What is an open account?

An open account is a type of credit arrangement where a customer purchases goods or services from a supplier but does not pay for them immediately. Instead, the supplier extends credit to the customer, allowing them to pay for the goods or services at a later date, typically within a specified period, usually 30, 60, or 90 days. Open accounts are also known as trade accounts or credit accounts. They are commonly used in business-to-business transactions and require a credit check to verify the customer's creditworthiness before the supplier approves the account. The supplier typically sets credit limits, which determine the maximum amount of credit the customer can use. Open accounts offer conveniences such as easy ordering and flexible payment terms, but they also carry the risk of non-payment or delinquency.