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7 Best Payment Processing Companies for Small Business

Payment processors allow small businesses to accept multiple online payment methods. Read up on the features of six popular credit card payment companies.

Just as would-be romantics must be prepared to accept love, small businesses must be prepared to accept payments . Fortunately for business owners, vendors known as payment processors will facilitate the process.

Ahead, you'll learn about the top seven payment processing options for small businesses, their pros and cons, and fees.

Table of contents

What is payment processing for small businesses?

• 7 popular payment processing companies for small businesses

What to consider when choosing payment processing for small businesses

• Payment processing for small businesses FAQ

Payment processing is the critical business function of accepting payments from customers for goods and/or services. Online payment processing involves a customer, a merchant, a payment processor , a payment gateway (for online transaction), the customer’s bank or credit card company, and a merchant account.

Payment processing should be efficient, secure, affordable, and user-friendly. In order to accept credit card payments , debit card payments, and digital wallet payments (such as Apple Pay and Google Pay), businesses must partner with a third-party payment processor, which communicates between the parties involved in the transaction.

7 popular payment processing companies for small businesses

Many popular credit card processing companies will provide payment processing for small businesses. Understanding their features, pros, and cons can help in choosing the best payment solution for your business.

Shopify has it's own payment gateway that lets merchants process online and in-person payments through Shopify Payments . The gateway is compatible with a variety of channels, like Facebook, Instagram, and Google, so you can accept payments anywhere you sell. 

Shopify's payment processing fees differ depending on your plan. This varies between 2.9% and 2.4%, plus a 30¢ fee per transaction.

Features: 

• Shopify Payments is fully integrated with the Shopify platform
• PCI DSS compliant to protect sensitive financial data
• Process international payments in your customer’s local currencies
• Intuitive financial reporting tools right in your Shopify dashboard
• 24/7 customer support available
• Optimized for mobile transactions
• No extra software required to process online payments
• Competitive payment processing fees
• Accept multiple payment methods, including credit cards, digital wallets, and Shop Pay
• Shopify Plus merchants can take advantage of lower payment fees for transactions completed through Shopify Payments

Cons: 

• Only available to Shopify merchants
• Extra fee for transactions made through third-party payment gateways for merchants that are not using Shopify Plus

Start accepting payments fast with Shopify Payments

Skip lengthy third-party activations and go from setup to selling in one click. Shopify Payments comes with your Shopify plan, all you need to do is turn it on.

Launched in 2012, Clover is a cloud-based POS system and merchant service provider that offers in-store and online payment processing technology. Clover uses a flat-rate pricing structure. For in-person payments, rates range from 2.3% to 2.6% plus 10¢ per transaction, while online rates come in at 3.5% plus 10¢ per transaction.

Clover offers much more than debit and credit card processing. Additional services include:

• Mobile device payments
• Wireless processing
• POS systems
• Virtual terminals
• Analytics and reporting
• Integrated merchant accounts
• An expansive app marketplace

Clover offers many features. If you’re looking for a payment processor that can support inventory management and employee scheduling, manage customer relationships with an integrated CRM, and provide advanced analytics to merchants, then Clover might be the partner for you.

Cost is a key concern in payment processing for small businesses—and Clover isn’t cheap. Monthly software subscription fees run up to $69.95, which is higher than that charged by many competitors, and POS hardware can be prohibitively expensive for small business owners, ranging from $49 to $1,649.

Square is an inexpensive payment solution that operates on a flat-rate pricing structure and charges no monthly subscription fee. Square’s fees come to 2.6% plus 10¢ for in-person transactions, and 2.9% plus 30¢ for online transactions. 

Squares offers a variety of features designed for small businesses. They include:

• Free invoicing functions
• A free mobile device card reader
• API integrations
• Retail and restaurant-specific software solutions

Price is a major selling point for devotees of the Square payment system. Square imposes no early termination, activation, refund, or chargeback fee and charges no monthly subscription or PCI compliance fees, which are additional charges for compliance with payment transaction security standards called the Payment Card Industry Data Security Standards (also known as PCI DSS, or PCI). It also comes with free POS software and a free mobile device card reader.

Square doesn’t work with high-risk merchants—merchants declared by a credit card company to be at particular risk of fraud or of experiencing a high volume of returns. Some payment processors charge increased fees to high-risk merchants, while others, like Square, don’t work with them at all. Square also only offers 24/7 customer support for its paid plan options.

Stax is a membership-style merchant account provider that charges businesses a monthly subscription fee ranging from $99 to $199, interchange fees, plus a per-transaction fee that ranges from 8¢ to 15¢ per transaction.

Stax offers a range of merchant services, including:

• 24/7 customer service
• Physical credit card terminals
• A free virtual terminal
• Payment gateways
• Same-day funding options
• PCI compliance

Stax offers round-the-clock customer service and same-day deposit options. It also includes PCI compliance features. Because Stax’s interchange-plus pricing structure doesn’t include an additional percentage-based processing fee, it can be a cost-effective option for businesses that process a high volume of transactions. Stax also doesn’t require any contract commitments.

Stax requires a flat-rate monthly subscription of $99 to $199. This makes it a poor choice for businesses that process a low volume of monthly transactions. Stax also doesn’t work with high-risk merchants.

Stripe is a credit card processing company that uses a flat-rate pricing structure, charging 2.9% plus 5¢ for online payments and 2.5% plus 30¢ for in-person transactions.

Stripe’s features are tailored to both retail and ecommerce companies. Highlights include:

• Virtual terminal
• Physical terminal
• Large library of platforms and extensions
• Accepts international payments and over 135 currencies
• Integrated billing and invoicing 

Stripe charges no monthly subscription fees, no set-up fees, and offers 24/7 customer service. It also accepts payment in 135 different currencies and currently offers a variety of extensions, including for sales analytics, inventory management, customer management, and tax calculation tools. The Stripe platform also includes invoicing and billing functions.

Like Square, Stripe doesn’t work with high-risk merchants. Stripe’s application programming interface (API) also requires a greater degree of software development skill than many of its competitor platforms.

6. Payment Depot

This membership-based merchant account provider charges interchange fees plus a per-transaction fee that ranges from 7¢ to 15¢ per transaction.

Payment Depot is a merchant services provider with numerous features:

• Free virtual terminal
• Physical card terminals
• PCI compliance 
• Payment gateway

Payment Depot offers a 90-day risk-free trial and charges no cancellation fees to merchants. It also offers PCI compliance and 24/7 customer service. Unlike other payment processors that use an interchange-plus pricing structure, Payment Depot doesn’t charge more for online transactions than it does for in-person transactions. Instead, Payment Depot determines transaction cost by plan type. For example, its $79-per-month plan charges interchange fees plus 15¢ per transaction, while its $199-per-month plan charges interchange fees plus 7¢ per transaction.

Payment Depot doesn’t work with high-risk merchants, and membership-based pricing makes it a poor choice for businesses with lower monthly credit card income. Less expensive plans also include a maximum monthly transaction limit.

Helcim is a merchant account provider that charges interchange fees plus 0.3% of total transaction cost and 8¢ per transaction for in-person payments and interchange fees, and 0.05% of total transaction cost plus 25¢ for keyed transactions.

As a full-service merchant account provider, Helcim includes a wide range of payment processing features:

• No monthly fees
• Mobile device processing

Helcim charges no monthly subscription fees, set-up fees, PCI compliance fees, or cancellation fees. It also offers discounts for businesses that process more than $25,000 a month in transactions.

Helcim doesn’t work with high-risk merchants or offer 24/7 support. Volume discounts also make Helcim a better choice for high-volume businesses than for low-volume ones.

The ultimate goal of partnering with a payment processor is to increase profits and customer satisfaction while decreasing administrative burden. To meet these goals, small business owners evaluate transaction fees, pricing structures, ease of use, included features, and quality of customer service .

Transaction fees

Although credit card transactions typically carry higher merchant fees than debit and ACH transactions , many small businesses accept credit card payments because they are popular with customers. Credit card payments are so popular, payment processors are often referred to as credit card processors, even though most credit card processing companies also process ACH and debit card transactions.

If your business accepts credit cards, pay special attention to credit card transaction fees and other variables. For example, many credit card payment processing companies charge higher fees for online credit card payments than for in-person transactions. If your business accepts a high volume of online credit card payments, look for a payment processing for small businesses plan that offers lower rates for these types of transactions.

Pricing structure

Different payment processors offer different pricing structures, and the most cost-effective model depends on average transaction volume, average transaction amount, and the payment methods accepted.

Common credit card payment processing pricing structures include flat rate pricing and interchange-plus pricing. Flat rate pricing structures charge merchants the same percentage rates (calculated as a percentage of total transaction cost) regardless of card type used, while interchange-plus pricing structures vary costs based on card type.

Some credit card payment processors also offer subscription models, waiving certain per-transaction fees in exchange for a monthly membership charge. For businesses that process a high volume of transactions, membership plans can offer a cost-effective way to lower per-transaction rates.

Good customer service

Payment solutions should be easy to use for both you and your customers. They should also be reliable: If your credit card processor malfunctions, your customers will be unable to make purchases, which can damage customer relationships and grind revenue generation to a halt. Many payment processors offer 24/7 support via phone or chat, making it easy to seek help if you have a question or encounter problems.

Choosing a credit card processing company with strong merchant support can help resolve issues quickly and make sure that you’re able to reliably accept payments from clients.

Card processing is complex, and many credit card processors offer additional services and add-ons that may or may not be beneficial to your business. For example, providers might offer both online and in-store payment options, point-of-sale (POS) systems including payment gateways and physical or virtual terminals, integrated merchant accounts to help streamline payment processing and business accounting, and specialty software for sales analytics or inventory management .

To maximize efficiency (and minimize cost), look for a plan that offers the services you need—not the ones you don’t. Choosing the simplest payment solution possible ensures that your processing fees aren’t subsidizing services that benefit your competitors—instead of you.

Take control of your cash flow with Shopify Payments

Only with Shopify Payments can you track your orders and payments all in one place. Have a complete view of your finances, accept local currencies and payment types for a smooth checkout experience.

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Payment processing for small business FAQ

How do small businesses process payments.

Small businesses can process payments either in person or online, and frequently accept payment methods including cash, check, ACH transfer, and credit and debit card. Many small businesses use a third-party payment processor to accept credit card and debit card payments.

How does a business process payments?

Businesses process payments both in person or online, and frequently use a payment processor to accept online payments including ACH transfers and debit and credit card payments.

How can small businesses take payment online?

Payment processors allow small businesses to accept online payments via debit card, credit card, and ACH transfer. Different payment processors operate under different fee structures and provide different benefits, with some merchant service providers offering payment processing, payment gateways, and integrated merchant accounts.

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Building a successful payments system

Leader in McKinsey's Private Equity and Financial Services Practices working with private equity, fintechs, payments, and technology clients with a focus on value creation, strategy, M&A and growth topics

Advises clients across the payments value chain, from transaction banks and central banks to digital attackers, payments processors, and merchants

Advises payments, fintech, and banking clients across North America on new product launch strategy, new market entry, and growth strategy

Advises issuers, acquirers, networks, processors, and fintechs on payments topics

• Customers are congregating in ecosystems and marketplaces where they consume similar services and can be more easily accessed, like Amazon, Alibaba, and Uber
• Technological advances are enabling companies to quickly scale up new products across critical masses of senders and recipients, creating large seed populations in digital marketplaces, social networks, and other groups
• Application programming interfaces (APIs) are enabling payments to be easily integrated with other products via underlying bank rails such as automated clearing house (ACH) payments and wire transfers
• Higher digital spending is allowing new “plug and play” solutions to be adopted without the need to roll out physical POS devices.

Networks and schemes: What’s the difference?

• A network, at its simplest, is a directory of participants along with the information required to access their stores of value and settle transfers: names and addresses, account details, and so on. Primary networks, such as ACH and real-time gross settlement (RTGS), are integrated with bank systems and do not rely on any other settlement mechanisms to execute payments.
• A scheme also has a directory of participants, but what differentiates it from a network is that it also enforces rules and standards. As well as connecting to bank networks to transfer funds, it ensures that participants abide by rules and standards on fraud liability, participant eligibility, data security, and other matters. Some “pure” schemes, such as the National Automated Clearing House Association (NACHA) in the US, focus only on managing their own rules and standards without maintaining a directory of participants. Examples of payments schemes include Visa, Mastercard, JCB, Amex, Girocard, China UnionPay, Zelle, and TransferWise.
• Hybrid schemes typically connect to both schemes and networks. They often include a store of value (that is, some kind of deposit account) and overlay their own rules to create a common set of standards. Examples of hybrids include Alipay, WeChat Pay, PayPal, and Twint.

How to start a payments system in 2020

• Identify an internal or external seed population with a critical mass of senders and receivers that generates strong network effects for its members. With an internal population, the company builds on a customer base or marketplace of its own that currently uses other schemes to send and receive payments. With an external population, the company partners or targets an external entity with a growing or under-served population, develops scheme standards, and then acquires customers. Companies with payments systems at this stage include the ride-sharing app Uber, the US restaurant-delivery services GrubHub and Caviar, and the US education, healthcare, and travel payments platform Flywire.
• Collect payments information and enable internal payments. Since direct-to-account payments methods are typically cheaper than card schemes, collecting payments information is financially advantageous. It is also getting easier, thanks to innovations such as Plaid for accessing bank accounts and API-based open-banking standards. Providers can enable internal payments within a target population before extending the scheme to external users. Amazon, which collects bank-account information to enable direct ACH transactions, exemplifies this stage of a payments system.
• Define pricing, rules, and standards. Graduating from a network to a scheme involves enforcing rules and standards for participants. (Swish, a mobile payments scheme in Sweden, has reached this stage in its evolution.) Branding is one key decision point: will the scheme have a different brand from the parent company? Will accepting merchants be required to communicate or display their acceptance? Another set of choices relates to open-data standards and access: what information is transmitted with each transaction? What data is retained, for how long, and who stores it? What data do participants and third parties have access to? Then there is pricing: what price is applied to transactions versus dollar flows? Does it vary by underlying payments type? Do cross-border transactions incur additional fees? Finally, fraud liability rules must be determined: if an unauthorized user gains access to a member’s credentials and conducts a fraudulent transaction, does that member have any recourse? If so, who is liable for that amount, under what conditions?
• Create access channels and expand distribution. Opening up a payments system to participants beyond the seed population requires new access points for different purposes. One is onboarding: allowing new participants to join the network and collecting their payments information. Another is APIs access, to extend acceptance of the system via proprietary or third-party distribution channels. Yet another is dedicated marketing and sales, to expand the teams that drive acceptance. Finally, third-party channel access is needed to enable the system provider to work with regional acquirers to bundle a scheme as part of their merchant-acceptance packages. Payments systems that have reached this stage include PayPal, which offers payments via buttons embedded in e-commerce sites, and Alipay, which has expanded acceptance via its 2018 partnership with First Data (now Fiserv).

Is it worth it?

The outlook for incumbents

Opportunities for new entrants.

Payment Gateway Business Model – Full 2024 Guide

Alexandra Dolia

It is no secret that the e-commerce business is growing insanely fast these days. According to the estimated value of global retail sales from 2021 onwards, e-commerce retail sales are expected to reach 8.5 trillion U.S. dollars on a global scale by 2025. Such a huge market growth implies a demand for the software infrastructure that will allow accepting payments on their websites. 

A Payment Gateway or a Payment Aggregator is a piece of vital infrastructure in the payment process that provides for the transfer of sensitive data from the client and the acquiring bank. The gateway is connected to an API inside e-commerce or payment accepting company. The aggregator charges a Merchant Discount Rate (MDR) on each transaction that goes through it. In this article, we present a full guide to a payment gateway infrastructure and its business model.

Payment gateway: the basics

A payment aggregator is an infrastructure company that provides software on a SaaS (Software as a Service) distribution model. To put it simply, the aggregator is a bridge between the client and the merchant. Its role is to transfer data between the major players involved in transaction processing: the customer, the merchant, the acquiring bank, the issuing bank, and the card network. 

Another important point is that the transfer of such sensitive information must be flawless and secure. Ensuring fast speed and security of data transfer is one of the payment aggregator’s main tasks. After checking card information for security, the gateway authorizes a payment.

The operating principle of the payment aggregator proceeds as follows: a person places an order and enters his payment details either directly on the merchant’s website if he is PCI DSS certified , or on the payment aggregator’s page. Then, the aggregator receives them, encrypts sensitive data, and transfers it to the acquiring bank. Afterward, the information goes to the card issuer, followed by the issuing bank, which approves or declines the transaction, and then the message with the approval or rejection goes back to the site.

How payment gateways make money

In simple terms, a payment gateway earns income from each transaction by taking a percentage and/or fixed fee that is called Merchant Discount Rate (MDR). However, it is much more complex than that. To figure out what exactly a MDR is, you need to understand the Card Networks business model since it is the major player in online payments.

Usually, when we talk about Credit Card Networks or Card Issuers, we mean either Visa or Mastercard. Have you ever wondered how they earn on their transactions? The majority of credit and debit cards all over the world are issued by Visa’s or Mastercard’s Network Participating Banks. To use the benefits of, let’s say, Visa, the bank should pay the Network Participation Fee, which is fixed and only paid once. The bank also pays the card network a fee for each transaction made.

Payment aggregators earn money in a similar way. Let’s take a look at the example. To accept payments online, an e-commerce merchant needs payment providers. The services that enable that are the acquiring and the issuing bank, card network, payment processor, and the payment gateway. All of them have a fixed amount fee paid per $1 transaction. The total of these fees is called MDR. 

Calculating Transaction Discount Rate 

On average, the merchant is charged 1-3% of MDR for each transaction processing. MDR is a general amount of fees that a merchant pays for the transaction processing. Assuming that the whole amount of MDR a merchant should pay is 1,0%, how do we split it? It looks like this:

• 0.35% fee to the card network;
• 0.35% fee to the acquiring bank.
• 0.20% fee to the payment gateway service provider;
• 0.10% fee to the payment orchestration platform;

For instance, a customer makes a $1,000 purchase at the online store by Visa credit card. From this amount, the merchant will pay $3,50 to the card network, $2 to the payment gateway, $1 to the payment orchestration platform, and $3,50 to the acquiring bank. Thus, a merchant would receive 990$ out of 1000$ paid by the customer. 

Payment Gateway Business Model

Payment gateways generate most of their revenue from MDR, but the amount of charge varies depending on the mode of transaction. During the payment phase, the client chooses the preferred way to pay for the purchase. Depending on whether the client chooses a credit card or a debit card, an e-wallet, Internet banking, or a prepaid wallet, the MDR charge will differ. 

There is also a difference between the business models that the aggregator chooses. For enterprises that make large volumes of transactions, a payment gateway may charge a fixed fee per month in addition to the MDR (although the MDR will be lower in this case). If the payment aggregator has a business model with no fixed fee, the amount of MDR charge is higher.

Additionally, international transactions that involve multiple currencies are charged an extra fee. If the merchant accepts the payment from the client in the same currency that he receives, there is no extra charge. But in case the currency in which the customer pays differs from the one that the merchant receives, there will be an extra conversion fee. Typically, the extra charge is about 1%.

Also, the fee is determined by the country in which the acquiring bank is located and the client’s country. If the client and the bank are located in the same country, the fee is lower. If their countries are different, but they are located within the same region (Europe, for instance), the fee is higher. And, if the client and the acquirer are located on different continents, then the fee will be a lot higher. 

A setup fee is one more source of income for the payment gateway. It is a fee that a merchant pays only once for setting up a merchant account. All the costs associated with setting up a merchant account are included in the fee. However, not all payment gateways charge merchants a setup, some aggregators waive it. 

Another service a merchant is charged for is the maintenance and support of the gateway. The aggregator charges an annual fee to cover the operational cost and the costs needed to maintain the software, security , and technology of payments, although it is up to the payment gateway providers whether to charge a maintenance fee.

Lastly, there might be an additional charge for InstaPay or One-click Payment . By choosing it as a preferred payment option, the client receives a link for payment in an e-mail or phone number in real-time. Clicking on the link or scanning a QR code, the client pays for the purchase without entering his payment data. 

Nowadays, it is impossible for a merchant to accept payments on a website without payment gateways. The business model of a payment gateway is based on the percentage and/or fixed fee that the merchant pays from each transaction. The amount of charge depends on the transaction mode. Therefore, businesses that have ongoing transaction flow generate constant profits for the payment gateway. Additionally, payment gateway providers generate profit from setup and maintenance fees, and extra charges for international and InstaPay/ One-click transactions . 

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Online payment methods for small businesses: how to choose.

Small businesses have a range of online payment methods that allow clients to pay their invoices online conveniently. Accepting various payment methods, including online payments, can help small businesses attract new clients and receive payment faster from existing customers.

These topics will outline the range of online payment methods for small businesses.

Table of Contents

Online Payment Methods

How to set up online payment for small business, benefits of online payments for a small business, what is the best online payment service, small business payment systems: what to look for.

• Frequently Asked Questions

There are different options for businesses looking to accept payments online from their clients. Small business owners should evaluate their online payment options to decide what method works best for their business and best serves their clients. Here are some simple online payment methods for small businesses to consider:

Accept Online Credit Card Payments on Your Website

You can add a simple payment form to your business website to accept online credit card payments using an online payment gateway . Businesses can do this easily by outsourcing the payment to an online payment service provider, which will then:

• host the payment form
• oversee secure payment processing
• safely store the payment information of your returning clients with their permission.

Accepting credit card payments as a small business just makes sense. It will make payments simpler for your clients, which, in turn, will help you get paid faster. 

Accept eCheck Payment Through Direct Transfer

Small business owners can allow their clients to easily transfer payments directly from a bank account by accepting eCheck payments. eChecks let clients take the banking information usually found on a paper check, including the routing number, account number, payment amount, and authorization, and enter it into an online form to send a direct transfer from their bank account to yours. The fees associated with eCheck payments are often lower than those associated with credit card payments.

Accept Mobile Payments

For businesses working outside of an office setting that want to accept payments on-site, including construction companies and landscaping businesses, accepting mobile payments can be an excellent solution for receiving payment quickly in person. To accept mobile payments, businesses need to invest in a mobile card reader, like Square. Mobile card readers plug into your phone or connect via Bluetooth and work with a mobile app to process credit and debit payments through a smartphone from anywhere.

Enable Click-To-Pay Email Invoicing

If your business uses a cloud-based accounting solution , your clients can quickly and easily submit payments just by clicking a link in their email to view and pay the invoice. Allowing clients to pay with just a few quick clicks simplifies the payment process and can help you get paid faster for your work.

Offer Automatic Bill Pay

If you accept online payments by credit and debit card, you can offer clients an even easier way to submit payments by allowing them to set up automatic bill payments . Automatic bill payments allow clients to schedule ongoing monthly or weekly invoice payments so that the money is transferred automatically on a recurring basis. That way, clients don’t have to do any work to send your payment, and you can receive your money faster. Check out our post on automatic payment service for small businesses to learn more about this convenient option.

Are you worried about keeping track of your business bank account and expenses? Connect your account or credit card with powerful bookkeeping software using FreshBooks for automatic updates and up-to-date, tax-friendly categorization of expenses. Our Expense & Receipt Tracking Page has more information on how you can stay on top of your accounts and track expenses on the go. 

Click here to get started.

Setting up online payments for small businesses takes some research, as there are a variety of third-party software options like PayPal or Stripe that you can utilize. After deciding which type of online payments you want to accept, you will need to create a merchant account. From there, depending on your business, you can either begin attaching the account information to your invoices or provide click-to-pay services on your website. 

If you are just starting out with your business and have never used online payments, it may be a good idea to speak with an accounting professional first to ensure you have all your bases covered. Each platform has its pros and cons, and a financial professional can guide you in the right direction. 

Get Paid Faster

Online payment methods offer fast processing times. Rather than having to wait for a check to clear, online payments allow businesses to access their money within a couple of business days. Getting access to payments faster can help small businesses improve their cash flow, which is crucial to their success.

Give Clients Options

When you accept online payment methods, you offer your clients more payment options, making the payment process more convenient. This can help improve your relationships with existing clients and may even help you attract new clients to your business. When your clients can pay using the most convenient method, it can also encourage them to submit their payments faster.

Offer Better Security

By accepting online payment methods, small businesses offer their clients peace of mind because online payment gateways offer several layers of security and will encrypt your clients’ personal and banking information. With online payments, the money is also transferred to your business bank account securely, so you don’t have to worry about theft or loss the way you do with cash payments.

Save Your Time

Your online payment service provider handles the heavy lifting of payment processing for you; it will:

• Manage and verify the transactions made by clients
• Send out payment confirmation to you and the client
• Oversee transferring money from your client’s account to your business bank account

Not having to go to the bank to cash checks or handle large amounts of cash can save you time so that you can focus on more important aspects of your business.

Get Robust Reporting

Online payment services offer robust reports that can give you crucial insights into the health of your small business and help you create accurate forecasts to plan for your company’s future. The reports generated by online payment gateways include information about how long it takes to receive payment for invoices, the most popular online payment methods used by clients, your average invoice amounts, and your most popular services. These insights can help you make important decisions to help make your business more efficient and successful in the future.

Help the Environment

Online payment methods offer an environmentally friendly payment system because you’re eliminating the need for printed invoices and bills, and you’re cutting down on the paper products used to mail invoices and receipts to clients. With online payments, all transactions take place in the cloud, and all your client information and business reports are also generated online, with no printing needed.

Give your clients more ways to pay with Freshbooks Payments options, accepting online payments via bank transfer, credit card, Stripe, and PayPal at the click of a button.

The best online payment service for your small business is the one that meets all the needs of your business and its clients and works with your budget. Here are some of the best ways to accept payments online services available:

• FreshBooks Payments: A secure platform that allows you to collect payment directly from the invoice. Accept credit and debit cards, Bank Transfers, Apple Pay, and Google Pay. It is also fully integrated into the FreshBooks accounting and payroll system, so your books are always up to date.
• Stripe: An online payment platform that allows businesses to accept various online payment methods.
• PayPal: An online payment service that enables businesses to process credit and debit purchases for a fee.
• Square: Provides small businesses with a card reader that works with a mobile device and mobile app to accept credit card payments from anywhere.
• Amazon Payments: Offers online payment solutions that integrate directly into small business websites.
• Apple Pay: Allows small businesses to use their Apple devices (phones, tablets, computers) as POS systems.
• Google Pay: A digital wallet platform and online payment system developed by Google, enabling users to make secure and fast payments using their mobile devices or online accounts.

When deciding on a small business payment system for your business, the most popular payment methods for small businesses are:

• Credit Card Payments
• Online Payments
• Mobile Payments
• Cash Payments
• Check Payments

Online and mobile payments are the top emerging technologies, combining convenience with secure transactions and providing a digital “paper trail” to simplify your business’s accounting processes. When deciding between the best online payment providers like PayPal, Venmo, and FreshBooks Payment, you will want to look at:

The Price – Do you need to pay a fee per transaction? What is the rate that they charge? 

Integration into your system – Does the provider offer software that works with your business? 

Flexibility in Methods of Payment – Will your customers have the choice to pay with credit, debit, or bank transfer? 

Security – Does the service offer fraud protection and secure payments?

Can you sell cross-border? – Does the provider allow you to process in different currencies and accept non-domestic credit cards?

Unique features – What does the provider have that others do not? 

Overall, there are pros and cons to each type of payment method, and what you choose for your business will depend on your own needs and those of your clients. Accepting payments online offers better security and accountability than cash payments do, with several layers of encryption and detailed transaction tracking. It is also a faster and more convenient method for your clients to pay invoices so that you can receive your money faster.

Payment services online offer reports and information laid out to offer important insights into your workflow, services, and finances,  and they allow you to manage and verify transactions and confirmations of payment. They also give your clients payment options, making the process more convenient while providing an eco-friendly way to pay for your services than traditional paper invoices.

FAQs On Online Payment Methods For Small Business

Which online payment method is best.

The best online payment method is the one that works best for your online business and your clients. You must weigh each system’s pros and cons and consider which payment method best suits your business and your customer base.

What is the easiest online payment system?

The easiest online payment system for customers may be the FreshBooks online payment service, as the payment options can be fully integrated into your invoice, making them easy to find and click to pay using a credit card or bank transfer. This option may also be easiest for you as a business owner, as you can accept the payment and deposit it in a few simple steps.

How do I accept a payment without fees?

Platforms like Square let you set up accounts to accept online payments using their free, basic plan without any fees up front, as they instead utilize a processing fee when you make a sale. If you are looking for a secure and safe way to accept payments with no fees, try FreshBooks , and consider using their simple and transparent interface with no hidden fees after your free 30 day-trial is over.

How can I accept payments online without a merchant account?

Accepting payments with no account may only work through a direct e-transfer between bank accounts. If you use an online platform, you will need an account connected to your bank account so that you can deposit your earnings. FreshBooks makes invoicing and deposits easy for small business owners, letting you access your money with a few simple steps.

Are there any government regulations or laws I need to be aware of when using online payment methods for my small business?

Yes, there are several government regulations and laws that small business owners need to be aware of when using online payment methods, such as PCI DSS compliance, GDPR, and state and federal consumer protection laws. It’s important to stay up-to-date with these regulations to avoid legal and financial consequences.

Jami Gong, MPAcc, CPA

About the author

Jami Gong is a Chartered Professional Account and Financial System Consultant. She holds a Masters Degree in Professional Accounting from the University of New South Wales. Her areas of expertise include accounting system and enterprise resource planning implementations, as well as accounting business process improvement and workflow design. Jami has collaborated with clients large and small in the technology, financial, and post-secondary fields.

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Should Your Business Offer Payment Plans for Customers? [2023]

The information in this article is intended for general information purposes only. You should not rely on it as the sole basis for making any business, legal, or other decisions. While we make every effort to ensure that facts stated are correct at the time of publication, we do not accept any responsibility for keeping this information up to date. Any views expressed in this article are those of the author and do not necessarily represent those of Pay.com.

Offering payment plans allows your customers to pay for a larger purchase with a series of smaller payments. Although it’s more convenient for you, as a business owner, to get that money upfront, a payment plan can attract more customers, earn more sales, and encourage your customers to make faster purchases.

Still, payment plans don’t make sense for every business. They can even have some negative consequences. Let’s discuss the pros and cons, as well as how to offer payment plans if you do choose to proceed.

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What Is a Customer Payment Plan?

Big-ticket items can be tough to pay for. If a customer doesn’t have a credit card or lump sum of cash to use when paying for goods, they may have to abandon the purchase or search for the product elsewhere. 

This is where customer payment plans come into play. Payment plans are a financing tool that allows a customer to pay for a purchase over time with low monthly payments. They are essentially interest-free loans with the condition that the consumer must pay back the loan according to a set timeframe. The consumer may have to pay interest if they don’t pay by the end of that grace period.

These plans are often essential for expensive purchases, like furniture or cars. However, there’s no minimum price necessary for a payment plan. The industry even considers things like streaming media and magazine subscriptions to be payment plans. 

All types of businesses use payment plans, so they can be useful whether you’re selling directly to consumers or to other businesses. For customer-facing businesses, payment plans are sometimes referred to as buy now pay later (BNPL) or layaway plans. In the business-to-business (B2B) space, some people refer to it as consumer financing.

The Benefits of Offering Customer Payment Plans

Offering payment plans can benefit both you and your customers. The biggest reason you’d opt into payment plans is that they can boost your sales. When you break up one payment into several smaller ones, it makes your product or service more accessible to more shoppers. You give them a way to make a purchase when they might have otherwise given up.

These aren’t just customers who don’t have the money to pay the full cost upfront. They’re also folks who can’t qualify for loans because they have no or low credit scores. They could also be smart shoppers who want to maintain their savings and avoid credit card interest and fees. 

Plus, offering payment plans often means more orders. This is because customers are more likely to buy even more products or services from you because they have more free cash. This allows them to buy what they want rather than just what they can afford at that exact moment. 

While it may be nice to have that larger lump sum payment when the customer purchases an item, payment plans also provide you with regular income. You automatically deduct the payments from the customer’s account at set intervals, so there’s no waiting around for late payments. You’ll know exactly how much you’ll earn and when, which provides you with a steady cash flow.

Having payment plans also sets you apart from the competition that doesn’t offer financing. That makes your business even more appealing and could help you take customers from other similar vendors. 

The Drawbacks of Offering Customer Payment Plans

Like most business decisions, there are also drawbacks to consider with payment plans. The first is that it is possible that a customer may walk away without paying back the entire amount. This could happen if their bank account doesn’t have enough funds when the payment auto-deducts. It could also happen if they suddenly close the credit card that they used for the payments.

However, this is fairly uncommon. Customers know that they can damage their financial and credit history if they miss payments, which impacts their future purchasing power. Most people want to avoid this income, so they ensure they have the funds to pay the monthly bill.

If you choose to set up payment plans through a bank, you may face higher fees as a merchant - up to 6% of the purchase amount. Implementing a payment plan also requires some specialized technology and tools to adjust your checkout process, which can be an added expense. 

It’s also important to review your own business to determine if you’re a good fit. These plans are usually best for businesses that sell more expensive services and goods. Additionally, certain types of businesses, like gaming and tobacco companies, aren’t legally eligible.

How to Offer Payment Plans to Customers

Start by deciding which products (if not all) you’ll offer payment plans for. This is easier for services or subscriptions, but more difficult for physical goods because you have to consider your own costs. 

For example, if you sold a watch and it breaks before it’s completely paid for, will you offer complimentary repairs? This is the time for you to set terms, including how you’ll handle servicing, maintenance, and refunds . You’ll share this agreement with the customer before they agree to the plan.

You’ll also need to decide the frequency of payments. Will you require weekly, biweekly, monthly, or annual payments? There’s no right or wrong answer – whatever works for your business and customers.

Next, you’ll set up recurring billing via a payment processor, which will implement automated invoicing and auto-debit. When the customer provides their payment details, you put them into the system which deducts them from the customer’s account on a set schedule. Those payments will automatically stop once the customer has paid for the item in full. Alternatively, subscriptions may continue indefinitely.

The Best Way to Accept Payments from Your Customers 

Payment plans can boost your revenue, but it’s important to choose a payment system that won’t eat away at that profit. Banks, in particular, can have expensive fees for setting up recurring payments. Alternatively, Pay.com charges a simple flat rate per transaction rather than a percentage, so you can keep more of your earnings.

Pay.com also makes it easy to set up payments. It’s all done through the Pay Dashboard . Here, you can keep track of the status of all your payments, update customer payment details, and view analytics. Pay.com makes payment plans straightforward and easy, so you can focus on growing your business. Click here to sign up now!

The Bottom Line 

Offering a payment plan can boost cash flow and increase order volume. Although there are some drawbacks, many businesses find that offering financing plans gets them more loyal customers. 

If you’re ready to start offering payment plans, check out Pay.com . As a payment service provider, we make it easy for you to set up a variety of payment methods with just a few clicks. Plus, you can send direct payment requests. Even after you make a sale, Pay.com offers support via reporting and analytics. Click here to find out how you can get started.

How can my business accept credit card payments?

You can use Pay.com to accept credit card payments . With your Pay Dashboard, you can easily set up a customized checkout page, send a payment request via email or text, and even enter your customer’s details manually. Click here to get started!

What are payment plans?

Payment plans allow customers to pay for a large purchase in several smaller installments over a set period of time. They’re usually interest-free unless the customer fails to repay the full amount within the agreed-upon term.

How do I set up payment plans for my business?

You can set up a payment plan by using a payment processor to set up recurring billing .

What are some examples of payment methods?

A payment method is anything you use to pay a bill. This includes cash, checks, credit cards, debit cards, mobile payments, electronic bank transfers, Apple Pay, Google Pay, PayPal, and more.

Pay.com lets you accept credit cards, debit cards, and a wide variety of alternative payment methods. You can easily set up recurring billing and manage all your transactions through your user-friendly Pay Dashboard. No tech experience required!

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PayPal Zettle is available to small businesses across the U.S. beginning today

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Square Review 2024: Features, Pros & Cons

Updated: Apr 23, 2024, 7:41pm

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Our Verdict

Is Square right for your small business? Read our 2024 Square review for everything you need to know about the latest features, pricing, pros and cons.

Square is a payment processing and point-of-sale (POS) platform used by businesses of all sizes, from brand-new startups to large multistore operations. Square offers an affordable fee structure for small businesses or startups, which is a nice perk for those whose turnover varies from month to month. There is much to like in this affordable, user-friendly POS.

• Free to start
• No monthly fees in Basic Plan
• Wide range of hardware to choose from
• Account can freeze due to irregular activity
• Not cost-effective for high-volume transactions
• No phone support

Table of Contents

Square at a glance, other benefits, how square pos stacks up, is square right for you or your business, frequently asked questions (faqs).

Square is popular among small and mid-sized businesses because it has no monthly fees for the basic plan and a flat transaction fee structure. This can make it ideal for brand-new businesses that want a solid POS platform without spending much upfront.

Square Processing Fees

Payment processing can be a big headache for businesses because there are multiple fees levied by card companies, banks and compliance standards. Square’s platform handles all of these for you and only requires you to pay them a few cents for each transaction.

Card-Present Payments

You pay 2.6% plus 10 cents per transaction for card payments accepted using a Square Reader, Register, Stand, Terminal, Retail Plus or Square for Restaurants.

Keyed Payments

If you key in the card details manually or from a file, you pay a transaction fee of 3.5% plus 15 cents per transaction.

For a purchase done through eCommerce API, Square Online Store, Square Online Checkout or online invoicing, you pay 2.9% plus 30 cents for cards or 1% with a minimum of $1 per transaction for ACH bank transfers (via invoices only).

Hardware and software

Square provides multiple hardware options for its service. The software for all of them is free. In many cases, you can download it from Google Play Store and Apple App Store. The software updates are also pushed via the app stores.

• Square Reader for magstripe: When you sign up for Square, you get a free magstripe reader, which is good enough to get you started. It comes in handy when you are on the go and need to accept payments. Additional Square Reader for magstripe costs $10 each.
• Square Reader for contactless and chip: This reader accepts payments via chip as well as contactless methods such as Apple Pay and Google Pay. This device, which starts at $49, is incredibly useful in a post-pandemic business landscape where contactless payment is on the rise. If you also need the charging dock, the set costs $66.
• Square Stand for contactless and chip: This device plugs into your iPad and converts it into a checkout station that can be used anywhere in your shop. It costs $149 or $14 per month for 12 months and comes bundled with a Square Reader for magstripe as well as a Square Reader for contactless and chip.
• Square Terminal: The latest device from Square comes with a built-in display, magstripe reader, chip reader and receipt printer. It costs $299 or $27 per month for 12 months.
• Square Register: This top-shelf device lets you accept payment from magstripes, chip cards, Apple Pay, Google Pay, e-Wallets and more. Square Register comes with the POS software pre-installed and costs $799 or $39 per month for 12 months.

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Square services come in four flavors, which lets businesses set up payment systems for both static and dynamic systems.

Square POS is free forever regardless of the hardware you choose. It also comes with a free Square Reader for magstripe device.

Square Appointments

Square Appointments is free for individuals, $50 per month for businesses with two to five employees and $90 per month for those with six to 10 employees.

Square for Restaurants

Square for Restaurants offers a free version that supports unlimited devices and locations. Being a restaurant-specific POS software, it lets you manage end-to-end restaurant operations from table management, course management and discounts to inventory management and reporting.

It has three plans – Free, Plus and Premium. Paid plans start at $60 for each location. Transaction fees are 2.6% plus 10 cents for in-person payments and 2.9% plus 30 cents for online payments.

Square for Retail

Like the restaurant software, Square for Retail has a robust free version. This app manages a wide variety of retail functions like vendor and purchase management.

Like the Restaurant platform, it has three plans: Free, Plus and Premium. Paid tiers start at $60 for the first establishment and $40 for the subsequent locations. Transaction fees are 2.5% plus 10 cents for in-person payments and 2.9% plus 30 cents for online payments.

Square App Marketplace offers multiple third-party integrations. These apps come at different costs depending on what you need. Additionally, Square also provides add-on features at extra cost:

• Invoicing: Costs 2.9% plus 30 cents per payment
• Loyalty: Starts at $45 per location, per month
• Marketing: Starts at $15 per month for up to 500 customers
• Payroll: Costs $5 per month per contractor and $29 plus $5 per month per employee
• Team management: Free Basic Plan. Plus plan costs $35 per location per month

Due to a flat transaction fee system, end-of-day reconciliation with Square is very easy. Square makes it easier by letting you decide your end-of-day preferences.

The major pull of Square payment processing system is its flat transaction fee system, but it can become expensive if your transaction volume scales up. If you find costs getting high, you can get in touch with the company and work out a customized plan that works best for you.

Square has a list of prohibited goods and services. If you offer any of them, your account will be frozen without notice, because it is included in its terms and conditions.

Before you choose Square, you should have an idea of what its competitors offer. Here we compare it with Shopify and Lightspeed.

When compared to Shopify and Lightspeed, Square is the only one with zero monthly fees and basic hardware included. The downside is it doesn’t provide 24/7 phone support. Both Shopify and Lightspeed fare better than Square in this regard.

Read more:  Square Vs. Clover Vs. Stripe

If you are just starting out and do not know how much your business will bring in, Square is the perfect choice for you because it has zero monthly fees with a Square Reader for Magstripes thrown in. Enough to get you started right away.

If your transaction volume is low or fluctuates from one month to the next, Square can be a good fit because it ensures that you pay processing charges only for what you earn. The lack of a monthly fee makes it one of the more flexible POS platforms available.

Does Square support third-party integrations?

Square supports multiple third-party integrations via its Square App Marketplace. You might have to pay for those integrations separately, depending on which apps you choose.

How long does it take Square to transfer money to my account?

Square takes one to two business days to transfer payments to your account. If you want an immediate transfer, that comes at an additional 1.5% fee.

Does Square offer fraud protection?

Square automatically monitors all payment activity and provides alerts on suspicious activity through both algorithmic automation and human observation. According to the company, Square evolves its fraud detection policies constantly to keep customers as safe as possible.

Is Square secure?

Square is Payment Card Industry Data Security Standard (PCI DSS)-compliant and its products do not save payment card data. All data is kept on the vendor server in encrypted form. Additionally, a customer’s full credit card number is never displayed even to the seller.

What is the difference between payment gateways and payment processors?

The two are very similar in that they help process transactions between merchants, customers and banks. Payment processors can’t verify the customer is who they say they are, whereas a payment gateway can.

How do I choose the right POS system for my business?

The best POS system for your business depends on a variety of factors, including the type of business you have, your budget and the features you need. For many situations, it makes sense to invest in the best system you can afford, and preferably, the system can grow with your business.

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How to use the mortgage calculator

Why use a mortgage calculator, key factors that affect your mortgage payments, how to calculate a mortgage payment, what is amortization, how lenders decide how much house you can afford, tips for lowering your monthly payments, common mistakes to avoid.

• Reasons your payment could increase

Mortgage Calculator: Estimate Your Monthly Payments

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Calculating Your Mortgage Payment

Before you start house hunting, you need to know much house you can afford. A mortgage calculator can help by showing you how much you'll pay each month depending on the price of the home you buy and the size of your down payment.

The free Business Insider mortgage calculator shows how much you'll pay each month based on your home price, down payment, term length, and mortgage rate . We also provide customized tips on how to save money on your mortgage.

Mortgage Calculator

• Paying a 25% higher down payment would save you $8,916.08 on interest charges
• Lowering the interest rate by 1% would save you $51,562.03
• Paying an additional $500 each month would reduce the loan length by 146 months

To see your mortgage payment with our calculator, here's what you'll need to provide:

The purchase price of the home: This is the amount you agree to pay the seller.

Down payment: How much of your own cash you'll be bringing to the transaction. A down payment on a house may be as low as 3%, or even 0%, depending on the loan type. The calculator's default is 20%, which is the amount you'll need to put down if you want to avoid paying for private mortgage insurance if you're getting a conventional loan.

Length of the loan: Your loan term, or the amount of time it takes to pay off your mortgage. The calculator uses a 30-year mortgage term as the default.

Interest rate: The amount your mortgage lender charges you for borrowing the money to purchase your home.

With these inputs, you can use the calculator to help determine how much house you can afford and what your monthly payments and overall expenses will be.

Click on "more details" to see how much you might pay in interest over the life of your loan, and how different rates and term lengths can impact that amount. You'll also get some tips on exactly how you can save on interest.

How can it help homebuyers?

You've entered numbers into the mortgage calculator. What can you do with this information?

• Determine how much house you can afford. With our mortgage calculator, you can enter how much you want to spend on a home and the amount you have for a down payment. If the monthly payment is too high for your current budget, you may decide that you need to buy a less expensive home.
• See how much more you need to save. The calculator also shows how a higher or lower down payment will affect your monthly mortgage payments. This can help you decide if you're ready to buy a house now, or if it makes more sense to wait a little longer to save more.
• Choose a term length. Input a few term lengths to figure out which one best fits your budget. With a 30-year term, your monthly payments will be lower, but you'll pay more in the long run since you're spreading payments out over a longer period of time. A 15-year mortgage will give you a higher monthly payment but cost less over the years. Play around with term lengths and think about which one best suits your goals.
• Find out how your interest rate affects payments. This can be particularly helpful if you're thinking about refinancing , or if you think you could snag a lower rate by improving your credit score before applying for a mortgage. Use the calculator to see how much of a difference a slightly lower rate could make, and if it's worth it to you.
• Learn how to save money. Once you've entered your numbers, we provide a few suggestions on how you can either lower your monthly payments or save in the long term.

This mortgage calculator shows you how much you'll pay toward your principal and interest each month, but your actual mortgage payment will likely include a couple other charges. Here's a breakdown of the different items that make up your mortgage payment.

• Principal : This is the amount you borrow to buy your home. For example, if you want to buy a $400,000 home and have $50,000 for a down payment, you'll need to borrow $350,000. Your loan principal is $350,000. You'll pay a portion of this each month, reducing your principal balance over time.
• Interest:  This is what the bank charges you to borrow money. 
• Taxes:  Mortgage lenders typically include your property taxes in your monthly mortgage payment and hold this part of your payment in an escrow account. When the taxes come due, the lender will pay them on your behalf using the money in the escrow account. 
• Insurance:  As with property taxes, your homeowners insurance premium will also be included in your monthly payment and set aside in an escrow account. If you made a small down payment or you have an FHA mortgage , a small portion of your monthly payment will also go toward a mortgage insurance premium, which protects the lender.

You may see this full mortgage payment amount referred to as "PITI."

Interest rates and their impact

Mortgage rates fluctuate from day to day and even from hour to hour. The higher your rate, the more you'll pay on your mortgage, both on a monthly basis and over the life of the loan. 

You can get a better rate by making a larger down payment or improving your credit score . But overall rate trends are influenced by what's going on in the economy. So a homeowner who got their mortgage several years ago may have a significantly lower rate compared to someone getting a mortgage right now.

The role of property taxes and insurance

Because your lender benefits when you pay your property taxes and homeowners insurance, it typically will include these costs in your monthly mortgage payment. 

The average cost of homeowners insurance in the US is $1,428 per year, which would add $119 to your monthly payment. 

You can also check out the average property taxes in your state to get an idea of how much you might pay for this cost, but keep in mind that tax rates can vary a lot from city to city. Your mortgage lender should be able to give you an estimate based on where you're planning to buy. 

Prefer to do it by hand? You can calculate your monthly mortgage payment (excluding property taxes and insurance) using the following equation:

M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]

"P" is your principal .

The "i" is your monthly interest rate . This is different than the interest rate you see on your mortgage documents. The lender provides the yearly interest rate, so divide that rate by 12 for this equation. If your interest rate is 4.25%, divide 0.0425 by 12 to find your monthly rate: 0.00354166%.

To find "n," the number of months required to repay the loan , multiply the number of years by 12. If you have a 30-year mortgage, multiply 30 by 12 to get 360 months.

Once you calculate M (monthly mortgage payment), you can add in the monthly property tax and homeowners insurance payment. 

Amortization refers to the process of making payments toward a debt until you've fully repaid it. With a mortgage, you'll make monthly payments that are calculated in a way that allows you to pay off your balance by the end of your term while also accounting for the interest you owe. 

When you get a mortgage, you'll receive an amortization schedule for your loan. This schedule will show you how each of your monthly payments breaks down in terms of how much you're paying toward your principal vs. interest.

For example, say you have a $300,000 mortgage with a 6.5% interest rate. Your monthly payment would be $1,896. To determine how this payment breaks down each month, you'll need to multiply the loan amount by your interest rate. Then, divide that number by 12 to see how much you'll pay in interest on a monthly basis.

300,000 × 0.065 = 19,500

19,500 / 12 = 1,625

This means that on your very first mortgage payment, you'll pay $1,625 in interest. The remaining $271 will go toward reducing your principal.

To determine how your second monthly payment breaks down, simply subtract the $271 from your principal and run the calculation again with the new loan amount.

You can use a spreadsheet tool like Excel to make it easier to calculate your full amortization schedule, or you can simply use an online amortization calculator.

Lenders have a responsibility to make sure they aren't lending more than what their borrowers can afford to pay back. This is known as the ability-to-repay rule.

To determine how much you can afford to borrow, lenders will look at your income, debts, assets, employment, and credit. They want to make sure that you have the income to afford your monthly payments, and that a mortgage wouldn't push your debt-to-income ratio (DTI) to an unacceptable level.

On conventional loans , you can't have a DTI higher than 50%, and borrowers with lower ratios will typically get better rates. 

But just because a lender says you can afford a certain amount doesn't mean you'll necessarily be comfortable with the monthly payment. Think about what your budget can comfortably handle when deciding your price range. 

Explore different down payment options

As you play around with the calculator, you can see how different down payment amounts will ultimately impact your monthly payment. The less money you borrow, the less you'll need to pay each month. 

However, the more you put down, the less money you'll have left over for things like furnishing your new home or paying for repairs and maintenance. Find the right balance that gives you a sufficient down payment but also leaves you enough cash for other costs.

The benefits of shorter term loans vs. longer term loans

The longer your loan term is, the lower your monthly payment will be.

Paying back $200,000 over the course of 30 years is going to yield a much lower monthly payment than paying that same amount back over the course of 15 years. However, you'll pay a lot more interest on the 30-year loan. This is because you'll not only be accruing interest for a longer period of time, but longer terms also come with higher interest rates. 

If you can afford a higher monthly payment, a shorter term could be worth it if your goal is to save money overall. But if you want to keep your monthly payment as low as possible, it's best to go with a longer term. 

Get a better rate

Rates vary among mortgage lenders, so be sure to get approved with three or four different lenders to be sure you're getting the lowest rate possible.

You can also work on getting a higher credit score and lowering your DTI to get access to lower rates.

Buy a less expensive home

You don't need to borrow the full amount a lender is willing to lend to you. For example, if your lender offers you a loan for $300,000 but you only borrow $270,000, you could potentially save around $200 per month.

Underestimating property taxes and insurance

First-time homebuyers are often surprised by how much their taxes and insurance can raise their monthly payment amount. Property taxes in particular can be fairly expensive, often adding at least a couple hundred dollars more to the payment. 

It's also important to understand that these costs can change every year. If your property taxes or homeowners insurance premium increase, your payment will go up as well. 

Forgetting to consider closing costs

The down payment isn't the only thing you'll need cash for at closing. Closing costs include lender fees, the cost of your appraisal, things you need to prepay like homeowners insurance, and other costs related to the mortgage and the home purchase.

In total, you'll typically pay between 3% and 6% of the loan amount in closing costs.

Reasons your monthly mortgage payment could increase

Your monthly mortgage payment amount will likely change slightly over the years, and may go up over time. Two of the most common reasons for this include:

• You have an adjustable-rate mortgage (ARM): Once your ARM's fixed-rate period is over, your rate will reset periodically, and your monthly payment could go up as a result.
• Your taxes or insurance increased: Most borrowers pay their property taxes and homeowners insurance premiums into an escrow account, which the lender pays out of on your behalf when those bills are due. If your taxes or premium have increased, so will your monthly payment.

Mortgage calculator FAQs

A mortgage calculator can give you an estimate of how much you might pay each month for a mortgage based on the home price, the size of your down payment, the loan term length, and your interest rate.

Mortgage calculators can be used for many different types of mortgages, including government-backed loans or adjustable-rate mortgages. Just be sure to account for any additional costs the calculator doesn't include (like FHA mortgage insurance, for example). 

Mortgage calculators are only as good as the information they're given. If you end up with a different rate than what you put into the calculator, your monthly payment will be different, too.

With current average rates, you might be able to borrow a little over $300,000 on a 30-year loan if you're looking to pay $2,000 a month for a mortgage, not including taxes or insurance. This is higher than the median monthly mortgage payment, but lower than the average monthly mortgage payment . 

You might need an annual salary of $120,000 or more to qualify for a $400,000 30-year mortgage. This is just a rough estimate — the amount you'll qualify for will depend on your current debt load and your estimated taxes and insurance in addition to your income. Depending on your individual circumstances, you may need to make more or less than this to qualify. 

Based on current rates, an average mortgage payment on a $300,000 house might be between $1,700 and $1,800 per month, not including taxes or insurance. But this will vary depending on the rate you can get.

A $500,000 mortgage might cost between $3,200 or $3,300 per month plus taxes and insurance. Depending on your individual mortgage rate, you may pay more or less than this. 

• Mortgages and mortgage lenders
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What We Know About the Global Microsoft Outage

Airlines to banks to retailers were affected in many countries. Businesses are struggling to recover.

• Share full article

By Eshe Nelson and Danielle Kaye

Eshe Nelson reported from London and Danielle Kaye from New York.

Across the world, critical businesses and services including airlines, hospitals, train networks and TV stations, were disrupted on Friday by a global tech outage affecting Microsoft users.

In many countries, flights were grounded, workers could not get access to their systems and, in some cases, customers could not make card payments in stores. While some of the problems were resolved within hours, many businesses, websites and airlines continued to struggle to recover.

What happened?

A series of outages rippled across the globe as information displays, login systems and broadcasting networks went dark.

The problem affecting the majority of services was caused by a flawed update by CrowdStrike , an American cybersecurity firm, whose systems are intended to protect users from hackers. Microsoft said on Friday that it was aware of an issue affecting machines running “CrowdStrike Falcon.”

But Microsoft had also said there was an earlier outage affecting U.S. users of Azure, its cloud service system. Some users may have been affected by both. Even as CrowdStrike sent out a fix, some systems were still affected by midday in the United States as businesses needed to make manual updates to their systems to resolve the issue.

George Kurtz, the president and chief executive of CrowdStrike, said on Friday morning that it could take some time for some systems to recover.

How a Software Update Crashed Computers Around the World

Here’s a visual explanation for how a faulty software update crippled machines.

How the airline cancellations rippled around the world (and across time zones)

Share of canceled flights at 25 airports on Friday

50% of flights

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London City

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Chicago O'Hare

Raleigh−Durham

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Philadelphia

1:20 a.m. ET

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