Freelance Finances - Getting Down to Business

Hi everyone,

When it comes to managing your payments while freelancing, sometimes it can get quite confusing and frustrating to deal with. You have to figure out what type of job you're looking for (job category, fixed vs. hourly), job skill requirements, the amount/rate, the hours, the output expected, turnaround times and how exactly your going to receive payment. For the novice freelancer, it can be a lot to handle in the first few months.

In this article, I will humbly outline some of the major online financial payment systems available to both freelancers and clients alike which facilitates the transfer and receipt of earnings.

Freelancing Payment Methods

Once you have nabbed a job or two, you are then ready to establish a payment gateway to receive your funds. Before diving in and highlighting the major freelancing payment methods available to you, you should first understand the differences between fixed jobs and hourly jobs, work schedule and work week and marketplace guarantees and liability exclusions (for payments, performance, dispute resolution, etc.)

The most common of these are:

1. Local fund transfer (LFT) - converts the dollars you earn into your local currency through the marketplace's own bank and transfers the money to your local bank account (whether it's a current/checking account or a savings account). This method is helps to avoid third-party fees and complications and is the method most endorsed by oDesk.

For both the LFT and wired transfer methods, you need to first know all of your personal bank account details (bank account number, account type, bank address and your bank's IBAN or SWIFT code).

2. Wire transfer - similar to LFT except that instead of earning money in local currency, you would be receiving US dollars. It's among the costliest methods - hovering between $25-50 per withdrawal charged by the marketplace alone excluding any additional charges by your local bank.

3. Credit cards - as an alternative to using your bank account, you can also decide to make and receive payments using your local credit card. Cards directly registered under American Express, JCB, Mastercard or VISA are accepted in all the major freelancing sites (except notably oDesk).

4. Paypal - used by most of the major e-commerce websites like eBay and Amazon, Paypal is a globally-known online payment mechanism which acts as an intermediary between buyers and sellers. Paypal works by registering your international credit/debit cards into its system to send and receive payments online. The Silicon Valley giant (now owned by eBay) is trusted around the world and is the system of choice for large e-commerce portals and payment providers.

Despite its international popularity and inexpensive charges and rates, Paypal is still unavailable in many countries including mine and therefore its use is out of the question for freelancers like myself. In addition, it can occasionally cause account hassles relating to balance transfers and validation.

Notable country exceptions: Bangladesh & Pakistan

5. Payoneer - as an alternative to Paypal, Payoneer is a very popular online payment provider for freelancers. Unlike the other re-loadable debit card account systems on the market, Payoneer is accepted by nearly all the major marketplaces like oDesk, Elance and Guru (excepting Freelancer.com). According to Techcrunch, what gives Payoneer an edge over its more established rival Paypal is that it eases the payments of international payments by not requiring bank account verification. Therefore, you could say that it acts like an alternative to traditional banks - a 'virtual bank' if you will. Another advantage is that it is more efficient in transferring micro-payments (any transactions below $50).

Alongside my bank account, I also have a prepaid Payoneer card to spread the risk in case one of my methods isn't functioning in a timely or accurate manner. If you are considering diversifying your payment methods, then register for a Payoneer account and refer to me to earn $25 now just for signing up today.

Notable country exceptions: India

6. Skrill (Moneybookers) - Another popular online payment system behind Payoneer, Skrill is a UK-based e-commerce business that facilitates payments for both individuals and merchants alike. Moneybookers allows payments to be sent using over 40 currencies and supports major debit and credit cards. Like Payoneer, getting a new Skrill account is fast and hassle-free with an optional verification requirement. Skrill is available in all the major freelancer marketplaces apart from Guru. What distinguishes it from Payoneer however is the email address that you register with will be used as your default identification and account facility (as a substitute for directly visiting the website). A major issue with Skrill however is the inability to receive a prepaid debit card unless you are a resident of the UK or EU.

Notable country exceptions: United States (since 2013)

There exist other methods which are less well known and more limited in scope like: direct deposits/ACH (available usually only for US customers), Payza/AlertPay (another online payment provider like Payoneer and Skrill), Discover Network, and other lesser known alternatives like Google Wallet and eWAY.

There's no one best solution that suits everyone. You just have to select the method that's most convenient and appropriate for your needs. I personally use a local bank account alongside my Payoneer prepaid MasterCard when receiving payments online from clients.