Types of Payment Methods: A Complete Guide
Cash, check or card used to be the only payment options available. Today, customers have more choices than ever, including digital wallets, online payments, bank transfers and Buy Now Pay Later (BNPL). Accepting multiple payment methods allows your business to accommodate numerous customers.
What is a Payment Method?
A payment method is how a customer pays for a product or service – the instrument or system used to transfer funds from buyer to seller. Payment methods range from traditional instruments (cash, checks or credit/debit cards) to digital options like digital wallets, mobile payments, bank transfers [Automated Clearing House (ACH)] and BNPL.
Businesses should consider offering a variety of offline and online payment options.
Traditional Payment Methods
Cash
A cash payment is a transaction settled with physical currency (such as paper banknotes and coins). Because cash is handed directly from the buyer to the business at the point of sale, these payments settle instantly with no processing fees. Cash payments work without power, internet access, or third-party services like payment gateways—so businesses can keep collecting money during outages, downtime, or card-reader failures. Cash cannot be used for online payments, making this payment method less convenient, particularly when paying bills for services (such as utilities).
Credit and Debit Cards
Credit and debit cards allow customers to pay for products and services without using cash or writing a check. Credit cards give customers access to a line of credit issued by a bank, while debit cards deduct money directly from the customer’s bank account.
Accepting credit and debit cards increases overall sales, accelerates cash flow, and satisfies modern consumer expectations. Credit and debit cards are the most widely used payment method, globally.
Credit cards are typically processed, verified, and settled within a day or two (faster than checks which can take up to 7 days). Merchants who accept credit cards pay processing fees and may be liable for expenses related to credit card fraud. Visa, Mastercard, American Express and Discover are the four major credit card networks.
Checks & eChecks
A check is a written, dated, and signed document instructing a bank to pay a specified amount from the payor's account to the designated recipient. While checks may seem outdated, accepting them has important benefits. Checks—especially ACH-based electronic checks—often have fixed, lower processing fees than credit cards, and checks have a lower risk of chargebacks than credit cards. However, checks may take up to seven days to clear. Paper and electronic checks can be susceptible to fraud, and there’s a risk of checks being returned for non-sufficient funds. Despite these limitations, checks are still a common payment method for B2B and real estate transactions.
Prepaid Cards
Prepaid cards are like traditional debit cards, but they aren’t linked to a bank account. Prepaid cards let people spend only the amount preloaded onto it, working more like a reloadable gift card than a standard debit or credit card. Accepting prepaid cards allows businesses to expand their customer base by reaching unbanked consumers. Six percent of U.S. adults were unbanked in 2025, according to a survey conducted by The Federal Reserve.
Digital & Alternative Payment Methods
Digital & Mobile Wallets
Digital wallets are apps or online services that store payment information (such as debit, credit and gift cards) for making purchases electronically. People can access a digital wallet on their phone, laptop or other compatible electronic devices. Digital wallets use tokenization—swapping real card numbers for one-time codes—making them more secure than magstripe or chip transactions and lowering fraud risk for businesses.
Although the terms “digital wallet” and “mobile wallet” are often used interchangeably, they differ slightly. Digital wallet is an umbrella term that includes mobile wallets. A mobile wallet is a type of digital wallet that’s linked to a mobile device, like a smartphone or smartwatch. People can use mobile wallets to make contactless in-store purchases at a store’s checkout. Near-field communication (NFC) technology transmits payment information to the merchant’s point of sale terminal when the mobile device is close to it.
Apple Pay, Google Pay, Samsung Pay and PayPal are popular digital wallets.
Bank Transfers
A bank transfer is the electronic movement of funds from one bank account to another. Bank transfers can occur via wire transfer or Automated Clearing House (ACH). The Automated Clearing House (ACH) network allows banks and other financial institutions in the US to send and receive money. ACH transfers can be used for payment of bills, taxes, tuition and donations. ACH transactions have lower processing fees (typically 0.5–1%) than credit cards (2–3%). Therefore, ACH is often preferred for recurring payments and large business to business (B2B) transactions.
Buy Now, Pay Later (BNPL)
Buy now, pay later (BNPL) is an alternative payment method that allows customers to immediately finance purchases and pay them back in fixed installments over time. Merchants receive the full payment for the item up front, minus any fees, without managing the financing. BNPL providers handle the underwriting, manage the installments, and collect payments. Used by a variety of businesses, especially eCommerce retailers, BNPL increases conversions and average order value and helps merchants reach new customers (such as younger customers who don’t have a credit card).
But higher BNPL fees and additional costs can cut into profits. BNPL providers typically charge merchants 3% to 6% of the total purchase amount—compared to 1% to 3% fees for most debit and credit cards. Furthermore, BNPL may encourage impulse purchases, resulting in higher returns or exchanges. Returns cost retailers $10 to $20 per item processed, reducing margins.
BNPL providers include Klarna, Afterpay, and Affirm.
Cryptocurrency
Cryptocurrency, or crypto, is a form of digital currency that can be used for internet-based electronic payments or as a store of value. Cryptocurrencies like Bitcoin and Ethereum rely on blockchain technology, function independently of any government or central bank, and have no intrinsic value. Because of their volatility, cryptocurrencies aren’t widely accepted.
Comparison of Different Payment Methods
Which traditional and online payment methods should your business accept? Here’s a comparison to help you decide which methods best meet your needs. Please note that features and fees may vary by provider.
Payment Method | Used for Recurring Payments? | Subject to Disputes/ Chargebacks? | Settlement Speed | Typical Merchant Fees |
|---|---|---|---|---|
Credit / Debit Card | Yes (via stored token) | Yes — highest dispute rate | 1–3 business days | 0.5% – 3.5%
|
Digital / Mobile Wallet | Yes (via a stored card) | Yes — lower rate than cards | Immediate / 1–3 days | Varies by provider |
Bank Transfer / ACH | Yes (core use case) | Yes (low rate— mandate disputes only) | 1–3 business days | 0.5–1% |
BNPL | Provider-specific | BNPL provider handles | Immediate (merchant paid upfront) | 3% to 6% |
Cryptocurrency | Niche | No. Charges are typically irreversible. | Minutes to hours | Low / no processing fee |
Prepaid Card | No | Depends on issuer | Immediate | 1.5–3% |
Cash | No | No | Instant | None |
What Are the Most Used Payment Methods?
Credit and debit cards are the most common payment method in the U.S. Credit card payments made up 35% of all payments in 2024, followed by debit cards (30%) and cash (14%), according to the Federal Reserve Board’s 2025 Diary of Consumer Payment Choice survey. The Worldpay Global Payments Report 2026 found that, in the U.S., credit cards accounted for 40% of the point-of-sale transaction value and 32% of the eCommerce transaction value in 2025.
Digital wallets lead the consumer payment sector globally (online and in store), responsible for 56% of the global e-commerce transaction value and 33% of the POS value. In the U.S., digital wallets were the most widely used payment method for eCommerce (40% of the transaction value) but only accounted for 17% of the POS transaction value.
Payment preferences vary by region. In the Asia Pacific region, digital wallets dominate, accounting for 77% of online transaction value and 62% of POS transaction value. In Europe, consumers prefer debit cards (38% of transaction value) and cash (20%) for POS transactions, with credit cards and digital wallets accounting for 18% of the POS transaction value.
What Is the Safest Payment Method?
Payment fraud—such as identity theft and card-not-present fraud—is costly for businesses, in terms of chargebacks, revenue losses and churn. A CSG-commissioned global survey found that 57% of consumers would stop doing business with a brand if they experience fraud on their account. Offering the safest payment methods is essential for protecting customer data and loyalty.
The safest online payment methods are:
Digital wallets
Digital wallets offer many layers of security, including
Encryption technology
Passcodes
Biometric security
Tokenization (replaces sensitive card information with a unique, one-time-use code)
Digital wallets can be safer than physical credit cards because digital wallets don’t share the real card number with merchants. Digital wallets usually require Face ID, fingerprint or a passcode, so someone who steals a smartphone can’t make purchases without unlocking the digital wallet. Stolen credit cards can be used until the account holder reports it lost or stolen.
Credit cards
Credit card transactions are protected by multiple layers of security, including
Tokenization
Encryption in transit
3-D Secure (3DS) authentication
Fraud monitoring
Many major credit card issuers let customers request randomly generated virtual card numbers to protect their account information when shopping online.
Payment Card Industry Data Security Standard (PCI DSS) compliance requires businesses to follow 12 core security requirements.
ACH payments
ACH payments go through clearinghouses that enforce strict regulations, making it a safer payment method. ACH is terrific for recurring payments to trusted institutions, such as rent or utility bill payments.
How to Choose the Right Payment Methods for Your Business
Accepting several payment methods is wise, but some methods may not be necessary. When choosing the right payment methods, consider:
Type of transactions (online, offline, or both). If your business is entirely online, it probably doesn’t make sense to accept cash or paper checks that require physical delivery.
Average order size. If your average orders are small (less than $25), offering buy now, pay later services probably isn’t necessary.
Business model. Choose the right payment methods for your business model:
Business Model | Preferred Payment Methods | Benefits |
|---|---|---|
eCommerce | Credit/debit cards Digital wallets BNPL | Quick, frictionless checkout Fraud protection BNPL increases conversions and order value |
SaaS/Subscription (e.g., Zoom or Adobe; streaming or entertainment; gym memberships; utility or telecom services) | Credit/debit cards ACH/direct debit | Support recurring payments Bank accounts don’t expire, reducing involuntary churn |
On-demand services (e.g., pay per view streaming, food delivery, ride share, home repair or cleaning) | Credit/debit cards Digital wallets | Immediate payment verification and confirmation |
Professional/B2B services | Bank transfers via ACH Credit/debit cards for small transactions | ACH payments have lower fees and dispute rates than credit cards, making them better options for large payments. |
Payment Method vs. Payment Channel
A payment method is how a customer pays (check, card, digital wallet, ACH).
A payment channel is where they pay (in-person, online, phone with a live agent, Interactive Voice Response (IVR) system, text-to-pay). The same payment method can be used across multiple channels. For example, someone can use a credit card to pay in person, online, or over the phone.
Customers may pay using traditional channels (mailing a check, paying in person or giving payment information to a live call center agent) or digital channels:
Online Payments: Online payments allow customers to complete transactions electronically through a website, mobile device, or online checkout page. Customers can pay anytime and from virtually anywhere with an internet connection, while funds are transferred securely between accounts.
Interactive Voice Response (IVR) Payment System: An Interactive Voice Response (IVR) payment system lets customers make payments by phone using spoken commands or their telephone keypad. Available 24/7, IVR payments give customers a convenient self-service option while helping businesses reduce the cost and volume of calls handled by live agents.
Text-to-Pay: With Text-to-Pay, a business sends a payment request or invoice directly to a customer by text message. The customer selects the link to open a secure checkout page and can pay immediately using a credit or debit card, digital wallet, or ACH.
Point of Sale: Point-of-sale (POS) payments allow customers to pay in person at a physical business location using a payment terminal or checkout system. Businesses can accept common payment methods, including cards, contactless payments, and digital wallets, for a fast and convenient checkout experience.
Best Payment Methods by Industry
Industry | Preferred Payment Methods | Considerations |
|---|---|---|
Utilities & Telecommunications | ACH and credit/debit cards for recurring bills (Autopay), as well as IVR phone payments for customers without online access. | ACH transactions have lower processing fees than credit cards. Consider passing card processing fees on to the customer. |
Healthcare | Allow patients to pay online, by phone, or in the clinic using ACH (including eChecks), credit/debit cards, IVR, and text-to-pay. | Collect copayments at the time of the medical appointment. |
Insurance | ACH (including eChecks), credit/debit cards, IVR, and text-to-pay. | Payment reminders are essential to reduce involuntary churn and policy cancellation. |
Government | Allow constituents to pay online using credit/debit cards and ACH or eChecks; by mail via ACH; and in person using cash, check, or credit/debit card. | Multiple payment methods and channels are required to serve constituents with different resources (e.g., internet and bank account access) and preferences. |
Non-Profit | ACH and credit/debit cards for recurring donations. | Autopay promotes regular donations and reduces administrative burden. |
Property Management | ACH for recurring rent payments. | ACH transactions have lower processing fees than credit cards. If you accept credit/debit cards, consider passing the card processing fees on to the tenant. |
Retail/Ecommerce | Credit/debit cards, digital wallets, and BNPL. | Provide convenient, secure payment methods that promote checkout conversion. |
Modernize and Streamline Payments with CSG Forte
Want to accept more payment methods and grow your business? CSG Forte is a unified payments platform with omnichannel capabilities, allowing customers to pay online, in person, by phone (IVR or live agent) or text-to-pay, using credit/debit cards, ACH or digital wallets. CSG Forte protects sensitive payment data through tokenization, encryption and built-in PCI DSS compliance.
Schedule a demo today.
Payment Method FAQs
What are the different payment methods?
Payment methods include traditional options like cash, checks, and credit/debit cards, as well as digital and alternative methods like mobile wallets (Apple Pay, Google Pay), ACH/bank transfers, Buy Now, Pay Later (BNPL), and cryptocurrency. Each method differs in how it moves money, how quickly it settles, and applicable fees and fraud protections.
What are the most used payment methods?
Digital wallets are the most widely used payment method globally, responsible for 56% of the global e-commerce transaction value and 33% of the POS value. Credit and debit cards are the most widely used payment method in the U.S., accounting for about 65% of all payments.
What is the safest method of payment?
Many experts consider digital wallets to be the safest payment method, due to tokenization, encryption and biometric security. Card payments become similarly secure when 3-D Secure authentication, tokenization, and PCI DSS compliance are in place.
What is the difference between a payment method and a payment channel?
A payment method is how a customer pays — the instrument used to transfer funds, such as a credit card, ACH, or digital wallet. A payment channel is where the payment takes place — online, in-person, over the phone, or via text. The same payment method (for example, a credit card) can be used across multiple channels (e.g., online or in store).
Which payment methods work best for recurring billing?
ACH and credit cards are the best options for recurring billing. ACH fees are lower than credit card fees, and bank account information does not expire, reducing involuntary churn from failed payments. Often preferred by customers, credit cards require active management of expiration dates and reissued cards. Tools like Account Updater automate this process.