The Pros and Cons of Freelancer’s Online Payment Options

With the popularity of websites such as PeoplePerHour and Guru, as a freelancer you can easily find that your clients are dotted all over the country or even internationally based.

This can present its own unique challenges for freelancers. Simple things such as meeting your clients face to face are quickly overcome with technologies such as Skype, but how about payment? In hindsight this a two way issue, both the client and freelancer are affected. The client doesn’t want to part with money before any work is completed however the freelancer doesn’t want to start work without the guarantee of payment at the end. Chances are you’ve never met your client so how can you trust them?

Many online payment services offer to solve this issue and make it stress free and easy for freelancers to receive money and for clients to send money. In our independent guide we will discuss the most common payment systems, and come to a conclusion on what we feel works best for freelancers.

PayPal

Arguably PayPal is the most well known of all the online payment brands. It’s also the fastest and easiest. Wherever you are in the world as soon as the payment is processed, usually within minutes the funds are credited to your account. Confidently your client doesn’t need an account to send funds just an email address. PayPal’s fees are average with example a payment of £0-£1,500 would occur a 3.4% charge and a 0.20p transaction fee. Rates can be lowered by opening a PayPal merchant account however for a small freelancer you not meet the criteria of £3,000 a month. More recently PayPal have introduced transaction limits for UK sellers these are £5000.

The one major problem with PayPal is if PayPal suspect the authenticity of a transaction, they have the rights to take the funds out of your account as well as any funds which may have been transferred to your personal bank account. This can also occur if client reverses the transaction, PayPal doesn’t state how many days they have to reverse a transaction so it’s anyone’s guess.  When you sign up to PayPal you agree to their T’s and C’s which gives PayPal the authority to be the judge in any actions they take. You have 20 days to dispute this, but a quick Google search will show you it is a nightmare getting your money back as PayPal are not helpful at all.

This makes PayPal a rather risky option for freelancers as they could never receive their funds or get them taken back off them.

Google Checkout

Google checkout is becoming the preferred method for receiving payments internationally and therefore is rapidly growing in popularity. Simply as a freelancer you would raise an invoice through Google checkout; the invoice will contain a unique URL for the client to use. The client simply follows a few simple steps and you’d then receive an email to tell you when it’s done. Fees are on a tiered structure with a transaction less than £1,500 occurring a 3.4% fee and a 20pence transaction fee. In additional there is a 1% charge if making a payment to an international country. There are no fees to transfer your balance to your bank.

Google has its own fraud protection program and unlike PayPal it claims to only trigger if you are using a fraudulent card, however a quick Google search of Google checkout fraud up numerous problems. Similarly to PayPal, Google Checkout can reverse a transaction a transaction and even remove funds from your bank account.  Google has no contact number and their customer service is solely email based.

As a freelancer Goggle Checkout still has the risks associated with PayPal, making it a risky option for Freelancers.

Escrow

Freelance job websites such as PeoplePerHour have integrated Escrow into their in-site payment option. Escrow works on a unique concept that the client will deposit funds into your account before work has commenced. Giving you and the client reassurance, once the work has been completed to a satisfactory standard the buyer can give permission to release the funds to you. Or if they are not satisfied the funds remain in the account until any disputes’ are solved. Fees are on a tiered structure and payments up to $5000 occur a 3.25% fee.

Having the funds administrated by a third party and the lowest fees makes this the safest and cheapest way for a Freelancer to be paid.

There are numerous other payment systems though these are the three most common payment methods that are online payment systems. Once trust has been built up between the client and the freelancer usually they default to more commonly used methods such as BACS and SWIFT.