6 Best Payment Methods for Small Businesses (2024)

FAQs

What is the best payment method for a small business? ›

Some of the best modes of payment in worldwide include credit card, debit card, bank transfer, direct deposit, UPI, digital payment, electronic or physical cheques, etc. However the best suited payment mode depends on your individual preferences and the nature of your transactions.

For people who sell goods or services online, it's incredibly important to have a trusted e-commerce payment service. Online payment services accept debit and credit card payments and usually charge a fee to accept these payments. Three of the most popular payment tools include PayPal, Stripe, and Square.

There are three ways a small business can take card payments. This includes in person using a card machine or terminal, through an online payment gateway or using over the phone payment.

You can pay yourself as a business owner by setting a regular salary or taking owner's draws. Maintain clear financial separation between personal and business accounts, and choose an amount that aligns with your business's financial health.

Open a merchant account

For in-person transactions, you'll need to have a merchant services account if you don't already have one. Most banks offer in-house merchant services for business account holders to help them accept multiple forms of payment, keep track of sales and offer loyalty programs.

Services like Apple Pay and Google Pay don't charge any extra fees on top of credit card processing fees, so the cost is the same as accepting card payments directly. PayPal does charge an additional fee for each transaction, so it's more expensive for merchants – but it's also a more established payment method.

As a sole proprietor, you can pay yourself by taking money out of your business earnings. Since you and your business are considered the same, you can simply withdraw money from your business account for personal use.

The merchant services provider, or payment processor, will charge a fee to facilitate the credit card transaction. Processing fees can range from 1.5% to 3.5% typically, but in some cases can be as high at 6% per sale.

Is it illegal to use personal credit card for business? ›

While there's no law preventing you from using a personal card for business expenses, you lose the legal protections you'd get with a business credit card if your company runs into debt. You'll also have a tough time separating your business and personal expenses when tax season hits.

Credit cards can be a useful tool for your business, as long as they're used appropriately. Business cards often will offer better APRs than personal cards, but interest charges for unpaid balances can still be high. Make sure you know your card's APR and annual fee (if any).

Debit and credit cards

Not only are they quick and easy to use, but they offer a relatively high level of security and protection of your private data. If you're using a credit card, you don't actually pay for the goods or services until your credit card bill is due.

Besides cash, a certified check is the safest way you can receive a payment to your business. However, if you want to get paid online, you'll need more flexibility.

Build the payment form/payment page. Find a payment processor that gives you the ability to process different types of payments, from credit and debit cards to account-to-account bank payments. Integrate your payment processor/merchant account with your payment page.