OBC

Onboard credit (OBC) is a prepaid balance held by a carrier, freight forwarder, or logistics provider on behalf of a shipper. The shipper deposits funds in advance; the carrier deducts charges for each shipment directly from this account without generating a separate invoice for every single movement. It functions as a running ledger rather than a pay-as-you-go arrangement.

OBC accounts are common in high-volume shipping environments where a manufacturer, distributor, or freight broker moves dozens or hundreds of shipments monthly. Instead of receiving an invoice for each parcel, each truck load, or each less-than-truckload (LTL) move, the shipper receives a single monthly statement showing all deductions against the credit balance. This reduces administrative overhead and accelerates the carrier's cash flow.

Setup and replenishment

A shipper typically deposits a lump sum, often ranging from several hundred to tens of thousands of dollars depending on expected monthly volume. The carrier monitors the balance and may require replenishment when it falls below a threshold, commonly 30 to 50 percent of the initial deposit. Some agreements include automatic triggers: if the balance drops below a set figure (for example, $5,000), the carrier notifies the shipper to top up the account. Interest or service fees on the held credit are uncommon unless explicitly negotiated.

OBC is particularly useful in contract logistics and dedicated account relationships. A carrier serving a single large customer may establish an OBC arrangement to streamline billing for multiple daily pickups, drop-offs, or cross-dock moves. Small and medium-sized freight forwarders also use OBC as a trust mechanism: a shipper prepays, reducing the forwarder's credit risk and guaranteeing immediate payment regardless of whether the customer's payment reaches them later.

The main risk is insolvency: if a carrier fails while holding a large OBC balance, the shipper becomes an unsecured creditor competing with other claimants. Some shippers negotiate caps on the maximum balance the carrier may hold, or require quarterly reconciliations and refunds of excess credit. In domestic LTL and truckload markets, OBC arrangements are less common than in international freight forwarding, where they often serve as a performance bond and a hedge against currency fluctuation or payment delays.