Nowadays, there are just so many different payment methods for shoppers to use. This is great news for shoppers, as it means that they can use the payment method that works best for them.
Yet, it can be hard to stay on top of all of these different ways of making payments. Each payment method has its advantages and disadvantages, which must be considered when making a payment. To help you, let’s get into the different payment methods: the pros and cons of each.
Different Payment Methods: The Pros & Cons Of Each
Debit cards are a popular and convenient way of making payments. These cards allow you to electronically transfer money from your bank account.
These plastic cards will take money directly from your bank account. Essentially, this means that you are spending your own money when using a debit card. Here are the advantages and disadvantages of debit cards:
- You won’t get into debt when using a debit card. Unlike credit cards, you only have access to the money in your account when using a debit card.
- They are incredibly easy to obtain. It’s easy to apply for a debit card with most banks, as you will simply need proof of identification. You must be over the age of 18 to apply, though you can get a debit card at a younger age with the permission of a parent or guardian.
- They can be used to withdraw cash from an ATM, giving you access to another payment method.
- You won’t have to undergo a credit check.
- There aren’t any pesky annual fees.
- Debit cards won’t improve your credit score. A high credit score can be valuable when you apply for loans.
- You will have to remember a PIN. Without this PIN, you won’t be able to access your finances. Though this increases security, it can be frustrating to remember a PIN.
- You will have limited funds, which means that you can’t pay for something later.
Like debit cards, credit cards are thin pieces of plastic that can be used to make payments.
However, credit cards allow you to pay for goods and services without using the funds in your bank account. This is because you promise to repay these fees at a later date. This makes them an incredibly flexible payment solution.
There are some pros and cons associated with credit cards that you should consider, namely:
- They are flexible. You can repay a charge when it’s convenient for you.
- Credit cards can boost your credit score. This is only true if you are responsible with the use of your credit card. This includes making timely payments.
- Numerous credit card providers provide rewards for users. This can include loyalty points or cashback.
- These cards are more secure than alternative payment solutions. You have access to payment protection, which enables credit card users to get their money back if there is a problem with a product or service.
- You can pay for something in installments. This feature is brilliant for budgeting.
- You can end up in debt if you can’t repay the money that you’ve borrowed.
- It’s harder to apply for a credit card than it is for a debit card. For instance, you must be at least 18 years old to obtain a credit card. For some providers, you will have to be over the age of 21.
- There can be additional fees, such as interest for late payments. Moreover, you could face penalties for going over your credit limit.
Of all the payment methods, cash is perhaps the most low-tech option. When using cash, you can pay for goods or services with coins or notes. This legal tender is a type of physical currency.
Cash is becoming an increasingly less popular payment solution. This could be thanks to the pros and cons of cash:
- Cash is widely accepted. Not all small businesses will accept other payment methods, but most establishments will accept cash.
- It’s easy to manage your spending. If you have a limited supply of cash, it’s simple to control your budget and prevent impulse purchases.
- There aren’t any additional or hidden fees. You simply pay for a good or service with whatever cash you can access.
- It’s simple. If you aren’t tech-savvy, you won’t have to deal with smartphones that won’t load or other technology problems.
- It’s not a secure payment method. Carrying cash can make you vulnerable to crime.
- You may be charged when you withdraw cash from an ATM.
- Cash may not be sanitary. This is likely because cash regularly exchanges hands.
- It’s not very convenient for larger purchases. You will have to bring a massive wash of cash with you if you want to buy something expensive.
Cheques are considered an old-fashioned payment method. They are formal documents that tell a bank to transfer money from one account to another.
The reason why cheques are rapidly declining in popularity is that there are numerous limitations, including:
- They are easy to process.
- You can write a cheque whenever you want.
- They are easy to fill in. Cheques are particularly popular with the older generation, so it can be worthwhile for businesses to accept cheques.
- It can be time-consuming to deposit cheques at your bank.
- These funds are also slower to leave your account.
- Cheques can bounce. This means that they are not accepted. This could be because the customer has insufficient funds in their bank account. Plus, this might be because the cheque has expired.
- Many small businesses will not accept cheques.
Online banking is a way of transferring money electronically. These payments can be made through a banking app or website. Though popular, there are advantages and disadvantages to online banking, like:
- Online baking is simple to use.
- Payments are quick and easy.
- You can set up payments to ensure that your bills are paid on time.
- There aren’t any interactions with real people.
- Technological problems can occur.
Last but not least, mobile payments are perfectly summed up by their name. This payment method enables users to make payments through their mobile devices.
As a result, this solution is particularly popular with younger people. There are different ways of making these payments, such as through a digital wallet.
You should consider the strengths and weaknesses of mobile payments, such as:
- Mobile payments are made through a wireless transmission of data. As a result, this is a contactless form of payment.
- This is a secure payment system, as mobile payments won’t keep your card information.
- They tend to be quite speedy.
- All you need is your phone. Therefore, you won’t have to bring a credit card or a wad of cash whenever you want to pay for something.
- If your phone rubs out of battery or you experience any other technical issues, you can’t use mobile payments.
- While mobile payments are becoming increasingly accepted, not all retailers will allow this payment.
Frequently Asked Questions
What Is The Most Popular Payment Method?
Debit and credit cards are usually considered the most popular methods of payment thanks to their versatility. Arguably, debit cards are more popular than credit cards, perhaps because they are easier to obtain.
What Are The Best Online Payment Systems?
If you are interested in online payments, we recommend using one of the following payment systems:
As you can see, there is a broad range of payment options available to shoppers. To pick the right payment method, you should weigh up these pros and cons. Yet, it’s important to master the use of multiple payment methods, especially if you work for a small business.
Paul Martinez is the founder of EcomSidekick.com. He is an expert in the areas of finance, real estate, eCommerce, traffic and conversion.
Join him on EcomSidekick.com to learn how to improve your financial life and excel in these areas. Before starting this media site, Paul built from scratch and managed two multi-million dollar companies. One in the real estate sector and one in the eCommerce sector.