Every business owner wants to make it as easy as possible for customers to make a purchase. In this guide, we’ll cover numerous methods of receiving payments from in-store checkout to online transactions.

12 ways businesses can accept payments

Some payment options make accounting more difficult for businesses. Others can drain more out of profits. As a small business owner, it is important to establish reliable ways to get paid by customers.

With evolving technology, an increase in online shopping, and greater consumer expectations making cards and online payment options a business necessity, you will want to determine what products or services will be most convenient for you and your customers. 

Let’s start by outlining popular methods of accepting payment from customers.

In-person payments

Cash payments

Cash once was the only way many small businesses allowed customers to pay for services and goods. Now, only a fraction of U.S. consumers actually use cash.

Cash is beneficial to a company because it’s an immediate payment method that does not entail delays or third party fees. 

The disadvantages include the lack of popularity among customers and increased risk of theft or mismanagement. Logistically, using cash requires trips to the bank to make deposits and ensure that the till has plenty of small bills and coins to make change for customers. Lastly, as you know, cash payments are for in-person transactions and cannot be used online.

Check payments

Personal checks also are not particularly popular among customers, but they do offer some payment flexibility.

Checks allow customers to document their transactions and access personal accounts without a debit card. Some customers prefer this method, particularly for large purchases.

The benefits of checks include documentation of a transaction, convenience, and ease of use. Businesses can also deposit check payments into their bank accounts without a fee. The disadvantages include the risk of fraud and nonpayment. Businesses can sue for payment, but it could be expensive, time-consuming, and unpleasant.

In-person credit card payments

The credit card payment allows customers to make purchases that can be paid off over time. Using credit cards (such as Mastercard, Visa, American Express, or Discover) is a popular choice among customers and the funds are transferred relatively quickly to the business owner’s account.

The advantages of credit card processing includes a simple and quick transaction and the ability for customers to pay off the expense over time. The key disadvantages of credit card payments are the various credit card processing fees charged to businesses, including monthly fees, flat-rate and per-transaction fees, and the setup fees for software and hardware to process payments. Another potential issue with card payments is the risk of fraud, but customers have more opportunities (e.g., chargebacks) to dispute fraudulent credit card transactions, making them a desired payment choice.

Debit card payments

The debit card takes money directly from a personal bank account for payment. Some customers like this payment method because it means they don’t have to carry around cash or rely on a line of credit for their purchases. 

An advantage of a debit card is that its association with a personal banking account means that business owners usually know if there is a lack of funds for the purchase. It is also a popular payment option for customers. 

A disadvantage of the debit card includes fees charged for the transactions, such as those charged for credit cards. However, there are caps on debit fees that can be charged.

Online payments

Bank transfer payments

Bank transfers allow a customer to transfer money from their account to the account of a business. Bank transfer payments typically are used by customers who don’t want to use a credit card to make a payment online, whether that be because of fees or the amount of their credit limit. These payments are initiated by the customer.

The advantages of bank transfer payments include a quick and easy electronic transfer of money and the inability for customers to reverse the payment. Bank transfers are also becoming more popular among customers, particularly international customers.

The disadvantages include possible delays in completing the payment process since it requires the customer to contact their bank directly.

ACH or direct deposit payments

An automated clearing house (ACH) is a digital electronic network for processing transactions between financial institutions.

For example, a business deposits an employee’s pay directly into the worker’s personal account. A consumer sets up automatic payments on a mortgage that are taken each month out of a personal account. These are ACH payments that move money from one financial account to another.

This form of payment is becoming popular among many small businesses. There are more than 10,000 financial institutions that participate in the ACH electronic network.

The advantages for small businesses include the growing popularity among consumers since it’s a quick and easy payment processing method with greater security against fraud. Businesses receive payments into their accounts quickly with ACH processing.

There are disadvantages to ACH processing, such as transaction limits by some financial institutions and potential penalties for frequent transfers.

Online credit card payments

Just as with in-person payments, credit cards used for online payments are among the most popular among customers. They provide an easy, direct payment form for purchases. 

The advantages of online credit card payments is the quick processing of funds. The key disadvantage of online credit card payments is the potential for fraud. Businesses could be left without payment in the face of credit card fraud or misuse.

Digital wallet and third party payments

A digital wallet is an online payment option that allows customers to complete payment transactions electronically. The digital wallet stores the payment information in a secure place—typically an app on a personal device—like a smartphone or laptop. People who use digital wallets must download the specific mobile app used by banks or trusted third parties to access the service.

While this payment solution is critical for an online business, it also offers more security for customers. Online processing is easy. The advantages of online payment processing include ease of use and convenience for the customer. However, there are typically fees for each transaction, which is a disadvantage.

Popular third-party payment processors include:

  • PayPal: With an account set up for free by a business, Paypal allows customers to make payments directly. The payments come from a credit or debit card stored in their account, or from credit established with PayPal.
  • Google Pay and Apple Pay: The Apple Pay digital app is used on iPhones, iPads, and Apple watches. The Apple Pay app provides a quick and secure form of payment for customers and businesses. Google Pay offers an app that is similar to Apple Pay, but for users of Android phones, Google Account, Google Play, Chrome, YouTube, and Apple watches.
  • Stripe: This payment processor allows businesses to accept payments online with software that processes U.S. and international payments. This gives businesses a global reach.
  • Square: This processor offers point-of-sale software that businesses can use to accept payments. Businesses can manage card payments, ACH, and contactless payments online on the processor’s platform or in-person with processing hardware.

Mobile payments

Mobile card reader payments

A mobile card reader allows a small business to accept debit and credit card payments through an electronic device that connects to a point-of-sale system. The mobile card reader allows customers to swipe cards for payment, including from cards with chips and NFC contactless payments.

One major advantage of mobile card reader payments is its popularity among consumers. This payment option also gives small business operators the flexibility to complete sales on the go outside of a business location. The main disadvantage of mobile payment is the high transaction fees charged to businesses.

Money transfer app payments

Money transfer apps allow users to transfer money electronically using an app on a mobile device. Some apps allow the use of a digital wallet that is linked to a credit card or customer’s bank account. The payment method is a quick and easy way for customers to complete transactions on mobile devices.

The advantages of money transfer apps include fast, secure payments accessing a customer’s account directly. Some apps allow global transactions. The disadvantages of the apps include high transaction fees and delays of several days for some payments.

Some money transfer apps include:

  • PayPal: this app allows transfers from a PayPal balance, bank account, or credit account. 
  • Venmo: this app allows users to spend or send money in a Venmo account, or transfer it to a personal account.
  • TransferWise: this app can be used internationally to transfer money, although not all countries are accessible.

Mobile digital wallet and third party payments

Digital wallets and third-party payments used for online purchases can also be used for mobile payment. The digital wallet processes payments electronically and stores payment information securely in an app on a mobile device. Some of the mobile digital wallet and third-party payment providers include PayPal, Google Pay, and Apple Pay.

The advantages of online payment processing include quick and easy payments preferred by many customers. The main disadvantage is what businesses pay in transaction fees.

Choosing the best payment options

How to select and set up your small business to accept payments

There are advantages and risks for each payment option. Ultimately, your selection(s) should be reliable, affordable, and convenient for your business and your customers. 

Most payment methods require software and hardware (such as a point-of-sale payment system or credit card reader) to process transactions. Follow the next steps outlined below.

1. Determine your payment methods

Depending on the type of customers you are targeting and the type of business, use the above descriptions to identify what works best for your business.

2. Determine what payment processing tools you need

Payment processing software

You’ll likely need software for some types of payment processing, including:

  • Point-of-Sale (POS): Software allows payments and tips from customers, and tracks purchases, among other things. It can also include a secure method for customer payments online through a “payment gateway.”
  • Third-party processors: Software is needed to process online and credit card payments for businesses that don’t have a merchant account.
Payment processing hardware

Here are a few hardware basics:

  • Point-of-Sale (POS): the hardware needed for this system can include a barcode scanner, receipt printer, monitor or tablet, and a credit card reader.
  • Mobile card readers: these must be attached to a mobile device to allow the swipe of credit or debit cards to make payments.
  • Card reader: this device allows the customer to swipe, tap, or insert a credit or debit card into a reader to pay for services or goods.
Other payment processing resources

For non-cash payments, you typically need a dedicated business merchant account. When payments are made through a POS system, the payment goes directly into the merchant account.

Related resources might include recurring billing software to schedule automatic payments from a bank account, credit card, or debit card. Some online payment processors offer software that can help small businesses establish the recurring payment and automate the process.

Contactless payments use near-field communication (NFC) technology that allows customers to use personal devices for payment. Customers hold a personal device like a smartphone near a device to generate a payment. This method, which requires an NFC-enabled reader, can handle processing through providers such as Google Pay or Apple Pay.

3. Set up your payment methods

Once you’re set up with your new payment method(s), make sure that you test the system and train your employees on how to use it before making it available to customers. When you are ready to make the methods available to customers, display your various payment options in a prominent place so they are aware of the various methods your business accepts.

Frequently asked questions about accepting payments for small businesses

What is the best payment method for small businesses?

It depends on your business and customer preferences. For example, if you’re a retailer with an online store, you will want to offer plenty of desirable payment options—such as credit cards and digital wallets—that customers expect with e-commerce platforms. Do your research to fully understand the cost of these various methods and what your target market shoppers want to use. 

What is the most secure way to accept payments?

All payment methods have some issues of security risk. Cash payments can be mishandled or stolen. Credit cards are also subject to fraudulent use. Typically, payment methods that are linked directly to a personal account provide good security.

What payment methods have the least amount of fees?

The payment methods with the least amount of fees are also the least popular among customers: cash, checks, and ACH.

How do small businesses accept credit card payments?

Businesses need card readers or POS systems in place to process credit card payments. They may also need a dedicated merchant account to receive the money.

How do small businesses accept payments online?

A business can accept money online with certain POS systems and through third-party processors, such as payment service providers (PSPs) or merchant service providers. They can assist with the various online payment options, such as bank transfers, ACH, credit cards and digital wallets.

Gusto Editors Gusto Editors, contributing authors on Gusto, provide actionable tips and expert advice on HR and payroll for successful business management.
Back to top