Preferences for Payment Terms for a group of items

I'm dabbling pretty much for the first time into preferences. We have a need to offer a different payment term for specific customers for a group of items.

We have already established a group for the items... let's call it ABC. The items are assigned to that item group.

I thought I could go into P40070, add my customer with Item Group ABC, my payment term (which differs from their customer master payment term) and I would be good to go.

First: am I headed in the right direction?

Second: why am I redlining on Payment Instrument? It says I can't have a blank for a Payment Instrument, although blank is a valid value.