Businesses should be aware of the eight most common payment methods. It is important for them to know which ones their customers prefer and what the advantages and disadvantages are of each one.
Contactless payments are made with smartcards that use near-field communication technology (NFC) to enable a secure transaction at the point of sale. This includes credit card and debit card payments with a tap or swipe of the device.
Credit cards
Credit cards are a common way for consumers to pay for goods and services. They can be used to purchase items at a physical store, through a mobile app, or online. Some credit cards offer consumer protections that can help protect shoppers from identity theft and other types of fraud.
Debit cards, also known as bank cards or check cards, work similarly to credit cards. They draw money directly from a consumer’s bank account to pay for a purchase. Many online merchants accept debit cards as a payment method.
When it comes to ecommerce payments, most consumers prefer to use credit cards or debit cards. In 2020, these methods accounted for 57% of all transactions. However, their share has started to slip since the pandemic, as digital wallets and buy now, pay later services have gained popularity. In 2022, these options accounted for 31% of all ecommerce transactions. Other popular methods include cash and accounts-to-account transfers.
Debit cards
Unlike credit cards, which function as loans that require you to pay back the amount borrowed, debit cards pull money directly from the cardholder’s savings account. They make shopping easier and have reduced the need for cash and checks.
Debit cards typically have a PIN (personal identification number) that only the cardholder knows. This helps protect against theft by limiting the funds available to those who know the code. They work with most mobile payment apps and also can be used at ATMs, or automated teller machines.
You can usually get a debit card when you open a checking or savings account with a bank or credit union. Many are free to use, but you may incur fees if you withdraw cash from an out-of-network ATM or overdraw your account. You should always review your bank’s cardholder agreement to understand what fees apply to specific transactions.
Cash
Cash is one of the most common payment methods, and it also has its disadvantages. For example, it is not very secure and can be easily stolen or lost. Additionally, it can lead to inaccurate accounting and can be difficult to track for business owners. Nevertheless, customers today expect to be able to pay using a variety of payment methods. Choosing the right method for your business will help you keep your customers happy and keep them spending.
As more innovative solutions become available, cash may lose its popularity. But for now, it is still an important part of the payment ecosystem. In fact, the COVID-19 pandemic may have accelerated its decline by speeding up the adoption of mobile wallets. Interestingly, the word “cash” was originally used to describe bronze coins that were round with square holes. The word eventually evolved to refer to paper money. Money that is passed from hand to hand can get contaminated and accumulate germs, so it is important to wash your hands after handling it.
Checks
Checks allow two or more parties to make a monetary transaction without using physical currency. A check works by instructing a bank to transfer funds from the person writing the check (known as the payor) to the person or entity specified in the payment area of the check, known as the payee line.
There are several types of checks, including cashier’s and certified checks. A cashier’s check is similar to a personal check, but has additional security features. These include a signature line, an area where the amount is written in words rather than numbers and a memo line.
A check has a lot of personal information on it, including the payee line, the amount and the bank account and routing number. If a check falls into the wrong hands, someone could use it to steal money from your bank account. Fortunately, there are many modern tools that work similarly to a check and provide a more secure way to transfer funds, such as debit cards, wire transfers and online banking.