Payment

Definition of 'Payment'


The transfer of one form of good, service or financial asset in exchange for another form of good, service or financial asset in proportions that have been previously agreed upon by all parties involved. Payment can be made in the form of funds, assets or services.

Investopedia explains 'Payment'


Today's monetary system allows for payments to be made with currency. Currency, which has simplified the means of economic transactions, provides a convenient medium through which payments can be made; it can also be easily stored.

For example, in the past, if an egg farmer with a large surplus of eggs wanted milk, he would need to find a dairy farmer who would be willing to take eggs as payment for milk. In this case, if a suitable dairy farmer weren't found in time, not only would the egg farmer not get his milk, but his eggs would spoil, becoming worthless. Currency, on the other hand, maintains its value over time.


Filed Under:

comments powered by Disqus
Hot Definitions
  1. 80-10-10 Mortgage

    A mortgage transaction in which a first and second mortgage are simultaneously originated. The first position lien has an 80% loan-to-value ratio, the second position lien has a 10% loan-to-value ratio and the borrower makes a 10% down payment. 80-10-10 mortgage transactions are piggy-back mortgage transactions, and are frequently used by borrowers to avoid paying private mortgage insurance.
  2. Passive ETF

    One of two types of exchange-traded funds (ETFs) available for investors. Passive ETFs are index funds that track a specific benchmark, such as a SPDR. Unlike actively managed ETFs, passive ETFs are not managed by a fund manager on a daily basis.
  3. Walras' Law

    An economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another market so that it balances out. So when examining a specific market, if all other markets are in equilibrium, Walras' Law asserts that the examined market is also in equilibrium.
  4. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will respond similarly to a marketing action. Market segmentation enables companies to target different categories of consumers who perceive the full value of certain products and services differently from one another.
  5. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following:
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option is purchased and the lower premium option is sold - both at the same time. The higher the debit spread, the greater the initial cash outflow the investor will incur on the transaction.
Trading Center