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Credit Card Opportunities

April 13, 2006

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In addition to government contracting, there is a whole new area of opportunity that isn't included in the figures above: credit card buying, often referred to as "micro-purchasing."

In Fiscal Year 2003, the federal government spent an additional $16.4 billion in credit card purchases. Yes, you read that right, $16.4 billion in business just using that little old piece of plastic money. Since 1984, when credit card purchases were first authorized, the number of credit card transactions has grown from 4.2 million to 26.5 million in Fiscal Year 2003. This means that, on average, over 72,587 transactions were placed each day. The amount of dollars spent with credit cards by government personnel, not just official government buyers, grew from $1.6 billion to almost $16.4 billion.

Although the largest credit card users were the Department of Defense, the Department of Veterans Prime Vendors and the Department of Veterans Affairs, accounting for almost $12.1 billion, every government office utilizes the credit card for almost everything it needs. That means that you can potentially have a government customer right next door. Does your company accept credit cards? If not, you might want to think about the advantages of offering credit card purchasing as a part of your business strategy. Remember that the private sector is also increasing its use of the credit card.

In all, about 70 percent of all procurement transactions in government are for micro-purchases (i.e., sums under $2,500) and are done with a credit card. (This is similar to the situation in the corporate world.)

Here's more information on how to establish a merchant account so you can accept credit cards, .

The government most often uses MasterCard or Visa, but does use others like American Express and Discover. If you decide to set up your account for either MC or Visa, you should be OK. It is best to shop around because the charges vary significantly. Something else to consider is using the newer wireless systems that allow you to use it where needed without being hard-lined to a given location. Depending on the usage level, it may pay to buy the hardware rather than rent. Choose the most cost-effective method for you.

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While the article touches on the MicroPurchase program at a very high level, there are several very important facts left out. You need to discuss that the MicroPurchase program is not only a purchase threshold, but a contracting platform where all payments are made by the SmartPay Purchase Card. SmartPay is a program managed by the General Services Administration and the Purchase Card is but one of three cards used by nearly 300,000 government employees (Fleet and Travel are the other two cards). The MicroPurchase program did not increase Government spending, it actually alleviated a major burden from warranted contracting officers by allowing trained, non-acquisition government workers to procure goods and services for incidental and operational requirements. Since it basically took the same amount of time to process a $2500 purchase as it did a $250,000 purchase. Additionally, Purchase Cards are frequently used to procure purchases in the Simplified Acquisition range ($2500 to $100,000) as well. Finally, the SmartPay Card is actually not a credit card. Since the Government makes all payments by electronic payments, the SmartPay Card is a way for Government workers to make electronic payments.

GT