6 Types of Payment Methods & Their Pros and Cons

Know about the different types of payment methods that customers can choose from in 2022, and why merchants should aim to offer as many as possible.


We've come a long way when it comes to paying for goods and services. From using barter-like methods dating back at least 100,000 ago to accepting online purchases with a card for the first time in 1994, the incredible evolution of payments is unquestionable. In this article, we will discuss the different types of payment methods that customers can choose from in 2022, and why merchants should aim to offer as many as possible.

What is a payment method?

Put simply, a payment method is a way in which customers can pay for goods and services. Common payment methods include cash, credit or debit cards, checks, prepaid cards, digital wallets, mobile payments and more. The earliest form of paying is barter, or the exchange of goods and services for other goods and services without the use of money.

As we mentioned earlier, payments have a long history that dates back to hundreds and even thousands of years ago. The first metal money was used for the first time around 1000 B.C. in China, represented in coins made from stamped pieces of valuable metals (for example, copper and bronze). The ancient Greeks were also using early variations of coins around 650 B.C.

According to Cashbook, paper money was used for the first time in China in the year 806, while the first printed cheque dates to 1762 - almost 1,000 years later. 252 later, in 2014, Android, Google and Samsung Pay released their digital wallets to the public.

Types of payment methods and their evolution over the years. Source: cashbook.com

Over the last decade, digital payments have undoubtedly been on the rise - according to the same study conducted by Cashbook, 90% of mobile owners in 2020 have made an online transaction.

Considering that 91.4% of the entire world's population own a mobile phone, and 83.72% own a smartphone, we can clearly see that mobile payments are among the most popular types of payment methods nowadays.

And now, let's take a look at the types of payment methods that merchants can offer in 2022:

1. Cash

While customers are switching more and more to online payments as opposed to cash, especially following the global COVID-19 pandemic, cash is still among the most used payment methods. According to Querysprout, 30% of people in the US prefer paying in cash, especially for items under $10. On average, Americans pay 14 transactions per month with cash.

According to Statista, however, cash (37%) will be at the bottom of the list of preferred payment methods in 2022 across the globe, higher just above digital currencies (15%) and check (4%).

Which payment instruments will dominate in 2022? Source: Statista.com

Pros of cash

No hidden fees

Accepted everywhere

Convenient for smaller purchases

Cash is among the easiest and most convenient types of payment methods, and probably the only one that is accepted everywhere. In comparison, not all merchants accept credit or debit cards, especially when it comes to card-present transactions in local or street shops and vendors.

In addition, there is no hidden or credit card fees when it comes to paying with cash - the amount the merchant asks is the exact amount that you will pay.

Cons of cash

Withdrawal fees


Inconvenient for bigger amounts

On the negative side, you still get to pay fees when withdrawing cash from an ATM, and you may not have an ATM nearby if a merchant only accept cash and you don't have enough, which can be an inconvenience. From the perspective of businesses, one of the biggest inconveniences when it comes to cash is that customers don't always want to make big purchases with it.

This type of payment method also tends to be ineffective for optimizing internal processes and operations, slowing down businesses who needs to count money at the end of the day.

2. Credit and debit cards

Undoubtedly, one of the most common types of payment methods are credit and debit cards. With more than 2.8 billion credit cards in circulation, there is no doubt that they are highly preferred by customers, especially when it comes to online purchases or in-store purchases that are too big for cash.

Average number of credit cards by generation. Source: Experian.com

Pros of credit & debit cards

Convenient for larger purchases

Allow customers to pay online

Make accounting easier for merchants

Credit and debit cards have become widely popular among customers, who prefer to carry cash less and less.

They are especially convenient for larger purchases, funds are quickly available (if you don't have enough cash, you would need to find the closest bank or ATM), and most importantly - they enable them to pay online. Which is something that they can't do with cash.

Credit and debit cards can be highly convenient for merchants as well, especially when it comes to accounting and keeping track of all transactions.

Cons of credit & debit cards

Merchants don't always receive funds immediately

Processing fees

There is a risk of chargebacks

While credit and debit cards can be highly convenient for customers, considering how easy it is for them to make payments, the funds are not always readily available for merchants as it is the case with cash.

Usually, merchants have to wait until the transaction is fully processed to get the payment, which may take a couple of days. It may take even longer if the company is placing a pre-authorization hold to ensure that there are enough funds in the card.

When it comes to types of payment methods, this one is also typically associated with processing fees, although they can be lower with debit cards. And last but not least, sellers face the risk of chargebacks disputes, which was initially created as a method of protection for customers. but can be damaging for businesses if wrong or fraudulent.

3. Online payments

Talking about popular types of payment methods, online payment options became extremely popular in the last few years, especially following the global COVID-19 pandemic which forced millions of people to stay home. In fact, according to Statista, electronic payments are the preferred option for 39% of people.

Preferred payment methods of online shoppers worldwide. Source: statista.com

Some of the most common forms of electronic payment include Stripe, PayPal, and Square, but many more have been arising on the market.

Pros of electronic payments

Fast & easy for customers

Increased sales for merchants

Great for international transactions

Unsurprisingly, electronic payments are extremely convenient for customers, enabling them to make payments online in a fast and easy manner without even reaching for their credit card. Because they are so convenient and so many users prefer them as opposed to other types of payment methods, this helps merchants boost their sales.

This is especially true for platforms such as PayPal, which many people use for security reasons due to their customer protection policies. A lot of customers may not complete a purchase if they aren't able to pay with PayPal, especially when they are doubting the online merchant.

Electronic payments are also highly convenient for international transactions because of all the features that these platforms offer.

Cons of electronic payments

High transaction fees

Risk of fraud

Disputed transactions

Of course, not everything is perfect when it comes to electronic payments. They are typically associated with higher processing fees, and there is a risk of online payment fraud as they can be subject to phishing attacks, in which hackers will try to steal payment data.

For this reason, it's really important that merchants use a powerful, highly-secure Payment Gateway for accepting payments online and ensuring that fraud is prevented in the best ways possible.

And last but not least, merchants also face the risk for disputes when it comes to online payments. For example, if a customer claims that the purchase has been made without their authorization (which, of course, can also be legitimate), they will take the dispute to the credit card issuer instead of communicating directly with you.

A high dispute (or chargeback) rate may not only lead to costly penalties, but can also damage a company's reputation. However, working with a good Payment Gateway such as MYMOID can seriously help businesses get less chargebacks and deal with them more effectively.

4. Mobile payments (e-wallets)

When it comes to types of payment methods, mobile payments essentially have similar pros and cons as electronic payments. They are currently used by more than 2 billion people globally, and they are expected to increase by 28% by the end of 2024.

Types of payment methods: The growth of mobile payments. Source: statista.com

Some of the most popular mobile wallets include Apple Pay, Samsung Pay, Google Pay and AliPay.

Pros of mobile payments

Among the fastest types of payment methods

No need to carry cash or cards

Work with rewards programs

Mobile payments are among the fastest types of payment methods. For customers, they are mostly tap and go, meaning that they can complete the transaction quickly without the need to carry and look for their cash or cards. In addition, they often work with rewards programs which incentivizes customers to purchase more.

For merchants, mobile payment methods can also be highly convenient. They can practically convert their smartphone into a mobile PoS system, and bring it with them to conferences, shows, markets, etc.

Cons of mobile payments

Not accepted everywhere

Can result in higher processing fees for merchants

Compatibility and update issues

Among all types of payment methods, this one is probably the most high-tech, and as such, it comes with some cons that both customers and merchants should be aware of. On one hand, mobile wallets are not always accepted, and if they are, not all of them will be accepted. For example, Walmart only accepts mobile payments from its own Walmart platform.

Apple Pay is the most widely accepted type of mobile payment, and even so, only 36% of US retailers support it.

For merchants, mobile payments can also mean higher processing fees than regular credit and debit card transactions. In addition, they may struggle with constant compatibility and update issues, which can also make payment system more vulnerable to security leaks.

5. Checks

Once being among the most popular types of payment methods, checks are far from what they used to be. In fact, they have been on the decline for the last 25 years, declining 7.2% per year by number and 4% percent per year by value according to data from The Federal Reserve.

However, they are still one of the types of payment methods that exist on the market and people can choose from, so let's take a look at their advantages and disadvantages as such:

Pros of checks

No convenience fees

Difficult to cash out by someone else

Proof of payment

One of the biggest advantages of checks is the lack of convenience fees. Compared to fees that can go up to $10 for electronic payments, a stamp is typically below 50 cents. On the good side, they are also difficult to cash out by someone else in case you lose your check and somebody else finds it - as opposed to dropped cash bills that don't have your personal name on them.

As opposed to cash, checks are also a proof that the payment was made in case it's needed, for example in the case of disputes.

Cons of checks

Processing time is longer

Risk of fake checks

They are inconvenient

While cash and credit transactions can be processed fairly quickly, delivering the funds into your account within hours or just a couple of days, this is not the case with checks. In this case, the amount doesn't leave the account until the recipient decides to cash out the check.

As a merchant, you also face the risk of being scammed with fake checks, which can be extremely damaging especially for larger amounts. Overall, checks are just not as convenient as the other types of payment methods that we described above.

6. Bank Transfers

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