Reviewed by Aug 27, 2020| Updated on
Payment is the transfer of money for goods or services from one party to another, or to satisfy a legal obligation. Payment can take a wide variety of forms. Barter, another type of payment, was the exchange of one good or service for another.
Payment methods most widely used include cash, cheque, debit/credit cards, or electronic transfers. Payments may also take different forms, such as issuing stocks or exchange of anything that interests or benefits the parties. Payer is the party who makes payment, while payee is the party who receives the payment. In trade, payments are often accompanied by a bill or invoice.
How it works
In general, the payee is free to determine which payment method he or she will accept; but usually, laws require that the payer accept the legal tender of the country up to a specified limit. Payment is most commonly made in the payee's local currency, unless otherwise agreed between the parties. A further foreign exchange trade requires payment in another currency.
The payee may negotiate on a debt, i.e. approve a partial payment in full payment of a debtor's obligation or give a discount for cash payment or timely payment, etc. On the other hand, the payee may enforce a surcharge as a late payment fee or for the use of a certain credit card, etc.
Acceptance by the payee extinguishes a debt or other duty. A borrower cannot unreasonably refuse to accept a payment, but in some cases, such as payment made on a Sunday or after banking hours may be refused. Generally, a payee is obliged to accept the payment by issuing a receipt to the payer. A receipt is the supporting evidence for the payment made to a specific payee.
Types of Payments
The following are the few methods which are used to make a payment. - Credit/Debit Cards - Mobile Payments - Bank Transfers - E-Wallets - Prepaid Cards - Direct Deposit - Cash