What payment methods small businesses can use to take money from customers
Small businesses can accept payments through cash, card networks (Visa, Mastercard, American Express, Discover), digital wallets (Apple Pay, Google Pay), bank transfers, checks, and buy-now-pay-later services. Which methods you use depends on your business type, where customers shop with you, how much it costs to set up each one, and what your customers expect. A retail store might need card readers at checkout. An online business might prioritize digital wallets. A service business might accept bank transfers and checks. Most small businesses use a combination of methods rather than just one.
The payment method landscape has shifted over the past decade. Cash remains useful but is declining. Card payments are standard. Digital wallets and contactless payments are now expected by many customers, especially for in-person transactions. Bank transfers work well for recurring or invoiced payments. Understanding how each method works, what it costs, and who uses it helps you decide which ones fit your business.
Key Takeaways
- Cash, cards, digital wallets, bank transfers, and checks each have different costs, speed of deposit, and customer reach.
- Card processing typically costs between 1.5% and 3.5% per transaction, plus monthly fees that vary by processor and business size.
- Digital wallets and contactless payments are growing faster than other methods and now account for a significant share of in-person transactions.
- Payment processors handle the technical work of connecting your business to card networks, but you pay them a fee for that service.
- The method that works best for you depends on whether you sell in person, online, or both, and what your customers actually use.
Cash payments and their place in small business
Cash has no processing fees, deposits when ready into your register, and works for any customer. It requires no technology, no internet connection, and no third party to approve the transaction. For this reason, many small businesses still accept cash even when they also accept cards.
Cash does require you to handle physical money, count it, find it, and transport it to the bank. Theft and loss are real risks. You also cannot track cash sales as easily as digital payments, which can make accounting and tax reporting harder. Some customers now carry less cash than they used to, so cash-only businesses may lose sales. Many small business owners keep cash as a backup payment method but do not rely on it as their primary way to receive money.
Card payments: how they work and what they cost
When a customer pays with a credit or debit card, the transaction moves through several steps. The customer's card is read by your payment terminal or online checkout. Your payment processor sends the card details to the card network (Visa, Mastercard, American Express, or Discover). The network routes the request to the customer's bank. The bank approves or declines the payment. The approval flows back through the network to your processor, and your terminal shows the result. The whole process usually takes a few seconds in person or a few seconds to a minute online.
Card payments cost money. You pay an interchange fee (set by the card network, typically 1% to 3% of the transaction), an assessment fee (also set by the network, usually under 0.2%), and a processor markup (set by your payment processor, typically 0.5% to 1.5%). Together these usually total between 1.5% and 3.5% per transaction. You may also pay a monthly gateway fee (for online payments), a terminal rental or purchase fee (for in-person payments), or a batch fee (a small charge each time you settle transactions). Some processors charge a flat rate instead of a percentage, which can be cheaper for high-value transactions but more expensive for low-value ones.
The time it takes to receive the money varies. Most processors deposit funds within one to three business days. Some offer next-day or same-day deposits for a higher fee. A few charge a reserve, holding back a percentage of your sales for a set period. When comparing processors, ask about their standard deposit timeline and whether they charge extra for faster deposits.
Digital wallets and contactless payments
Digital wallets let customers pay by holding their phone or smartwatch near a card reader, or by selecting a stored payment method on their phone during online checkout. Common digital wallets include Apple Pay, Google Pay, Samsung Pay, and PayPal. Contactless cards work the same way — the customer taps the card instead of inserting it or swiping.
From a business perspective, digital wallets and contactless cards process through the same card networks as traditional card payments, so the fees are similar. The main difference is speed and customer experience. Contactless and digital wallet payments are faster than inserting or swiping a card, which reduces checkout time. Many customers now prefer these methods, especially for small purchases. In-person contactless payments have grown significantly over the past few years and now represent a large share of card transactions in many retail categories.
To accept digital wallets and contactless payments, your payment terminal must support them. Most modern terminals do. If you sell online, your checkout page must be set up to accept them, which most payment processors now include by default. If your current terminal or processor does not support these methods, upgrading is usually straightforward and often costs less than you might expect.
Bank transfers and ACH payments
Bank transfers move money directly from a customer's bank account to yours. In the United States, this usually happens through the ACH network (Automated Clearing House), which is run by the Federal Reserve and private operators. A customer can authorize a one-time transfer or set up recurring payments. Bank transfers have no card network fees, so they cost less than card payments — typically a flat fee of $0.25 to $1.50 per transaction, or sometimes nothing at all.
The downside is speed. ACH transfers take one to three business days to complete, sometimes longer. They also require the customer to know their own bank details or to trust your business with their account information. For this reason, bank transfers work better for recurring payments (like subscriptions or invoices) than for one-time purchases at checkout. Many invoicing platforms and subscription services offer ACH as an option alongside cards. If you bill customers regularly, adding ACH as a payment option can reduce your processing costs significantly.
Checks and other payment methods
Checks are still used by some businesses, especially for B2B (business-to-business) payments and for customers who prefer not to use cards or digital methods. A check is a written instruction to the customer's bank to transfer money to you. Checks have no processing fees, but they require you to deposit them at a bank, which takes time. The funds may not be available for several business days. Checks can also bounce if the customer does not have enough money, leaving you without payment.
Some businesses also accept payment through buy-now-pay-later services (like Affirm, Klarna, or Afterpay), which let customers split a purchase into installments. These services charge you a fee similar to card processing, typically 2% to 8% per transaction. They work best for online retail and for purchases above a certain amount. Money orders and wire transfers are less common but may be used for large or high-risk transactions. Wire transfers are faster than ACH but cost more and are usually reserved for business-to-business payments or large amounts.
Choosing payment methods for your business type
A retail store that sells in person typically needs a card reader at the checkout counter, and should accept digital wallets and contactless payments because many customers expect them. Cash is still useful as a backup. Online businesses need a payment gateway that accepts cards and digital wallets at checkout. Bank transfers and buy-now-pay-later services can be added if they fit your customer base. Service businesses (like plumbers, accountants, or consultants) often send invoices and may accept bank transfers, checks, or cards. Subscription businesses almost always offer recurring card payments and sometimes bank transfers.
The best approach is to start with the methods your customers use most, then add others over time. You can research this by asking customers what they prefer, by looking at what your competitors accept, or by starting with a payment processor that supports multiple methods and seeing which ones get used. Track which payment methods your customers actually choose, and prioritize the ones that represent the largest share of your sales.
Payment processors and how they fit into the picture
A payment processor is a company that handles the technical work of connecting your business to card networks and banks. When you use a processor like Square, Stripe, PayPal, Toast, or Clover, you do not contact Visa or the Federal Reserve directly. The processor does that for you. You pay the processor a fee, and they handle the rest.
Different processors offer different features. Some specialize in in-person payments and provide hardware (card readers, tablets, registers). Others focus on online payments and provide checkout pages or plugins for your website. Some serve specific industries like restaurants or salons. Most now offer multiple payment methods through a single account, so you can accept cards, digital wallets, and bank transfers without signing up for separate services.
When choosing a processor, compare the per-transaction fees, monthly fees, deposit speed, customer support, and which payment methods they support. The cheapest processor is not always the best if it lacks features you need or has poor support. Many processors offer a trial period or a free tier for low-volume businesses, so you can test them before committing.
Frequently Asked Questions
What is the difference between a debit card and a credit card payment?
From your perspective as a business, they process the same way and cost the same. The customer's bank is different (their bank for debit, a credit card company for credit), but the card networks and fees are the same. The main difference is that debit card transactions clear faster and credit card transactions can be disputed more easily by the customer.
Do I have to accept all payment methods?
No. You can choose which methods to accept. However, accepting multiple methods usually increases sales because you reach more customers. Some customers will not shop with you if you do not accept their preferred payment method.
What happens if a customer disputes a card payment?
The customer can contact their card issuer and claim the charge was unauthorized or that they did not receive what they paid for. The card network then investigates and may reverse the charge, pulling the money back from your account. You can dispute the reversal by providing evidence (like a receipt or delivery confirmation), but the process takes time and you may lose.
Is it cheaper to process cards online or in person?
Card processing fees are usually similar whether the payment happens in person or online. However, online payments sometimes have slightly higher fees because there is no physical card to verify. Some processors charge different rates for different scenarios, so compare your specific situation.
Can I accept payments without a business bank account?
Most payment processors require a business bank account to deposit funds. Some will deposit to a personal account, but this can create accounting and tax problems. It is better to open a business account, which also protects your personal finances if there is a dispute or chargeback.