Cash On Delivery - COD

Loading the player...

What is 'Cash On Delivery - COD'

Cash on delivery (COD) is a type of transaction in which the recipient makes payment for a good at the time of delivery. If the purchaser does not make payment when the good is delivered, then the good is returned to the seller. The recipient can make payment by cash, certified check or money order, depending on what is the shipping contract stipulates.

BREAKING DOWN 'Cash On Delivery - COD'

This type of transaction usually takes place through a shipping company and allows both the seller and the buyer of the product to minimize the risk of fraud or default. COD allows the purchaser to pay at the time of delivery instead of having to pay upfront. The purchaser remits payment to the shipping company, which then relays the payment back to the seller.

Advantages and Disadvantages of COD Transactions

For consumers without credit cards, COD purchases offer a convenient way to order goods online or through mail order businesses. The transactions pose low risk for the buyer since he doesn't pay until he receives the product in satisfactory condition. COD transactions also protect the buyer against scams by online fraud artists who often pose as legitimate businesses to collect credit card information for illegal uses. In COD purchases, the buyer knows that the merchandise must actually show up before he needs to pay out any money; however, COD payment options may lead some consumers to make unwise purchases due to the ease of online ordering and the ability to defer payment until delivery.

On the merchant's side, offering a COD payment option may enhance buyer confidence in a new company that does not yet have strong name recognition. This can lead to more customers and increased sales. As another plus, since COD transactions do not involve a credit card, merchants save money on credit card transaction fees. Merchants can pass these savings along to the consumer in the form of lower prices.

In addition to enjoying the benefits of COD transactions, merchants who offer this payment option must be prepared to assume certain risks. Since the consumer may refuse delivery when the goods arrive, the seller may wind up carrying the costs of shipping for returned items. Delays in shipping or difficulties coordinating delivery times with buyers can also lead to frustrating waits for payment.

In some countries, including India and Pakistan, cash on delivery transactions are boosting Internet commerce. COD transactions are also popular with many younger consumers who do not yet have a credit card and consumers with poor credit who have no other means of paying for online goods.

RELATED TERMS
  1. Primary Mortgage Market

    The market where borrowers and mortgage originators come together ...
  2. 100% Mortgage

    A mortgage loan in which the borrower receives a loan amount ...
  3. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against ...
  4. Mortgage Originator

    An institution or individual that works with a borrower to complete ...
  5. Secondary Mortgage Market

    The market where mortgage loans and servicing rights are bought ...
  6. Mortgage Pool

    A group of mortgages held in trust as collateral for the issuance ...
Related Articles
  1. Retirement

    A Guide to Arizona's State Retirement System

    The Arizona State Retirement System offers a defined-benefit plan for former teachers, state workers and public employees.
  2. Mutual Funds & ETFs

    2 Reasons to Be Wary of New ETFs (IFLY, EQLT)

    Pay attention to the number of thematic and smart beta ETFs that may fail to survive as a result of poor performance and thin trading volume.
  3. Forex

    Global Utilities: Exploring Revenue Trends & Fundamentals

    Analyze global revenue exposure in the utilities sector to learn about the impact of currency, regulation and economic growth on geographic contributions.
  4. Home & Auto

    4 Alternatives to a Traditional Mortgage

    If you can't qualify for or don't want a traditional mortgage, one of these options might be right for you.
  5. Home & Auto

    Understanding Mortgage Impound Accounts

    Home buyers with low down payments may get stuck with higher mortgage payments. Find out what you get for the extra money.
  6. Investing

    Municipal Bonds Offer Something More for Everyone

    Are municipal bonds really for me? The popular perception is that tax-exempt income only benefits those investors in the highest tax brackets.
  7. Retirement

    5 Top Alternatives to a Reverse Mortgage

    If you have substantial home equity and don't want to do a reverse mortgage to tap it for retirement expenses, cost out these viable alternatives.
  8. Credit & Loans

    What Is an Alt-A Mortgage?

    Called "liar loans" for their low documentation requirements, Alt-A mortgages were hot until the subprime crisis. Now Wall Street wants to bring them back.
  9. Home & Auto

    Understanding Mortgage-Backed Securities

    Find out the meaning of this popular asset-backed security and its benefits for banks and investors.
  10. Investing

    Berkshire Hathaway Stock: Capital Structure Analysis (BRK.A)

    Review the capital structure of Berkshire Hathaway, and understand how equity and debt capitalization and enterprise value may interact with each other.
RELATED FAQS
  1. How safe are money market accounts?

    Learn the difference between a money market account and a money market fund. Both savings vehicles are relatively safe, but ... Read Answer >>
  2. Why is Belize considered a tax haven?

    Explore the factors that make Belize one of the most modern and corporate-friendly tax havens in the world, including its ... Read Answer >>
  3. What is an assumable mortgage?

    The purchase of a home is a very expensive undertaking and usually requires some form of financing to make the purchase possible. ... Read Answer >>
  4. Why would a homebuyer need to take out PMI (private mortgage insurance)?

    Learn why some home buyers are required to take out private mortgage insurance (PMI), and how it affects the total monthly ... Read Answer >>
  5. Why does the majority of my mortgage payment start out as interest and gradually ...

    When you make a mortgage payment, the amount paid is a combination of an interest charge and principal repayment. Over the ... Read Answer >>
  6. What are the disadvantages of a Roth IRA?

    Get informed about Roth IRAs, which have a few disadvantages, including limited access to funds and contribution limits based ... Read Answer >>
Hot Definitions
  1. Physical Capital

    Physical capital is one of the three main factors of production in economic theory. It consists of manmade goods that assist ...
  2. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  3. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  4. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  5. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  6. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
Trading Center