What is cash on delivery?

Cash on delivery, or COD, is just what it sounds like—cash that’s paid when goods or services are delivered instead of when they’re ordered. Paying for a pizza when it’s delivered to your door is a modern example of cash on delivery. 

These days, it may be more common to pay upfront for the things we buy and have delivered. But there are still some instances where cash on delivery is used. So it’s worth knowing what it is, how it works and what alternatives might be available.

Key takeaways

• Cash on delivery is when a buyer pays for a product once they’ve received and decided to keep it.
• Where offered, cash on delivery can be an alternative to paying upfront.
• Cash on delivery is sometimes known as collect on delivery.

Cash on delivery allows the buyer to defer payment until they receive the goods. When the product is delivered, the buyer must pay before they can take possession of it. 

When it’s offered, here’s how the process can work:

1. The buyer places their order, perhaps on an ecommerce site, and chooses cash on delivery as their payment method. 
2. The seller prepares the item and ships it via a carrier like the U.S. Postal Service to the customer’s address. 
3. The carrier exchanges the goods for cash, a check or a money order from the buyer—sometimes a credit card is even an option—and then passes the payment back to the seller. 

Cash on delivery can be an option for consumers who can’t or don’t want to pay upfront for goods or services.

Cash on delivery is sometimes called “collect on delivery” or “pay on delivery” because payment methods can now also include things like checks, money orders and credit cards.

During a product transaction, the buyer can address any issues with the product before handing over a payment. As for the seller, they can withhold the goods until they receive payment. But they might have to pay upfront for things like shipping, which they won’t get back if the product isn’t accepted. 

Cash on delivery of services can protect buyers from paying for unsatisfactory services. But it can be riskier for the service provider. Some services, like landscaping for example, can’t be “undone” if the customer decides not to pay. One way service providers can protect themselves against nonpayment is by requesting a down payment before starting work.

Cash on delivery gives buyers the chance to pay after receiving the product or service. But it’s a less common method of payment than it used to be.

If you’re wondering about cash on delivery because you don’t have credit or you have bad credit, it might be worth looking into a secured card. You open an account with a security deposit and use it just as you would any credit card. And with responsible use, like paying your statement on time every month, you use a card to build credit. 

For those with more established credit, other options that might be worth considering are low introductory rate cards or cards with special cash back rewards.