Online payment has become an important tool for individuals as it is an easy way to buy the product you want. So there are much Payment Methods that used in a modern business context include cash, checks, credit or debit cards, money orders, bank transfers and online payment services. Let us discuss here the Advantages and Disadvantages of Different Payment Methods.
There are many types of payment methods that are used all over the world. it facilitates money transfer and Financial transactions These types are:
Credit Cards It is a card issued by a financial company which enables the cardholder to borrow funds. The funds may be used as payment for goods and services. Issuance of credit cards has the condition that the cardholder will pay back the original, borrowed amount plus any additional agreed-upon charges.
Mobile Payments It refers to any payment made using a mobile device. Due to our ever-increasing smartphone dependence, various ways have been developed to allow consumers to pay conveniently through a phone.
Bank Transfers It is when money is sent from one bank account to another. Transferring money from your bank account is usually fast, free and safer than withdrawing and paying in cash. Read on for more information, including how to make a bank transfer and what details you’ll need.
E-wallets It is a type of electronic card which is used for transactions made online through a computer or a smartphone. Its utility is the same as a credit or debit card. An E-wallet needs to be linked with the individual’s bank account to make payments.
Prepaid Cards It is a secured card issued by a financial institution that has been secured with a prepayment. These cards can be compared to prepaid debit cards which use preloaded funds for transactions.
Direct Deposit It is a payment option where your funds are electronically transferred to your checking or savings account. This can help the payee receive payment faster and avoid dealing with physical checks.
Cash is money in the physical form of currency, such as banknotes and coins.
Advantages of Payment Methods
There are many advantages of payment methods, we will show them as follow:
- Instant money in hand, except taxes of course.
- There are no transaction fees with cash like there are with credit cards.
- Minimizes bookkeeping, which means less stress & less hassle.
- Some customers prefer to pay with a check instead of carrying cash or using a credit card. Checks are also better to send in the mail for payments and invoices.
- Checks can now be processed electronically at the point of purchase much like a credit card but cost less to process in most cases.
- A check is usually better than a customer walking out the door because they don’t have cash or plastic.
- Accepting credit cards boost sales.
- Accepting credit cards increase the cash flow.
- Accepting credit cards creates legitimacy.
- NFC payments are the newest form of accepting credit cards.
- Chances are if your customer has a smartphone they will likely have a mobile wallet.
- Mobile payments are secure.
Disadvantages of Payment Methods
There are Disadvantages of payment methods also, we will show them as follow:
- Money in the drawer can be tempting for some employees to steal.
- A safe needs to be on site or frequent trips to the bank for deposits must be made, which takes time and money.
- Money at your location increases your risk for theft not just from employees but criminals as well.
- Just because you have a check in hand, that doesn’t guarantee payment. bounced checks can even cost you money. Depending on your bank, they may assess fees for these bounced checks. Checking accounts can be frozen, empty or even nonexistent.
- Customers can put stop payments on checks, close their account, and even post-date checks if the cashier is not paying attention. All of these delay payment.
- If your bank does not offer remote capture, you again will be spending time and money away from your business driving to the bank regularly.
- Credit Cards can add another level of difficulty to bookkeeping and accepting credit cards can be an added monthly expense in most cases.
- Credit cards do come with risks such as chargebacks and fraud.
- Refunds on credit cards are not immediate.
- You must have NFC equipment. No NFC hardware = no mobile wallet payments
- There are many mobile wallets out there, and they don’t all work the same, you will have to figure out which one is right for you.
- The rewards for the customer to use a mobile wallet are not 100% clear yet.