Collect on delivery (COD) is a financial transaction where the payment of products and/or services received is done at the time of actual delivery rather than paid-for in advance. The term is mainly applied to consumer products purchased from a third party, where payment is made to or collected by the deliverer from the recipient rather than the sender, in the way that a collect call is also charged to the recipient instead of the caller. The delivery company in turn remits the charge for the item itself to the company which shipped it, keeping only the portion which it charged for the shipping service.
This type of transaction is better known as cash on delivery. However, as other forms of payment became more common, the word “cash” was replaced with the word “collect” to incorporate transactions with checks, credit cards or debit cards. Even with this, COD has become much less common now, and most companies will not ship this way.
Originally, COD delivery was made when a company owns its own transportation means. That way the delivery person can collect on site. However, because USPS, UPS, FedEx, On Trac, and other commercial shipping companies are often cheaper, most companies use COD to mean that the bill for the product is delivered with the product, and payment is expected immediately. Because of the commonality of credit cards and instant payment methods through the Internet, COD purchasing has become obsolete in most cases. However, it remains a standard method of payment for ordering products and services produced quickly and near the point of delivery; this is particularly common with the ordering of food, and it is the standard model for pizza delivery services, though some pizza restaurants require a credit card number before they will send a delivery, due to fraud and prank callers. But it helps to establish the credibility of online retailer as the consumer pays only after taking delivery of ordered item.
In some countries this remains a popular option with internet-based retailers, since it is far easier to set up for small businesses and does not require the purchaser to have a credit card.