COD Shipping: Cash on Delivery in 2026

Remember the days when a delivery driver would stand at the door, waiting patiently as someone fumbled through a wallet to pay for a package? That was Cash on Delivery (COD), a payment method that, surprisingly, still finds its place in 2026. It may not hold the same prominence it once did, overshadowed by digital wallets and instant payment solutions, but COD continues to serve a niche market. For certain businesses and customers, it fills a gap that no digital payment method can quite bridge.

What COD Actually Means Today

Cash on Delivery, often referred to as Collect on Delivery, is a method where the carrier collects payment from the recipient when the package is delivered. Contrary to its name, "cash" is rarely involved today. Instead, recipients often use money orders, cashier's checks, or certified checks. This evolution maintains the essence of COD while adapting to modern financial practices.

When you opt for COD, several key terms come into play:

• COD Amount: This is the total amount the recipient must pay upon delivery.
• COD Fee: This is the additional charge imposed by the carrier for facilitating the COD service.
• Remittance: This refers to the payment collected by the carrier and subsequently sent back to the shipper.
• COD Tag: A label or form that accompanies the package, detailing payment instructions.

Which Carriers Offer COD?

USPS COD

USPS offers COD services for several types of shipments, including Priority Mail, USPS Ground Advantage, and Priority Mail Express. The maximum COD amount USPS will handle is $1,000, with a COD fee of $12.75 on top of regular postage costs. Recipients are required to pay via money order, which USPS then sends back to you. Expect remittance to take between 2 to 4 weeks after delivery. Insurance is available up to the COD amount, and you will need to fill out Form 3816 to initiate a COD shipment.

UPS COD

UPS extends COD services across all domestic shipments with a notably higher maximum COD amount of $50,000. The service fee is $14.50 per package. Payments can be made using cashier's checks, money orders, or certified checks, with personal checks as an option if authorized by the shipper. Remittance can be quicker, taking 7-10 business days for checks or 3-5 business days for electronic fund transfers (EFT). Unlike USPS, UPS does not include insurance, so it's advisable to purchase this separately if needed.

FedEx COD

FedEx also supports COD for its Express, Ground, and Home Delivery services, with a maximum COD amount of $50,000. Fees vary, with $12.50 for Ground/Home deliveries and $14.00 for Express deliveries. Accepted payment methods are cashier's checks, money orders, and company checks. Remittance is processed within 5-10 business days after delivery. Insurance is included up to the declared value of the shipment.

Carrier Comparison

Each carrier offers different terms and conditions for COD services:

• Maximum COD Amount: USPS allows up to $1,000, whereas UPS and FedEx both offer up to $50,000.
• COD Fees: USPS charges $12.75, UPS $14.50, and FedEx between $12.50 to $14.00.
• Remittance Speed: USPS is the slowest, with 2-4 weeks, while UPS and FedEx range from 5 to 10 days.
• Payment Methods: None of the carriers accept cash, but they differ in accepted check types and optional personal checks.

Who Still Uses COD?

With a plethora of digital payment options available, you might wonder why anyone would still choose COD. However, several scenarios and industries find COD indispensable.

Legitimate Use Cases

For businesses without merchant accounts, COD removes the need for credit card processing, making it a viable option for small enterprises. High-value goods that require inspection, such as art or custom items, benefit from COD as buyers can verify the item before payment. Customers without bank accounts, estimated by the FDIC to be about 4.5% of US households, rely on COD for receiving goods. B2B transactions often prefer the tangible assurance of payment upon delivery. Additionally, rural or elderly customers who are less comfortable with online payments opt for COD, as do legal professionals who need to confirm document receipt.

Industries Where COD Is Still Common

COD remains relevant in several industries:

• Auto Parts (B2B): Many shops order parts from distributors using COD.
• Legal Services: Document delivery often accompanies payment collection.
• Antiques/Collectibles: Items that require inspection before purchase often use COD.
• Appliance Repair: Final payments are made upon receiving repaired items.
• Custom Manufacturing: Payment is collected upon delivery of custom orders.
• Wholesale Distribution: New customers sometimes use COD before establishing credit terms.
• Firearms Dealers (FFL): Legal requirements sometimes necessitate COD for certain transactions.

The COD Process Step by Step

For the Shipper

Create Shipment: Choose COD as a payment option in your shipping software.

Set COD Amount: Enter the total amount due from the recipient.

Choose Accepted Payment: Specify whether you accept money orders, cashier's checks, etc.

Attach COD Tag: Use the carrier-specific label or form.

Ship Package: Proceed with normal pickup or drop-off procedures.

Wait for Delivery and Collection: The carrier will collect payment from the recipient.

Receive Remittance: The carrier sends the collected payment back to you.

For the Recipient

Carrier Arrives with Package: The delivery is made.

Carrier Presents COD Amount Due: The recipient is informed of the payment required.

Recipient Provides Payment: Payment is made using the specified method.

Carrier Verifies Payment: The carrier checks that the payment meets the requirements.

Package is Handed Over: The recipient receives the package.

If Payment is Refused: The package is returned to the sender.

What Happens When the Recipient Refuses

The biggest risk with COD shipping is refusal by the recipient. If payment is refused, the package is returned to the sender, and the shipper incurs the return shipping cost. This fee can be significant, especially for heavy packages, and combined with the initial shipping and COD service fee, it can result in considerable financial loss.

COD Fees and Hidden Costs

While the COD fee is straightforward, the total costs can be misleading. Apart from the COD service fee, shippers need to consider original shipping costs, insurance, potential return shipping, administrative time for managing COD transactions, and the risk of bad checks. Moreover, the opportunity cost of having money in transit for weeks can affect cash flow.

Example Cost Analysis

Consider a $100 product shipped COD via UPS Ground:

• Successful Delivery: Total costs, including shipping and COD fees, amount to $67, leaving a profit of $33.
• Refused Delivery: Total costs rise to $79.50 due to added return shipping, resulting in a loss of $79.50.

If refusal rates reach 25%, profitability diminishes significantly, potentially turning into a loss if refusals rise to 30%.

Alternatives to COD in 2026

Before committing to COD, consider modern alternatives that might suit your needs better:

• Pay-by-Link: Customers pay online before delivery, but require digital access.
• PayPal/Venmo: No merchant account needed, but some customers may not use these services.
• Square/Stripe: Easy to set up with low fees, requiring internet access.
• Zelle: Fast bank-to-bank transfers, but customers need a bank account.
• Invoice with Net Terms: Standard for B2B, though risk of non-payment exists.
• Escrow Service: Protects both parties but involves fees and slower processing.
• Payment on Delivery via App: The driver collects payment digitally, requiring a device.

Setting Up COD Shipping

With USPS

To set up COD with USPS, visit your local post office as online options are limited. Complete PS Form 3816, attach the COD tag to your package, and pay the necessary fees. Keep your receipt as proof of shipment.

With UPS

For UPS, log into their website or use UPS WorldShip. Create a shipment, select the COD option, and enter the necessary details. Print the shipping label, which includes COD information, and arrange for pickup or drop-off.

With FedEx

FedEx requires you to use their Ship Manager or desktop software. Select COD in special services, enter the amount, and choose the payment type. Print and attach the label and COD tag to your package.

With Shipping Software (atoship, ShipStation, etc.)

Many shipping platforms support COD for UPS and FedEx, typically under "Special Services" or "Additional Options." However, USPS COD setup is less common due to its manual form requirement.

Legal and Tax Considerations

When using COD, be aware of several legal and tax considerations:

• Sales Tax: Ensure the COD amount includes applicable sales tax.
• Income Recognition: Revenue is recognized when payment is collected, not when shipped.
• 1099 Reporting: If you receive $600 or more from a single customer via COD, reporting may be necessary.
• State Regulations: Some states have specific laws governing COD, especially for home improvement.
• Consumer Protection: The FTC's Cooling-Off Rule allows cancellations of certain sales, which may apply to COD.
• Dispute Resolution: No chargeback option exists; disputes must be resolved directly with the customer.

When to Say Yes to COD

COD is appropriate when alternative payment methods are unavailable or when inspection before payment is necessary. It's suitable when there's a low refusal rate, margins can absorb refusals, or when the COD amount justifies the fees. Avoid COD if customer relationships are weak, margins are slim, return shipping costs are high, digital payments are an option, or if administrative demands are too great.

In 2026, COD remains a specialized tool for specific scenarios. It solves particular problems but is rarely the best standard choice due to fees, refusal risks, and slow remittance times. Use it when other options fall short.