Function based on this topic http://wordpress.org/support/topic/restrict-payment-options-based-on-product Small changes and fix to get the function to loop through all categories

gistfile1.txt

/**
 *
 * Filter gateways on specific category ID
 *
 **/



function filter_gateways($gateways){


$category_ID = '17';  

 global $woocommerce;

 foreach ($woocommerce->cart->cart_contents as $key => $values ) {
  // Get the terms, i.e. category list using the ID of the product
	$terms = get_the_terms( $values['product_id'], 'product_cat' );
		// Because a product can have multiple categories, we need to iterate through the list of the products category for a match
		foreach ($terms as $term) {
			
			if($term->term_id == $category_ID){
	               unset($gateways['paypal']);
	               unset($gateways['cheque']);
	               break;
	        }

		}

    }
	return $gateways;

}

add_filter('woocommerce_available_payment_gateways','filter_gateways');