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Freelance Payment Options That Beat Paypal

Paypal has become the standard payment channel of choice for freelancers as well as online marketers. It’s familiar, trusted and simple enough for freelancers in every field to feel comfortable using. Clients don’t worry that their credit card details will be abused. Freelancers are confident they’ll get their money. And having settled into one payment and invoicing system, asking clients to send their money elsewhere can be difficult.

But there are good reasons for shifting out of Paypal. The fees, for one, are expensive. Paypal charges as much as 2.9 percent plus 30 cents for monthly payments of less than $3,000. For the full amount, that’s $87, a not insignificant sum. (For payments originating outside the US, the fees are as high as 3.9 percent.) And Paypal isn’t as reliable as it looks, at least for freelancers. A class action suit is currently under way against the Ebay-owned company for withholding funds “without justification, reasonable cause or explanation.” Fortunately, there are alternatives.

Amazon WebPay

In the same way that Amazon has made its cloud servers available to other businesses to use, so the company has opened its payment system. The system has the benefit of being trusted: clients are likely to have already given their credit card details to Amazon, so they should feel comfortable sending funds through the site. Freelancers can use their funds to buy Amazon gift cards, if they wish, as well as withdrawing them to bank accounts.

The site provides widgets that business owners can place on their Web pages to accept payments directly. The fees for those business accounts are the same as Paypal’s but there are no fees for personal payments — and, unlike Paypal, no limits on the amounts that personal accounts can accept. If you’re selling online goods through a website then, Amazon WebPay will cost the same as Paypal. But if you’re selling services, the system is a free alternative.

Pros: Free for service providers, trusted by clients.

Disadvantages: Money transfers can only be made in the United States and the site requires a US address to sign up. It’s only good for US-based freelancers.


Dwolla pitches itself as an alternative to the “plastic network” of credit card payments, which it says costs businesses $45 billion every year. Users can add funds to their Dwolla accounts directly from their bank accounts, without using a credit card, then use those funds to make online payments and even purchase in stores using their mobile phones. The service is also integrated with a number of social media sites, including Twitter, Facebook and LinkedIn, allowing users to send money directly to social media contacts.

Skipping the “plastic network” has enabled the service to offer attractive rates. The only charge is a 25 cent fee per transaction, less than the transaction fee charged by other services which then add a percentage.

The company offers two kinds of accounts: personal and business but there’s little difference between them beyond the ability to accept single payments of up to $10,000 instead of $5,000 and enable “Dwolla Spots,” real world payment systems. To upgrade to a business account, you will need a valid Employer Identification Number.

Pros: With transaction fees of just 25 cents, Dwolla is remarkably cheap.

Disadvantages: Little known by clients who might be reluctant to transfer funds directly from their bank accounts, and currently only available to users in the United States.


Moneybookers’ transaction fees are comparable to those of Paypal but the site accepts more than 100 payment options and 41 currencies in more than 200 countries and territories. It has a more international feel than Paypal and is popular in countries and regions not supported by Paypal.

But the service also has a host of other charges that can start to add up. Transactions that involve currency conversions cost an additional 2.99 percent. Withdrawal fees are €1.80 for transfers by Visa or bank. And the site even charges a €19.95 monthly gateway fee for business users.

Pros: Multiple currencies make Moneybookers a useful choice for sellers with global markets.

Disadvantages: Additional fees and monthly charges make Moneybookers an expensive option, and that international branding can make it look parochial and less trusted than Paypal.


2Checkout also emphasizes its global connections. The company accepts payments in 24 currencies and through a variety of different channels, including Paypal. Unlike Moneybookers, there are no monthly gateway fees; the site sticks to a single flat rate for transactions. But those transaction fees are high — higher even than Paypal at 5.5 percent plus 45 cents.

Nor is the site really geared up for service providers. While it is possible to place the 2Checkout on a freelancer’s website, the system doesn’t allow for the kind of invoicing and money requests that service providers need to complete at the end of each month to get clients to pay.

Pros: Useful for small or medium-sized Internet businesses with global customers.

Disadvantages: High transaction fees and limited freelancer services.


Square is a credit card reader that integrates with iOS and Android-based mobile devices, allowing anyone to take credit card payments. Created by Twitter founder and CEO Jack Dorsey, the service opens the ability to accept plastic to sellers as small as holders of garage sales and market stall owners. The charge is a flat rate of 2.75 percent, which makes it cheaper than Paypal, and company issues the reader itself — a small, square device that plugs into the smartphone or tablet’s earphone socket — for free.

As a piece of technology, it’s very smart and as a way of democratizing payments, it’s very useful. But for freelancers? It’s something you’ll find essential if you meet your clients face-to-face but virtual workers will be left wondering what the fuss is about.

Pros: Very cool, cheaper than Paypal and accepts all major credit cards.

Disadvantages: You need to be able to physically swipe the credit card, making it a non-starter for virtual businesses and freelancers who work across the Web.


  1. Anony Mouse Says:

    And then there's Bitcoin -- the decentralized digital currency.

    Bitcoin is online money, sent person-to-person, globally.

    Though there are no fees (or trivial in size) for sending or receiving bitcoins, there are costs in converting between bitcoins and your local currency. The fees to exchange bitcoins to USD on Mt. Gox, for instance, are 0.5%. There then may be further fees, based on your withdrawal method. The cheapest method is to withdraw to Dwolla ($0.25 per transaction). Buying bitcoins encounters the same fee ... $0.25 for Dwolla to Mt. Gox and then 0.5% exchange fee.

    Other methods, such as withdrawing to EUR (SEPA zone) have a little higher fees.

    Compared to PayPal though, Bitcoin can be the cheapest method. And there are no chargebacks with Bitcoin.

    - http://bitcoinmedia.com/bulleted-advantages

  2. Matt Sornson Says:

    I think Stripe needs a mention here too. Stripe is amazingly simple and easy to use. If you dont want to go through the trouble of making your own payment forms, there's a slick little app for that too. http://www.easybill.co will let you create payment forms tied to your stripe account in about 5 minutes.

    Just thought Stripe should be mentioned for freelance payments.

  3. Tristan Says:

    Yep - Stripe is a big winner here.

    For freelancers, we recently released invoices with the new Stripe Payment button.

    The only catch is that Stripe (presently) only supports USD and CAD.

  4. Don draper Says:

    If you just don't like exposing your email for paypal payments. Why not try http://www.payvin.com

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