Best Payment Methods for Small Business: The Ultimate Guide

Payment method

Best for

Main advantage

Main drawback

Pros

✔ Widely accepted

✔ Supports multiple sales channels

✔ Speeds up checkout

✔ Integrates with business software

Cons

𐄂 Processing fees

𐄂 Chargeback risk

𐄂 Payment security requirements

𐄂 Variable transaction rates

Overview

Credit and debit cards are a practical choice if you want to give customers a familiar way to pay. You can accept them in person with a card reader or POS terminal, online through your website, or remotely using a payment link or virtual terminal. Your payment processor handles the transaction and transfers the funds to your business account.

Most processors charge a percentage of each sale plus a fixed fee. Online and manually keyed transactions often cost more than in-person payments. Before signing up, look at how much you'll pay per transaction, how quickly you'll receive your money, and what happens if a customer disputes a charge. These costs can add up, especially if you process a high volume of sales.

Learn more:

• Credit Card vs Debit Card Processing: What’s the Difference?

• Credit Card Processing Fees Explained (+ Cost Calculator)

• 6 Ways to Lower Credit Card Processing Fees

Pros

✔ Lower processing costs than many card payments

✔ Works well for large invoices and recurring payments

✔ Transfers funds directly between bank accounts

✔ Reduces manual payment handling

Cons

𐄂 Transfers can take several business days

𐄂 Requires customer authorization and bank details

𐄂 Payments can be returned or disputed

𐄂 Not suitable for every in-person or point-of-sale transaction

Overview

ACH (Automated Clearing House) payments let you collect money directly from a customer's bank account or pay vendors and employees electronically. They're commonly used for large invoices, recurring bills, and business-to-business payments. Customers can authorize a one-time transfer or set up recurring payments, depending on how your payment provider handles ACH transactions.

ACH payments usually cost less than credit card transactions, making them a good option for businesses that process large payments or want to reduce fees. However, they aren't instant. Transfers typically take one to several business days, and payments can be returned because of insufficient funds, incorrect account details, or other issues. You'll need a provider that supports ACH collection and a process for getting customer authorization.

Learn more:

• What Is an ACH Payment & How It Works for Small Business

• How to Accept ACH Payments as a Small Business

• ACH vs Credit Card Payments: Which Is Better for Your Business?

Pros

✔ Faster checkout with contactless payments

✔ No need for customers to carry physical cards

✔ Adds convenient payment options for online and in-person sales

✔ Uses security features such as tokenization and device authentication

Cons

𐄂 Requires compatible payment terminals or online checkout

𐄂 Not all customers use digital wallets

𐄂 Fees may be similar to standard card processing

𐄂 Acceptance varies by provider, device, and sales channel

Overview

Digital wallets let customers pay using a smartphone, smartwatch, or other compatible device instead of pulling out a physical card or cash. Popular options include Apple Pay, Google Pay, and PayPal. Customers can use them at compatible payment terminals, on websites, or in apps, depending on the wallet and how your business accepts payments.

For in-person sales, you'll generally need a contactless-enabled card reader or POS terminal. For online sales, your payment processor or ecommerce platform must support the wallet you want to offer. Digital wallets often use the card or bank account linked to the customer's wallet, so your processing fees may be similar to standard card payments. Check which wallets your provider supports and whether accepting them requires additional setup or fees.

Learn more:

• What Is a Digital Wallet & How Does It Work for Merchants?
• What Is Tap to Pay & How Does It Work?

Pros

✔ Collects payments without a website

✔ Easy to share by text, email, or social media

✔ Supports remote payments and deposits

✔ Simplifies checkout with a hosted payment page

Cons

𐄂 Transaction fees apply

𐄂 Customers need internet access to complete payment

𐄂 Payment links can be mistaken for scams if customers don't recognize the sender

𐄂 Limited control over the checkout experience compared with a custom online store

Overview

Payment links let you collect payments without building an online store or sending a formal invoice. You create a link for a specific amount or product, then share it with customers by email, text, chat, or social media. Customers open the link and pay through a hosted checkout page using the payment methods your provider supports.

This is useful if you sell through social media, take bookings, collect deposits, or need to charge customers remotely. Most payment providers charge a transaction fee when a customer pays through the link. Some let you reuse links for multiple customers, while others support one-time payments or recurring charges. Check which payment methods are supported and how quickly funds reach your account before choosing a provider.

Learn more: What Are Payment Links & How to Use Them

Pros

✔ Sends invoices quickly by email

✔ Gives customers a direct way to pay

✔ Tracks due dates, outstanding balances, and payment status

✔ Can connect invoices and payments to accounting software

Cons

𐄂 Online payment processing fees may apply

𐄂 Customers may still pay late or ignore reminders

𐄂 Some features require a paid subscription

𐄂 Reconciliation can take extra work if invoicing and accounting tools don't sync

Overview

Online invoices let you bill customers electronically and give them a convenient way to pay what they owe. Instead of mailing a paper invoice or sending payment instructions separately, you create an invoice using accounting or payment software and email it to your customer. Depending on the provider, customers can pay directly from the invoice using a credit or debit card, ACH transfer, or another supported payment method.

Online invoicing is especially useful for service businesses, freelancers, consultants, and contractors that bill customers after completing work or reaching project milestones. Some tools let you set due dates, send automatic reminders, track unpaid invoices, and record payments in your accounting software. You may pay a monthly subscription for invoicing features or transaction fees when customers pay online, so check what's included in your plan.

Learn more:

• How To Customize Invoices in QuickBooks Online
• How To Create and Send Invoices in QuickBooks Online

Pros

✔ No card processing fees

✔ Payment is received immediately

✔ Doesn't require internet access or payment terminals

✔ Simple for small, in-person transactions

Cons

𐄂 Requires secure cash handling and storage

𐄂 Risk of theft, loss, or counterfeit bills

𐄂 Requires manual counting and reconciliation

𐄂 Not suitable for online or remote sales

Overview

Cash is one of the simplest ways to accept payments. Your customer pays with bills or coins, and you receive the money immediately without paying a card processing fee. You'll need a cash drawer or secure place to store payments, enough change for customers, and a way to record each sale.

It works well for businesses that make in-person sales, especially those with small transactions, such as market vendors, food stalls, salons, and local service providers. The tradeoff is handling and protecting the money yourself. You also need to count cash, reconcile your sales, and arrange bank deposits. Accepting cash alongside cards or digital wallets gives customers more choice without requiring every transaction to go through a payment processor.

Learn more:

• How To Reconcile Petty Cash in 5 Easy Steps
• How to Detect Counterfeit Money: Ultimate Guide

Pros

✔ No typical card processing fees for paper checks

✔ Useful for large invoices and business-to-business payments

✔ Provides a record of the payment

✔ Familiar to customers and organizations that still use checks

Cons

𐄂 Payments can take several days to clear

𐄂 Checks may bounce or be returned

𐄂 Requires handling, depositing, and tracking paper checks

𐄂 Not practical for most online or immediate transactions

Overview

Checks let customers pay directly from their bank accounts without using a card or making an electronic transfer. You receive a paper check, deposit it into your business bank account, and wait for it to clear. Some businesses also accept electronic checks (echecks), which let customers authorize payments from their bank accounts online.

For businesses that collect large invoices or work with organizations that prefer traditional payment methods, checks can be a practical option. However, processing takes longer than many electronic payment methods, and checks can bounce if the account has insufficient funds. You'll also need a process for recording deposits, tracking outstanding payments, and following up on checks that don't clear.

Learn more:

• How to Spot a Fake Check: Ultimate Guide
• How To Write & Print Checks in QuickBooks Online

Pros

✔ Quick payments through a mobile app

✔ Convenient for local sales and independent service providers

✔ May offer low-cost or free transfers for eligible transactions

✔ Doesn't usually require a card reader

Cons

𐄂 Some apps restrict commercial payments or require business accounts

𐄂 Fees and transaction limits vary by provider

𐄂 Seller protection may be limited

𐄂 Payment records may need to be entered separately in accounting software

Overview

Peer-to-peer (P2P) payment apps let people send money to each other through a mobile app, often using a phone number, email address, or username. Some small businesses also accept payments through these apps, particularly freelancers, independent service providers, and sellers who operate through social media or local networks. Popular options in the US include Venmo, Cash App, and Zelle.

These apps can make collecting payments quick and convenient, but not all are designed for commercial transactions. Some require a business profile or account, and fees, transaction limits, and seller protections vary. Before accepting payments, check the app's business-use rules and confirm that your transactions qualify for any available purchase protection.

Pros

✔ Gives customers more flexibility when paying

✔ Can make higher-priced purchases more accessible

✔ Lets eligible customers split payments into installments

✔ Provider typically manages customer repayments

Cons

𐄂 Merchant fees can be higher than standard card processing

𐄂 Not all customers or purchases qualify

𐄂 Requires integration with a supported checkout system

𐄂 Availability and repayment terms vary by provider and market

Overview

Buy now, pay later (BNPL) lets customers purchase products or services and pay in installments instead of covering the full cost upfront. Providers such as Klarna, Afterpay, and Affirm typically pay the merchant according to their terms, while customers repay the provider over an agreed period. This gives shoppers more flexibility without requiring you to offer your own installment plan.

BNPL is most common in ecommerce and retail, especially for higher-priced purchases. Providers generally charge merchants a transaction fee, which may be higher than standard card processing fees. You'll also need to check how the service integrates with your checkout, when you receive funds, and which purchases qualify. Availability and terms vary by provider and market.

Learn more: What Is BNPL? Small Business Guide to Buy Now, Pay Later

Pros

✔ Automates regular billing and collection

✔ Reduces manual invoicing and follow-ups

✔ Makes revenue easier to forecast

✔ Supports subscription and membership models

Cons

𐄂 Failed payments can interrupt revenue

𐄂 Requires clear customer authorization and cancellation terms 

𐄂 Transaction or subscription management fees may apply

𐄂 Requires ongoing management of billing changes and payment details

Overview

Recurring payments let you charge customers automatically on a set schedule, such as weekly, monthly, or annually. They're commonly used for subscriptions, memberships, retainers, and ongoing services. Customers provide payment authorization upfront, and your payment provider collects each payment according to the agreed billing schedule.

Automating payments saves you from sending invoices and following up on every billing cycle. Most providers support recurring card payments, while some also offer bank debits. Fees typically include standard transaction charges, and some platforms charge extra for subscription management or billing features. You'll also need a process for handling failed payments, expired cards, cancellations, and changes to customer plans.

Learn more:

• How to Accept Recurring Payments: Small Business Guide
• What Is a Subscription Business Model & How Does It Work?
• Small Business Guide to Storing Credit Card Information

Business type

Payment methods to prioritize

Why

Cards, digital wallets, cash

Supports quick in-person checkout

Cards, digital wallets, BNPL where appropriate

Offers familiar online checkout options

ACH, cards, invoices, payment links

Supports remote collection and project billing

Cards, ACH, payment links, invoices

Accommodates on-site payments and larger invoices

ACH, cards, checks where needed

Supports larger transactions and established payment terms

Recurring ACH and card payments

Automates repeat collections

Cards, digital wallets, cash

Works across different in-person settings

Cards, digital wallets, cash

Accommodates varied customer preferences