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Many people no longer have checking accounts or don’t want to use them in the age of digital payments. And younger customers who don’t have easy access to credit may also not have credit cards.
What to do next if customers refuse to pay by check or credit card? Are the new payment methods less secure than any of these options?
PayPal for Small Business
An option that many merchants use is PayPal.
PayPal is a credit card processing service that allows merchants to accept credit and debit cards, as well as money that someone has deposited into their PayPal account.
Because of the latter feature, PayPal can be a good option for people who don’t have credit cards and don’t want to pay with a debit card for purchases.
- For credit cards accepted online, the processing fee is 2.59 percent plus 49 cents per transaction.as of September 8, 2021.
- you can accept Discover Maestro, Mastercard, Visa and JCB.
- For credit cards and debit cards accepted in person, the fee is 2.29 percent plus 9 cents per transaction. You can accept credit and debit cards with a card reader.
- For PayPal digital payments (PayPal, Pay Later, Venmo and Checkout with Crypto) the transaction fee is 3.49% plus 49 cents per transaction.
- For personal payments with your QR code, the fee for transactions over $10 is 1.9% plus 10 cents per transaction. For those worth $10 or less, it costs 2.4 percent plus 5 cents per transaction. You can use this method if you are meeting with clients in person.
- PayPal says it offers 24/7 fraud protection.. It also sends alerts if it detects suspicious activity.
One of the drawbacks of PayPal is that banks don’t always consider money a merchant has accumulated in a PayPal account when considering a loan, the way they treat money in a traditional bank account. This can be a disadvantage if you are trying to build your business credit.
Venmo for small businesses
More and more customers are also trying to pay with Venmo these days. Venmo is owned by PayPal.
- Venmo is a digital wallet. you can use to send and receive money.
- It’s free if someone pays with cash, but there is a 3% fee for credit card transactions.paid by the buyer.
- If you open a Venmo business profile, you must pay a transaction fee of 1.9% plus 10 cents for each payment received.. The benefits of opening a business profile include advanced payments (such as links to your business website and social media accounts), tax reporting, and dispute resolution services.
If you’re working with a client you know and trust well, Venmo might be a good option.
Venmo says it uses encryption to protect account information and monitors account activity for unauthorized transactions. If you lose your phone, you can log into Venmo to prevent your phone from accessing your account. You can also add multi-factor authentication and a pin.
However, Venmo has its limitations. If you use “accept payments through personal profile” on Venmo, you have less protection as a seller than with a bank transaction or credit card payment. Venmo does not offer buyer or seller protection for private profiles and therefore does not encourage transactions with people you do not know. This is a big consideration.
However, if you use a business profile, Venmo offers its Purchase Protection Program, which provides some protection in scenarios such as a buyer claiming that a purchase was an unauthorized transaction or that an item was not received.
Zelle Small Business
The third option that more and more people are using today is Zelle.
- Zelle allows you to send and receive money through your bank’s app, or the Zelle app if your bank doesn’t have one. Zelle does not charge any fees for sending and receiving money.
- Zelle describes itself as a fast, secure and easy way to send and receive money among people you trust. The company says it uses authentication features to make payments more secure.
However, like Venmo, Zelle is not really designed for merchant transactions, which may include purchases by strangers.
“If you don’t know the person or are not sure you will get what you paid for [for example, items bought from an online bidding or sales site], we recommend that you do not use Zelle for such transactions,” the site says. “These transactions are potentially high-risk… Neither Zelle nor participating financial institutions offer protection programs for any purchase or sale made using Zelle.”
It’s also important to check with your financial institution if Zelle charges a small business usage fee.
bottom line
You’re better off using traditional forms of payment like ACH payments, credit cards, and checks than these new landscape additions so you have the protection they come with.
If you’re going to use newer services, only do so with people you know and trust.
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