Choosing the Most Cost-Effective Types of Payment

by David Dierking

2 min read

Processing payments can involve fees and other costs. If you want to optimize your profits, you need to consider what types of payments are the most cost-effective for your business. You can’t just take processing fees into account – you also have to consider related factors and ancillary costs.


Cash is virtually the only payment that is free to accept. However, there are severe limitations with cash. Many people don’t carry cash, you can’t accept cash for website transactions, and in most cases, clients cannot mail cash to your office to pay an invoice. In addition to the inherent inconvenience associated with cash, you have to devote time taking it to the bank. If you plan to keep a lot of cash on the premises, you have to invest in a safe. Most importantly, numerous studies explain that consumers tend to spend more when they use credit cards – and as a business owner, you need to tap into that extra revenue potential.

If you’re thinking about only accepting cash, carefully consider whether that is feasible for your clients, and estimate how that may affect your revenue flow. If you want to encourage clients to pay in cash, consider offering a discount for cash payments. Ideally, the discount should be less than the fees you pay to process cheques or credit cards, or you won’t save any money.


Most banks accept cheque deposits for free, but you may have to pay a monthly fee to have a chequing account. In most cases, you need an account whether you accept cheques or not, so you shouldn’t take this fee into consideration. If all of your clients write cheques that don’t bounce, this can be one of the most cost-effective payment methods.

However, if customers write bad cheques, you may incur fees. As your account balance fluctuates due to bad cheques, that may cause outgoing payments to bounce and additional fees to be assessed. If you have a relatively small pool of clients you trust, accepting cheques may be the right option. However, if you own a coffee shop, a store, or any other business with lots of customers, you may find it financially cumbersome to accept cheques from customers due to the potential for insufficient funds or fraud.

Credit Cards

With credit cards, the processing fee varies based on the processor you select. Typically, the cost to you is a nominal fee per transaction and a percentage of each sale. For example, as of 2016, QuickBooks Online Payments charges 25 cents and 2.5% per transaction. So, if you run a credit card payment for $100, you would incur a fee of $2.75.

This is more than the cost of accepting cash and cheques, but it is considerably less than the cost of dealing with a bad cheque. With credit card transactions, you don’t have to run to the bank, as the funds automatically transfer to your bank account. Ultimately, you need to decide if the cost outweighs the convenience and potential for extra spending by your customers.

References & Resources

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