For any kind of side hustle that you plan to run, you need a way to get paid. After cutting someone's grass you can easily get paid in cash or use the Venmo payment app. What if you write an article online or sell an e-commerce product? There are a variety of online payment options and payment apps you can use for these purposes too.
What you are doing to make money online could work best with specific payment platforms. Some options may not even allow you to sell on their platform. It's important to have this knowledge before you start your business so you can plan accordingly. This guide will teach you about online payments and help you figure out what is best for your side hustle.
Customer Preferred Payment Methods
You may already have an idea of how you would like to get paid. Your decision of which platform to use could already be swayed by those initial thoughts. It is important for the payment option to be a method that you'll be able to use to get your cash out. However, it's also extremely important that you consider your potential customers too.
What do other people want to pay with online? One of the easiest ways to figure this out is to look up the most popular online payment platforms. More user accounts equals more potential customers with the ability to pay using that method.
From my personal experience, PayPal is the most popular option and most people also have credit cards. I use these two specific options on my websites in most cases. However, there are some instances when I make an exception. I'll use Zelle or even cash when doing in-person transactions. Very large transfers are best done using bank wires to avoid large fees. Ultimately, you should choose what makes the most sense for your business, yourself and for your customers. Matching up all three of those factors will allow you to maximize your potential revenue.
Payment Platform Policies
Something that is often overlooked these days until it is too late are the policies of payment apps and online payment methods. Each company will have their own terms of service and payment policies that you'll need to follow. You'll also notice that certain activities and types of products are restricted and not allowed.
Certain products that are more likely to be regulated, such as alcohol, marijuana, adult entertainment and gambling, are usually not allowed. There are some specialty payment methods that work with those industries, but you'll need to seek them out since I won't be covering them here.
Make sure you look through these documents on the websites of all payment methods you intend to use. Even though the legal jargon can be confusing at times, the lists of restricted activities and products are usually more straightforward. There's nothing worse than building a successful business only to have it shut down overnight over a technicality. These payment method policies are usually a common technicality that trips up many people when they're starting their first side hustle online.
Where Are You Selling?
Where you intend to sell your products or services online can affect your payment method plans. For example, eBay has switched to their own in-house payment system. To be able to make withdrawals from their system, you'll need to use one of their supported options.
If you'll be running your own website, you can usually have more freedom to choose the method or multiple methods that you want. Your only restriction on your own site will be the software that you use for automation to process your sales. As long as your software will support the methods you want, you can proceed with your plans with ease.
In general, research your selling plans thoroughly. Take a look through the websites where you want to sell and figure out the payment methods you can choose. Also be sure to match these methods up with the policies to ensure you can continue to use them long-term.
Online Payment Fees
Most of the companies that let you send and receive payments online will charge you a fee for this service. This is typically a set amount per transaction plus a percentage of the sale amount. With most options, the fee averages around 3% - 4% of the total transaction price.
There are a handful of options that do not charge any fees, which tempts many small sellers to use them. However, you need to be careful with this approach. Many of the no-fee payment methods will not offer seller protection. It's also common for these options to restrict the use of their platforms for the sale of physical goods and even people you don't know in person.
In many cases, the options that charge fees will be more popular for customers. It's much better to have more sales and pay a small fee compared with less sales and no fees. For most types of side hustles online, I highly recommend sticking with platforms that charge fees and write off that as a business expense.
Chargebacks & Disputes
Before I start talking about some specific online payment methods, you need to know one more thing about these companies. Sites like PayPal and credit card merchant accounts that charge fees may allow customers to file chargebacks and/or disputes. This is done as a buyer complaint resolution process when a customer isn't happy with the item they've purchased.
When you aren't aware that chargebacks can occur, it can really surprise you the first time it happens. Provide the best customer support you can to avoid most disputes. Unfortunately, chargebacks will still sometimes happen even with the best customer support. This is just a fact of doing business that you need to accept.
In the event of a chargeback, you'll get a chance to tell your side of the story. Any evidence you can give with that report will drastically help you to win the case if the customer is wrong. Evidence like proof of shipping and your website sales policy are important for online sales. Avoid problems by laying out these rules on your site and make the customer agree to them before purchasing.
The worst part about chargebacks is that you'll get charged an extra fee when they happen on your account. Besides having happy customers, money is the other main reason you should try to avoid these whenever possible. In general, the fee will be between $15 and $35 per chargeback, no matter the value of the transaction. If you sell a product online for $5 and receive a chargeback, you will lose money on that sale. You should avoid unhappy customers and maybe even try to sell more expensive products to reduce your chargebacks and the financial setbacks that come along with them.
Instant, Protected Online Payments: PayPal
One of the most popular ways to get paid online is with a PayPal account. It's easy for you to use and gives you quick access to your money. Even better, a ton of people use it, so it is a good option to offer to maximize your sales. Even offering multiple payment options myself in the past, 80-90% of sales from most of my websites have gone through PayPal. For this reason, I highly recommend it for anyone trying to run an online side hustle.
PayPal does charge fees, but they are reasonable and fairly standard for the industry. They also have a dispute and chargeback resolution process, but they can actually be much better about winning a case for you compared with credit card companies. Their dispute process also offers tiered fees. If you have a low percentage of your transactions with disputes, you'll be charged a lower fee around $15. With credit card companies, you'll usually pay $32-$35 for each dispute no matter your sales history. This dispute process is designed to protect buyers from fraudulent purchases, but it can also work in your favor against fraudulent buyers.
For e-commerce, PayPal is one of the best payment methods. Most online marketplaces and website software will have a way to support it to automate sales for you. This allows you to instantly get paid for a purchase, even while you sleep. Your PayPal account connects to a credit card and your bank account. Payments into your PayPal account are instantly available to you to use.
You can withdraw to your bank account in a few days without paying any fee or pay a small fee to get an instant transfer. They also have a debit card that I highly recommend. Using the debit card, you can instantly use account funds, which makes it perfect for paying business expenses like shipping costs.
Online Credit Card Merchant Accounts
In my opinion, the next best payment option is a credit card merchant account. There are a lot of different companies that offer this service, but not all of them are intended for online use. Brick and mortar businesses also use these accounts with card scanners to process sales in person, so you need to make sure you get the right kind of account.
I prefer using Stripe. Their fees are similar to PayPal. They can even be used for subscription payments that need to be billed each month. Another perk is that they have a Working Capital program similar to PayPal that lets you take out loans based on your sales performance and repay with a percentage of future sales.
While PayPal can be connected to accounts with many online marketplaces to get paid, that may not be the case with credit card accounts. You can use Stripe with WordPress and WooCommerce though. If you will build your own website for e-commerce sales, service sales or even digital product sales, this can be a good pick.
Even though PayPal does have the most users, there are some people that hate PayPal because they can be strict with their rules. For that reason, a small percentage of the population seems to avoid using PayPal like the plague. PayPal can process credit card payments for you to avoid the use of merchant accounts. However, I try to think of the customer and offer the credit card option too, which many of them seem to use.
Payment Apps: Venmo & Zelle
Many beginners that sell online will try to avoid payment transaction fees and the potential for chargebacks. While this may seem like a financially wise decision, it's not actually the best choice for a professional business. In fact, most online payment apps like Venmo or Zelle specifically prohibit the use of their services for buying goods online. They're intended to be used for in-person transactions and sending money to people you know and trust.
Since no fee is charged and a customer can't file a dispute on an app like Venmo or Zelle, these payment methods have actually become extremely popular to use among scammers. You see, if a seller is running a scam and has no intention of fulfilling a purchase, the buyer has no protection against this fraud using these payment apps. This lack of buyer protection will scare away potential customers that have this knowledge.
When you sell anything online to people you don't know, I highly recommend avoiding these payment apps and any others that don't offer the chargeback process. While that may seem odd to you at first, it is what appears the most professional and is usually what follows the policies of these apps. If you're running a side hustle offline where you'll be meeting customers in person, you can look into these options and accept them safely.
In-Person Payments: Square
You may be planning a side hustle where you sell online and in person to try to maximize your potential. If this is the case, Square is an easy option that allows you accept in-person credit card sales.
This works very similar to an online credit card merchant account like Stripe, but you'll also be able to scan physical cards using Square. PayPal also makes a card reader that you can get to use with those accounts. However, Square is a much more professional method that can even work with a brick and mortar store.
Square is useful for professional in-person selling because it offers and full POS (Point-of-Sale) system. These accessories do cost extra, but you could run a full retail store with them. They offer card readers in a variety of types, including ones you can attach to your phone. They even have receipt printers and screen terminals. You can use as many or as few of their accessories as you need too.
Even though I've provided a lot of information about online payment methods and even payment apps in this post, this knowledge is really just a fraction of everything there is to know about these platforms. However, you don't need to know everything to get started. The info I've given you here should give you the most essential parts that will help you make an educated decision about which services to use for your online side hustle or small business.
One final piece of advice is to diversify. When you have more than one payment method that you use and accept, you avoid putting all of your eggs in one basket. Payment companies do change their policies over time, and you may even try to bend their rules, even without knowing it. It's always possible for one of these companies to suspend your account, which could even lock up funds that you own there. If you rely on a single platform and this happens to you, it will instantly put you out of business, but a second option can let you keep doing business while you figure out the problem.