What is a payment type?

What is a payment type?

A payment type is how a seller tracks payment-related information. For example, a seller might use payment types such as a credit card, check, or customer account.

What is the difference between a payment type and a payment method?

A “payment type” is a broad category of how a payment can be made, while a payment method is the specific way that payment is made within that category.
For example, a payment method is a Visa card or paying with a $20 bill; Payment type would be credit card and cash.

Types of Payments

Payments are made using different methods and types are constantly evolving to keep up with technology. Here are the most common payment types used today.

Credit Cards

Credit cards offer holders a line of credit up to a certain limit. The credit card network must authorize the cardholder’s information to process the transaction.

Debit Cards

When someone pays with a debit card, funds are immediately withdrawn from their account. There is no line of credit; instead, transactions can be declined if there isn’t enough money in their account.

Cash

Although less and less, some industries still accept cash, such as retail businesses. Businesses completing large transactions often need to pay for security measures such as secured transit or fraud detection.

Mobile phones or digital wallets

The contactless payment technology reads the customer’s banking information through an application installed on the mobile device. Mobile wallets are used for everything from retail purchases to salary payments.

Checks

Checks aren’t as popular as they once were, but they are useful in certain situations. Banks still offer cashier’s checks or certified checks to help sellers receive money from the buyer.

Electronic Funds Transfers

Wire transfers and ACH payments (Automatic Clearing House) are used for larger or more frequent payments, such as supplier or direct deposit salary payments. ACHs and wires usually take between one to five days.

Cryptocurrency

With digital currency or token transactions, one person sends coins or tokens to an address on a blockchain. Blockchains then automatically withdraw or transfer specific amounts based on certain conditions.

Bank transfers

Bank transfers are a common payment method, though now more and more, bank payments take place online. Payments can be less secure because there is no card network to oversee the transaction

Buy now pay later (BNPL)

BNPL allows customers to make purchases through installment plans. The customer will pay a specific amount every other week or month until they have paid off the purchase. This approach increases affordability for consumers and boosts sales for businesses.

What Are the main types of payments?

Cash, debit cards, credit cards, and checks have been the main types of payments for the last several decades. Now, digital payments are gaining popularity. This includes digital wallets, online payment services, digital currencies, and electronic transfers.