, and later the debt may be passed on to a collection agency, with extra costs that can exceed the original value of the goods. Paying by invoice postpones the payment, it does not cancel it, and a missed due date ends up weighing more heavily than with an order paid straight away, where there is no such deadline in the first place.

Some providers also charge a small surcharge for invoicing compared with an immediate payment method, because the risk they take on and the effort of chasing payments have their own costs. Whether this applies at a particular shop is usually shown with the payment methods at checkout or in the delivery terms.

When the invoice is missing from the parcel or gets lost

Some shops do not put the invoice in the parcel but send it separately by email or make it available to download in your customer account. If you cannot find an invoice in the delivery, it is worth first checking your account with the shop or your inbox before assuming the payment request is missing or wrong. A lost invoice does not usually release you from the payment deadline, so it makes more sense to get hold of a copy in good time than simply to put off paying.

Paying by invoice across borders and outside the EU

Within the EU, many shops offer paying by invoice using broadly the same mechanisms whichever member state you order from, even if a different payment provider may be working in the background in individual cases. Outside the EU, for example in the UK, the US, Canada or Switzerland, each country has its own rules, and a statutory right of withdrawal for online purchases like the one required within the EU is not a given everywhere. Whether and on what terms a shop offers payment by invoice to another country is up to the shop itself. If you order on invoice from a shop in another country, it is therefore worth checking beforehand which terms actually apply to that particular order, instead of assuming the rules you are used to at home.

How it differs from instalments and immediate payment

Paying by invoice is not paying in instalments: the whole outstanding amount is due on one date, not split over several months. How instalment plans and buy now, pay later work in detail is covered in a separate article. Both differ from paying by invoice mainly in that the payment is split into several instalments and in the provider's own terms.

A look at online shop payment methods compared also shows where paying by invoice stands against paying in advance, card and PayPal. Since the question of who pays for returning an item often comes up anyway, returns and return costs when you shop online is a useful addition, as are the basics of the 14-day right of withdrawal for online purchases in the EU, which applies whichever payment method you choose.

Frequently asked questions

Why am I sometimes not offered the option to pay by invoice?

Usually because of an automated credit check in the background, or because the basket is above an amount set by the payment provider. The option is also sometimes not yet offered on a first order with a shop.

Do I have to pay before a return has reached the retailer?

The deadline stated on the invoice keeps running regardless of a return in progress. If in doubt, it is worth asking customer service how a return that has not yet been processed is handled, rather than simply letting the deadline pass.

What happens if I pay the invoice late?

Usually you first get a reminder, and later the debt may be passed on to a collection agency with extra costs. That is why it is worth keeping an eye on the due date, even if the goods themselves arrived long ago.

Is paying by invoice the same as paying in instalments?

No. When you pay by invoice, the whole outstanding amount is due on one date, whereas an instalment plan spreads the total over several payments over a longer period.