Is the gig economy going to take over the future workforce? Around the world, both professionals and students are turning towards freelancing to grow their careers.
Worldwide, more than half of freelancers are under 30 years old. And only 6% are over 50. With the younger generations taking to freelancing by the millions, it’s only plausible to think this will become the way of the future.
While there are 55 million freelancers in America, the majority of the world’s freelancers reside in Europe – 35.5% to be exact. To give you some perspective on this, only 4.1% of the freelancers are in North America.
You’ll also find freelancers are some of the most hardworking groups of people, with the majority working between 30 and 50 hours per week.
And another 80% are managing between one and three projects at a time.
Unfortunately, getting paid on time for all of their hard work isn’t always the case. According to PayPal, 58% of freelancers in four major Asian countries aren’t getting paid on time.
One way to make getting paid easier as a freelancer is to use convenient freelance payment methods.
Not sure what’s out there and which are the best to use? We’re here to help.
Let’s review the pros and cons of the various payment methods for freelancers so you can make a more informed decision.
1. ACH Freelance Payments
When you work for an employer who offers direct deposit, they send you ACH money transfers directly to your bank account. ACH stands for Automated Clearing House and is used for bank transfers.
In most cases, it’s the sender (the client) who has to pay the transaction fee, which can range between 0.50 cents to $10, depending on the financial institution.
As a freelancer, this is a great option because you don’t have to worry about paying fees. Also, if you’re in no rush to receive your payments, then this is a good choice.
It can sometimes take 2-3 business days to process payments, depending on the banks involved. For some freelancers, this may be a con.
Also, if you’re located outside of America, then ACH isn’t an option for you since you must have a US bank account.
2. Transferwise Payment Options
If you’re interested in a bank transfer service and you reside in London, then Transferwise is a good choice. This is based in London and has been around since 2011.
What makes this freelance payment method attractive to many is that it transmits payments directly in the recipient’s currency. If you’ve done business with clients in another country, then you know how annoying multiple currency conversions can be.
Needless to say, this payment method is cost-effective for freelancers based in Europe. Another positive about this option is that you can get paid within 10 hours for an ACH bank transfer, 12 hours for a Swift transfer, and 36 hours for a bank transfer.
Then based on the bank you have and the fees charged will determine if it’s a cheaper option for non-US-based freelancers. The fees are also dependent upon the rate you bill your client.
As for the negatives, the fee Transferwire charges is sometimes unattractive. There’s a charge of 1% of the total you bill to clients.
So if you charge $1,500, then you’ll have to pay $15 in fees. Then you also have to worry about the exchange rate.
This is set somewhere around the mid-market rate range.
3. PayPal Online Payments
Digital payments are the go-to choice for many freelancers around the world. You can look at PayPal as the pioneer of the online payment platform industry.
It’s been out since 2002 and is in 200 different countries. Another key benefit is that it sends money to your account instantly – but only if sent from another PayPal account.
If sent from a bank account, then you must wait around 3 business days for the payment to process. Also, getting a PayPal account is free and simple to do.
All you need is a bank account to attach to your PayPal account. Then you have to verify your account by entering the two small payments PayPal makes to your bank account.
But as with any payment method, there are cons. For PayPal, it revolves around its fees. For starters, the fee for receiving payments (paid by the freelancer, unless the client opts to do so) is 2.9% + 0.30 USD.
So if you billed a client for $1,000, then you’ll pay PayPal $29.30. Then if you’re based outside of the US, then you have to also pay a currency conversion rate of 2.5%.
In most cases, banks have a lower exchange rate.
4. Payoneer Digital Payments
Here’s another company based in the US that offers online payment services to freelancers. It too is in 200 countries around the world and offers payment processing in 150 different currencies.
There are some popular sites already using this platform, including Newegg, Amazon, Airbnb, and Google.
What makes this platform promising is that you can receive payments from countries around the world in the same way you would if it were done locally – within your currency. Then if you’re a freelancer in Europe, America, UK, China, or Japan, then you don’t have to pay any extra conversion fees.
The payments received are also quick compared to wire transfers and other traditional forms of payment. In most cases, you can get access to your funds within two to six hours.
On the downside, Payoneer charges you 3% and 1% if you don’t go through the platform or if your clients pay you with an eCheck or credit card.
Also, if you’re outside of the countries listed above, then you’re charged an additional 2% above the mid-market rate for currency conversions. There’s also the complaint that it takes a long time to get approved for a Payoneer account.
So if you opt for this freelance payment method, then be sure to open your account well in advance of billing your clients.
5. In-Person Cash Payments
Then there’s the old-school way of running a business – accepting cash payments. To date, there’s no business that won’t accept cash.
However, this does limit you in a number of ways. For instance, you have to be in-person to receive payment. You never want to risk having a client mail you money due to the potential of it being lost or stolen.
Then there are the currency issues – imagine accepting cash payments from clients from multiple countries. You’d have to manually go to a bank to convert the currency for you.
While cash payments are reliable forms of payment – it’s best to use it when you’re dealing with customers locally.
But also keep in mind that it’s not convenient for most customers who will have to withdraw money from their bank and come to your place of business to pay you.
6. Paper Check Payments
Here’s another old method that’s been the staple of business payments around the world. But that’s quickly changing, thanks to e-checks and online payments.
Unlike with cash, checks can be mailed to your business. But there’s still the risk of the check being lost, damaged, or stolen.
There’s also the risk of your client’s personal information being stolen by identity thieves.
However, you’ll still come across big companies that still prefer to make payments by check. By accepting this form of payment, you could land yourself bigger clients.
But there’s still the risk of the check bouncing and then you have to make trips to the bank to cash it.
7. Plastic Payments – Credit and Debit Cards
Just about everyone today has a credit or debit card they use for paying day-to-day expenses. As a freelance business, you can accept debit and credit card payments using a number of online platforms.
For example, you can use PayPal, Stripe, and Mollie. These platforms allow you to accept all major credit cards, including Visa, Mastercard, Discover, Amex, and so on.
Mollie takes it a step further and accepts other payment types, such as Bitcoin.
Then many of these platforms, including Stripe and PayPal, offer in-person card readers you can use to accept card payments in person.
Both forms are great because it allows customers to choose how they want to pay you. They can do it virtually online or whip out their card when doing deals in person. It beats having to go to the ATM or bank to pay by cash.
And freelancers don’t have to worry about the payment bouncing.
Choosing the Best Freelance Payment Method
At the end of the day, selecting the best freelance payment method comes down to multiple factors. For example, you need a platform that’s accepted in your country and that suits your business needs.
Bank transfers may not benefit your freelance business if you rely on immediate payments. Or maybe you’re more worried about currency exchanges, which means you need to find the cheapest platforms.
But you have to keep in mind that the best payments are those that are convenient for your clients. This way, you don’t run into issues with receiving payments on-time and without issue.
So which payment options are you leaning towards? Let us know in the comments!