Today, modern society is rife with different payment methods. Cash, credit card, check, and mobile payments have recently become the norm. So which one should you choose?
We will examine each’s security, convenience, and transparency to help you decide which payment method to use. We also hope to help guide your decision if your company needs a new payment method or if you are considering switching from one type to another.
NOTE: However, if you plan to set up your business, check our guide on ‘How to Register a Company’ in the USA. This will guide you in registering your business and opening a bank account.
First, Let’s look at credit cards.
Credit cards have been a popular way of paying for goods since their introduction in the 20th century. Their popularity is attributed to the convenience of making purchases at the point of sale—no need to carry cash or write checks. Simply:
- swipe your card,
- input your Personal Identification Number (PIN),
- and you’re done!
Not to mention, cards are accepted everywhere and don’t require additional information to complete the transaction.
The convenience of using credit cards is balanced by the fact that they carry sets of unique risks for businesses. Credit card companies protect businesses against fraudulent transactions if specific security measures are followed. However, this does not eliminate all risks for the business owner.
Prepaid Debit Cards
Prepaid debit cards are issued by a bank or some other financial institution and can be used in most places where a credit card is accepted. The advantage of using these cards is that they carry a minimal risk for the merchant. The only times the consumer worries about fraudulent charges are when they have lost their card or if they don’t follow basic security precautions such as signing off every time they use their card. To stay safe, always remember to sign off and ensure you don’t leave your card behind!
Bank transfers are the process by which a merchant can send money from one bank account to another. This is usually done by simply typing in an amount and then selecting the account you wish to pay from.
Bank transfers are an excellent choice for larger purchases due to the convenience of making a transaction and having the money appear in your account almost immediately. However, bank transfers may be too time-consuming for you if your business does not have much of a customer base or you rely heavily on online sales.
Cash is a form of payment that is almost entirely risk-free. You can pass it on to friends, pay at the gas station or even give it as a gift! The only risk of using cash is if you do not have any on you and need to go into the bank to get some. However, this risk is balanced out by the fact that cash transactions are entirely transparent and are recorded by banks for consumer protection.
Cash is an excellent way for consumers to buy merchandise or services and for businesses to collect money from customers when handing out paychecks or invoices. However, since cash transactions are not electronic, your business must still handle the financial records of these sales separately from your everyday transactions.
Virtual wallets are electronic payment methods that allow customers to spend money online. E-wallets enable users to link their credit cards to the app and can be used at any place where credit cards are accepted. Then, you simply click the app, and your payment is processed.
The advantage of using these virtual wallets is that they make it easy for the customer to pay for purchases without having to purchase the e-wallet itself separately. The downside is that you must trust the merchant for them not to take your card information and buy stuff in your name!
Mobile payments have become a bit of a buzzword in the business world lately, and for a good reason. Mobile payments are a popular way of making purchases because they are convenient, fast, and secure. They also allow you to pay without having to give away your details or sensitive financial information. When paying for purchases with a smartphone or tablet, one only needs to input their credit card information directly into the mobile app and confirm the transaction with their PIN code.
Criteria for choosing a proper payment method
The best payment method for you and your customers will depend on how important the following criteria are to you.
If security is your primary concern, it doesn’t matter which payment option you choose. Each of the above payment methods has security measures to protect your information. For instance, one way to ensure security is by utilizing the additional features of most credit card companies.
Ease of use
For merchants, accepting a new payment method can be expensive and time-consuming, depending on the type of business. If you are taking cash, there’s no point in switching over to other methods if most transactions are handled in-house. If you have the resources to add more payment options, consider their ease of use before making a decision. For example, would it be easier to have an app on your phone versus taking out a physical card?
For customers, ease of use is also essential when deciding what type of payment method to use. For example, using your debit card at the supermarket should not be more work than writing out a check or swiping your credit card, but these things always happen. If it becomes too inconvenient for the consumer to use your service, they may find a way to go elsewhere.
Transparency is a great thing, but when it comes to payment methods, it can lead to some difficult situations. For example, if you are using an E-wallet and choose not to disclose your transaction information, which would be under the digital thumbprint of your phone or card, this could become an issue later. For example, what happens if you don’t use your personal information when making a payment? Also, what happens if you lose your device?
The solution is simple. Be transparent with the information you are collecting and how it will be used. Unless you are planning on selling the data, which is something you should make very clear to consumers, there should not be any problem with this.
Make your choice
Hopefully, this article has helped you decide for yourself or at least given you a better understanding of how each payment method works. The best advice we can give is to choose the option that best fits your business needs. Don’t choose what other businesses are doing or what you think they are doing. The last thing you want to do is try to become an overnight success and fail miserably just because you tried to follow a trend!