Micropayment

Micro payments are payments that involve a very small amount of money. In fact, these amounts of money are so small that they typically make the regular forms of payment impractical and possible expensive for the payment processor.

An example of this is through the use of credit cards. Generally, when you purchase something with your credit card, the store that you are purchasing from has to pay twenty cents per transaction in addition to a two or three percent fee based on the purchase price. This means that on an incredibly small micro payment, the company may only make a few cents off the purchase. This makes a micro payment somewhat expensive for the company, as they did not really make a profit off of selling something for such a small amount.

A micro payment system is commonly used in locations such as a university student dining room, toll roads, and public transportation systems. These are areas where it is generally concerned to be inconvenient to collect the full price of the service. Therefore, these systems are often set up with a charge card type system. Students may go to the dining hall and swipe their card to pay for whatever they buy whether it is a quarter for milk or three dollars for a whole meal. The same is also true for public transportation systems where you receive a pass that allows you to pay for a specific time period up front and then you only have to show the card every time you use the system.

One area where the micro payment has been very successful is with Apple's iTunes system. This system allows you to use your PayPal account to purchase music for ninety-nine cents each. Additionally, parents can set up an allowance system for their children who download music, especially because most children don't have a credit card and would not be able to take advantage of the system. Parents are able to control how much they are allowed to spend.