What is 'Payment'

Payment
Payment is the voluntary transfer of money, equivalent, or other valuable items from one person to another in exchange for goods or services received or to meet a legal obligation. The person who gives the money is often called the payer, while the person who gets the money is called the payee.

What is the payment?
Payment is the exchange of money, goods, or services for goods and services in an acceptable amount to both parties and has been agreed upon in advance. You can pay with cash, a check, a wire transfer, a credit card, a debit card, or even cryptocurrency.

Understanding Payment
The way money works now, you can pay for things with cash. Money is a convenient way to pay for things and easy to store. It has made economic transactions easier.

Before, many people used money and other ways to make payments; people would trade one good or service for another. For example, if an egg farmer had a lot of extra eggs and wanted milk, he would have to find a dairy farmer who would trade eggs for milk.

If a good dairy farmer couldn't be found in time, the egg farmer wouldn't get the milk, and the eggs would go bad, making them useless. On the other hand, the money stays worth what it is worth over time. But bartering is still used by businesses that want to trade services.

Payment can be the exchange of something of value or use to both parties. Most of the time, an invoice or bill comes before a payment. Payees can usually choose how they want to be paid most of the time. However, several rules say that the payer must take up to a certain amount of the country's legal cash. When a payment is made in a foreign currency, there are often fees for the foreign exchange transaction. These fees are usually between 2 and 3 percent of the total payment amount, but they can be much higher depending on the bank, card issuer, and place of purchase.

Different ways to pay
Payments can be made in several ways, some of which are listed below.

Credit and debit cards
Most people use credit and debit cards to buy things and pay for them. But many businesses that accept credit cards are charged a fee by both the merchant who provides the machine and payments infrastructure and their bank. Most of the time, this fee is a fixed rate or a percentage of the transaction amount.

Cash
Cash is still used in a lot of businesses, including retail. For example, you can still pay cash at coffee shops and convenience stores. Due to the fees with debit and credit cards, many small stores would rather have customers pay in cash. Cash can be lost, stolen, or destroyed, which is bad. Businesses that do a lot of large transactions often have to pay more for security measures.

Mobile Phones
Contactless payment technology has made it easier to pay than ever in the past few years. The customer's banking information can be accessed by the credit or debit card machine, also called a point of sale terminal (POS). This is done through the software application on the customer's mobile device. Once the phone has read the information from the POS terminal, a signal is sent to let the customer know that payment has been received.

Checks
A bank cashier's check or a certified check are two types of checks that banks offer to help sellers get the money that the buyer owes them. Over time, people have used checks less and less because technology has made it possible to send payments electronically. There are, however, times when checks can be useful, such as when the vendor needs a guarantee of payment.

Wire Transfers
Wire transfers and ACH (Automated Clearing House) payments are often used when a check or credit card wouldn't be enough for a larger or more frequent payment. A manufacturer would often send a payment to a supplier through a wire transfer, especially if the transaction took place in another country. ACH payments are often used to deposit paychecks directly into an employee's bank account.

Some things to think about
The person who owes the money may choose to settle for less than the full amount, or it may offer a discount. The payee may also add a surcharge, like a late payment fee or a fee for using a certain credit card.

When the person who owes the money accepts payment, the debt or other obligation is paid off. A creditor can't just refuse to make a payment for no reason. However, payment can be turned down in certain situations, like on a Sunday or when banks are closed.

• Money or other goods and services are exchanged for a product or service.

• After everyone agrees to the terms, payments are usually sent out.

• You can pay with cash, a check, a wire transfer, a credit card, a debit card, etc.

What are the three ways that you can pay?
Checks and cash are both ways to pay. Cash and checks are being used less and less as ways to pay, but they are still legal and widely accepted.

• Money Order. Money orders are going down in popularity, just like cash and checks.
• charges and credits.
• Mobile payments or digital wallets
• Bitcoin is a form of digital money.

What other ways can you pay for something?
Other ways to pay than cash are called alternative payment methods. Alternative payment methods (AMOP) include paying with a credit or debit card, loyalty programs points, virtual wallets like Google Pay and Apple Pay, and cryptocurrencies like bitcoin. Another well-known AMOP is Venmo.

What's the point of making a payment?
Similar to the "Purpose of Payment" section of the check request form, the "Purpose of Payment" area lets Cardholders explain why they made the purchase. Getting this information for all purchases is very important for the auditing process.

Disclaimer: This content is authored by an external agency. The views expressed here are that of the respective authors/ entities and do not represent the views of Economic Times (ET). ET does not guarantee, vouch for or endorse any of its contents nor is responsible for them in any manner whatsoever. Please take all steps necessary to ascertain that any information and content provided is correct, updated and verified. ET hereby disclaims any and all warranties, express or implied, relating to the report and any content therein.