Advantages and disadvantages of different payment methods

There is a fine line between developing one of your passions as a professional career or doing it as a hobby. The difference lies in a single element (what differentiates a profession from a hobby): money.

Charging is one of the most important components (if not the most) of any career as a freelancer. And as I suppose you already know, you should do everything possible to facilitate payment to your potential customers. In fact, it would be a big mistake not to consider (and use) different payment methods to collect your bills.

But what is the best option?

Each payment method has its own advantages and disadvantages. I tell you some of them.

CASH

Cash and direct money to your pocket. No matter if they are bills or currency, cash is the most classic and popular form of payment, and probably the first one you use in your business.

Advantage

· You have the money immediately. There is no waiting.

· There are no additional commissions. Almost all other forms of payment support some type of commission. If you cash, there is no intermediary that manages the collection and, therefore, 100% of the agreed upon will go directly to your cash.

Disadvantages

· Most people do not carry much cash on top. Increasingly, people use credit or debit cards and do not carry many bills. If you only receive cash, you may end up losing a lot of customers.

· You should be careful with fakes. Although it is not something that happens every day, you should be prepared in case you end up with a fake banknote in your hands.

· If you handle large amounts of cash, you will have to exert more control over your numbers. Money in cash is harder to control and you will not want to see yourself without a penny when the day comes to pay taxes. And unless you’re one of those who keeps all their income under the mattress, you’ll be going back and forth from the bank all day.

CREDIT AND DEBIT CARDS

Credit cards are the most common form of payment in the world today.

Advantage

· Cards are the most common form of payment. It is rare to find someone who does not have a credit card, or at least a debit card.

· Card acceptance drives sales. Credit cards are very easy to use, at least from the customer’s perspective.

· Credit cards can be used to make purchases through PayPal. If you are already using PayPal in your business, as most online freelancers do, then you can accept payments with credit cards, without the need for your user to have (or want) a PayPal account.

Disadvantages

· Comply with several laws and safety regulations. Before accepting credit cards, you must comply with a good number of security and data protection regulations to ensure the data of your customers.

· Intermediation commissions. Obviously, you will have to contract the services of a payment gateway to process credit and debit cards, and those services have a cost based on the amounts you deposit.

CHECKS

Before the popularization of the cards, checks were extended to make payments of a certain amount without having to carry a lot of cash. Nowadays they are not so frequent, but there are still people and companies that use them. The value of the check is directly linked to your client’s current account.

Advantage

· If you accept checks you can work with large accounts. There are large companies that make many of their payments only through bank checks. If you do not accept this form of payment, leave saying goodbye to this type of client.

· Checks can now be processed electronically. If you have the means to do so, you can process the checks electronically and collect more securely, although you will have to pay the corresponding commission (usually less than other forms of payment).

Disadvantages

· Checks can be returned. If your client does not have enough funds in your account, then you will not be able to cash your check and your bank will return it (with its corresponding commission). Currently, it is a crime to pay with a check without funds, but it is better not to find yourself with that dislike, especially when you already had that income to make some kind of purchase or investment.

· Trips to the bank. To cash the check you will have to physically present yourself at your bank or at your customer’s bank. And that is the time that you are not dedicating to your work.

MOBILE PAYMENTS

This form of payment really consists of different variants. In this article, we will refer only to the payments that you can issue or receive through your mobile phone, either by SMS, QR code, NFC, or any other system.

Advantage

· Almost everyone has a mobile. As with credit cards, it is difficult to find someone who does not carry a mobile phone with them. The advantage of instant payment is there.

· Payments are usually very fast. There is no need to think. You just have to take out your mobile phone and in a matter of seconds, you have the money in your bank account.

Disadvantages

· Security Breaches. Some forms of mobile payment still present some loopholes that do not make them 100% safe.

· Not all card readers work the same. If you have chosen a mobile payment system that involves using an application with your card processors, such as Square, PayPal or Inuit GoPayment, then it is quite likely that you may have some compatibility problems. Most card processors are compatible with iPhone, but perhaps not with other devices. Investigate it well before making a decision.

· Problems with the updates. A simply failed update can break the whole system and prevent you from continuing to charge normally. So be very careful if you update the application you use to charge and make sure it is compatible with your phone before installing it.

ELECTRONIC PAYMENTS

It is my favorite form of payment. Electronic payment methods such as PayPal or Stripe are the most popular new methods among freelancers, entrepreneurs, and online sellers.

Advantage

· They are very simple. They are usually the simplest and most immediate form of payment.

· They are international. They open the doors of the world market. It does not matter where your client resides or in what currency they want to pay you. A freelancer from the United States can charge a client in Guatemala without any type of impediment.

· They are fast! Almost as much as the cash payment.

Disadvantages

· The commissions are somewhat high. With few exceptions, the commissions associated with electronic payment systems are usually quite high. Sometimes, too much. It is likely that the commission that you have to pay will compensate all the advantages that I listed above, but if you are going to charge a high bill, perhaps you should consider using an alternative form of payment. To eliminate this problem of high charges, you can compare the money transfer services online to choose the best.

And these are some of the most popular payment methods nowadays. Of course, there are many other alternative methods, such as money orders or direct debits. You must find out which one is most suitable for your business.