What Does 2/10 Net 30 Really Cost? Early-Payment Discounts Explained
By Arshi Khan, Founder of Just4Marketing · October 6, 2026 · 5 min read
A 2% discount for paying 20 days early is worth about 37% a year. Here's how to work out the real value of early-payment terms, and when to take them.
"2/10 net 30" appears on a lot of supplier invoices, and it's easy to glance past: 2% off if you pay within 10 days, otherwise the full amount in 30. Two percent sounds like small change. It's actually one of the best returns available to a business — or, if you're the one offering it, one of the most expensive ways to get paid early.
Why 2% is really about 37%
The discount isn't a reward for paying at all — you'll pay either way. It's a reward for paying 20 days sooner (day 10 instead of day 30). So the question is: what does it cost to keep your money for those extra 20 days?
On a $10,000 invoice, paying early costs $9,800; paying late costs $10,000. Skipping the discount is like borrowing $9,800 for 20 days and paying $200 interest. That's 2 ÷ 98 = 2.04% for 20 days. There are about 18 twenty-day periods in a year (365 ÷ 20), so the annual rate is 2.04% × 18.25 = 37.24%. Compounded, it's 44.59%.
How common terms compare
| Terms | Annual cost of skipping the discount |
|---|---|
| 1/10 net 30 | 18.43% |
| 2/10 net 30 | 37.24% |
| 2/10 net 60 | 14.90% |
| 3/15 net 45 | 37.63% |
The formula is: discount ÷ (100 − discount) × 365 ÷ (net days − discount days). Longer net terms lower the rate because you get to keep the money longer in exchange for the same discount.
Should you take it?
Compare the annual rate with what your cash costs you or earns you. If you have a credit line at 10% a year, borrowing to pay early on 2/10 net 30 still saves money: borrowing $9,800 for 20 days at 10% costs about $53.70, against a $200 discount — a net saving of $146.30 on one invoice.
- Take it if the annual rate is higher than your borrowing cost or what your cash earns in the bank. For most businesses, 2/10 net 30 clears that bar easily.
- Pay on day 10, not day 1. You get the full discount and keep the cash for as long as possible.
- Don't pay late instead. Stretching past the net date to make up for a missed discount usually means late fees and a worse relationship with the supplier.
If you're the seller offering it
Offering 2/10 net 30 means paying roughly 37% a year to get cash 20 days earlier. That can still make sense if late payments are hurting your cash flow, but compare it with alternatives: invoice financing, a small deposit upfront, or simply sending reminders before the due date. And make your late-payment terms clear, so customers who skip the discount still pay on time.