Payment Methods

As a small business owner, you’ll need to decide what types of payment you’ll accept from customers.

You might offer customers the choice to pay with:

  • Cash
  • Checks
  • Debit cards
  • Credit cards
  • Mobile payments
  • Electronic bank transfers

Offering more than one option could help you attract a wider variety of customers and allow your customers to make larger purchases. However, there are advantages, disadvantages and costs associated with each payment type.

Pros and cons of different payment types

Where you open your business and the types of items you sell could play an important role in deciding which payments systems to offer customers.

If you expect to make a large portion of your sales online, accepting electronic payments will be a must. Similarly, if your products or services are expensive, customers might not feel comfortable carrying that much cash to your store to make a purchase — checks, cards or mobile payment could be better options.

On the other hand, if you sell inexpensive items from a physical store, your customers may prefer to pay with cash. Customers may also expect you to accept cash if you open a shop in an area where many people don’t have bank accounts or where card processing networks, the companies that send and verify information when someone makes a purchase with a card, frequently go offline.

No matter which payment type(s) you offer, there will be advantages and disadvantages to each. Here are some of the pros and cons of the main payment types:

Payment Type Advantages Disadvantages
Cash One of the most common and easiest forms of payment. Customers might not want to make large purchases with cash.
Many customers will expect you to accept cash. Storing cash at your place of business or home, or transporting it to the bank, can be dangerous.
You won’t have to pay any fees to accept cash. Ensuring your register is stocked with bills to make change can tie up money you could use for other business purposes.
Counting money at the end of each day is time-consuming.
Checks May lead customers to make more frequent or larger purchases. After depositing a check, you’ll need to wait for the bank to process the check and put the money in your account.
Allows customers to safely make large purchases. There’s a risk that someone will try to pay with a fake check, or that a check will “bounce” if the customer doesn't have enough money and you won’t receive the payment.
You won’t have to keep as much cash in your store.  
You won’t have to pay any fees to accept checks.  
Debit, Credit and Prepaid Cards May lead customers to make more frequent or larger purchases. You’ll have to wait for the transaction to process before getting money in your account. This usually takes between one and three days.
Allows customers to safely make large purchases. You may have to pay transaction fees, a small percentage of the transaction. Debit cards generally have lower fees.
Can be quicker and more convenient for customers at checkout than cash or checks. You will need to purchase or rent a device to accept payment (called a point-of-sale device).
You won’t have to keep as much cash in your store. You may be responsible if a customer uses a fake or stolen card to make a purchase.
You don’t have to worry about bad checks or fake cash. If a customer disputes a charge (i.e., initiates a “chargeback”), the transaction may be reversed and you won’t receive a payment.
Allows foreign travelers to more easily make purchases.  
Mobile Payments May lead customers to make more frequent or larger purchases. You’ll have to wait for the transaction to process before getting money in your account. This usually takes between one and three days.
Allows customers to safely make large purchases. You may have to pay transaction fees, which is usually a small percentage of the transaction.
Can be quicker and more convenient than accepting cash or checks. You will need to purchase or rent a device to accept payment (called a point-of-sale device).
You won’t have to keep as much cash in your store. You may be responsible if a customer uses a fake or stolen payment information to make a purchase.
You don’t have to worry about bad checks or fake cash. If a customer disputes a charge (i.e., initiates a “chargeback”), the transaction may be reversed and you won’t receive a payment.
Mobile payments may be more reliable than card-based transactions in some areas.  
If you sell items at markets, conferences or trade shows, you can bring your mobile payment system with you.  
Allows foreign travelers to more easily make purchases.  
Electronic Bank Transfers Allow you to receive large payments without paying fees. Non-business customers might not feel comfortable transferring money directly from their bank account to your business.
Allows customers to safely make large purchases. You’ll have to wait for the transaction to process before getting money in your account.
Can be quicker and more convenient than accepting cash or checks. You may need to set up this type of transaction with your bank and the customer’s bank, which isn’t always easy.
You won’t have to keep as much cash in your store.  
You don’t have to worry about bad checks or fake cash.  
Could be a good option if you sell products or services to other businesses.  
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