The Different Methods Of Payment For Online Purchases

By Michael Diaz. May 7th 2016

If you are planning on making an online purchase, then you have multiple payment options at your disposal. Credit cards, electronic fund transfers and checks are just a few of the ways that online customers can pay for their purchases. However, not all methods of payment were created equal. Some types of payments are superior to other types. Read on for a discussion on the various payment methods for online purchases.

Credit Cards

Credit cards remain the dominant form of online payment. Credit cards are convenient because the credit card company acts as an intermediary between the customer and the seller.

Why Online Merchants Like Them: Sellers enjoy getting paid by credit cards because they receive their payment immediately rather than having to wait for slower methods of payment. Additionally, if there is an issue with the credit card used, the seller is informed immediately and the sale does not go through.

Why Online Customers Like Them: Customers enjoy using credit cards to pay for online purchases because they do not have to pay for the product immediately. Instead, the credit card company pays the merchant and the cardholder gets a bill for the purchase at the end of the month (or the end of the billing cycle). If there is any discrepancy with the online order, the customer can refuse to pay the credit card company until the issue is settled. Additionally, many customers receive rewards from their credit card company for using their credit card. Popular rewards include cash, airline miles and hotel discounts. (For learn more about the rewards of using a credit card, see 7 Important Benefits Of Using A Credit Card.)

Debit Cards

Debit cards are another payment option for online sales. They function like a credit card except that there is no intermediary. Therefore, the merchant pulls the payment directly out of your checking account when the sale is made.

Why Online Merchants Like Them: While they would probably prefer a credit card, sellers are happy to get paid by a debit card. Like credit card sales, debit card purchases allow the vendor to be paid immediately. If there are insufficient funds in your bank account, then the sale will not go through or, if you have overdraft protection, money will be pulled out of your savings account to cover the purchase.

Why Online Customers Like Them: They function like credit cards except the money is not borrowed. Instead, it comes from your checking account. This helps to prevent overspending. However, if you overdraw your account, you will likely have to pay penalty fees. Also, if the online merchant fraudulently takes money out of your bank account, you might have to wait a long time to get it back.

Money Order

A money order is like a check, but it does not pull money out of your checking account. Instead, when you buy a money order, you pay the vendor for it using cash, check or credit card. The money order will then be worth the exact amount of money you paid for it. You can then use the money order to pay for purchases. Money orders are available at post offices, Western Union, financial institutions and some retail stores such as Wal-Mart. Make sure to only buy money orders from a trusted source as there are scam artists who might try to rip you off.

Why Online Merchants Like Them: They don’t. In fact, many online merchants do not accept them. This is because they have to be sent through the mail which can take time. The merchant also has to find an institution that will cash the money order which can be a hassle. Make sure that your online merchant accepts money orders before buying one.

Why Online Customers Like Them: If you do not have a bank account or a credit card, then a money order might be the best way for you to make an online purchase since many online companies will not accept cash. However, getting a money order is a hassle. First you need to find a reputable seller. Then you need to mail the money order out. Since the vender will not send your product until the money order is received, you may have to wait a long time to get your product. And if the merchant is a con artist, you might have a hard time getting your money back.


Checks were once the standard method of payment for non-cash purchases. However, because of the rising popularity of credit cards, the use of checks has dwindled.

Why Online Merchants Like Them: They don’t. However, because many people do not have a credit or debit card, checks are still accepted by some online vendors. The downside for the merchants is that checks take time to arrive. Checks can also bounce which can cost a vendor if they send out a product before cashing a check.

Why Online Customers Like Them: If you have a bank account but do not have a credit or debit card, paying by check is probably your preferred method of payment. However, because you need to mail a check for online orders, you will likely have to wait a long time to receive your purchase. Additionally, if you are dealing with a fraudulent merchant, you will likely be subjected to a painful investigation by your bank before you can get your money back.

Electronic Funds Transfers

An EFT is like paying with a check without having to fill out and mail an actual check. Instead, you enter your checking account information and the money is pulled directly from your account. EFTs can be done directly with the merchant or through a third party vendor.

Why Online Merchants Like Them: ETFs are fast and reliable. The merchant is paid immediately.

Why Online Customers Like Them: ETFs are fast and reliable. The payment is made automatically so you do not need to wait longer to receive your product. However, if you use ETF, you still need to be wary of seller fraud as it is often difficult to get your money back once it leaves your account.

Payment Service Providers

PSPs are companies like PayPal which help to facilitate payments for online purchases.

Why Online Merchants Like Them: Merchants like PSPs because they prevent the merchants from having to deal with transaction issues. Because the PSP is in charge of making sure the payment is made and received by the appropriate parties, the merchant can focus on its business.

Why Online Customers Like Them: PSPs allow an added level of security which helps customers to alleviate concerns about fraud. They also have easy to use customer interfaces which customers can use across all of their purchases.

Now that you know that popular methods for making payments online, you can evaluate which method will work best for you. If you want the best protection from fraud and the most convenience, consider paying with a credit card or payment service provider. If you don’t have access to a credit card, an ETF might be your best bet. Do your homework ahead of time to make sure that you use a method that you are comfortable with.

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