Payment Systems For Feelancers

Hello first time visitor!

I have lost some freelance income because of inability to receive my payment in an easy way. Sounds weird? Maybe it is, but this is a real problem for many programmers who are not living in US or West European countries.

Here is the full story in short. I was contacted by an old customer who was happy with my work on a project we’ve done through RentACoder. He asked why should I pay 15% fee, we already know each other, let us do the work outside. I agreed, we started the project and completed it successfully. It was a small project for $100.

The payment time came, but… I realized there is no good way to receive $100 from USA to Bulgaria. He wanted to pay me with Paypal, but Paypal does not work here. I was not able to accept his credit card either. He was too busy to go out and search for Western Union office. So we ended up with online bank wire which costed me about $35. That was 35% of my payment – I felt robbed!

Of course your customer can always find a way to pay you. But sending money over the world can be a real pain, especially for small amounts and especially in some countries.

I have been researching better payment methods all the years I work as a freelancer. There is not an ideal solution, but below you will find my impressions and conclusions about some payment systems. Hopefully you will find the one that suits you and your location best.

Paypal – Good, but not available for everyone

Paypal is most preferred from the customers from USA and Western Europe. It is easy to use for them and cheap. It costs either nothing or 4.2% to receive money with them – depending on your account type. You can accumulate your earnings and withdraw to your bank account or you can use the funds to purchase things online.


Almost everything is great with Paypal, except that they don’t work in many countries. The full list of countries which can use Paypal is available here. If you don’t see yours, you’ll have to forget about this payment option.

Credit Cards – work almost everywhere, but costly

Another convenient method of payment is accepting credit cards. If you want your customers to pay for your freelance work with credit cards, you need to set up an account with credit card processor company.

However, many of these companies charge monthly or yearly fees on your account in addition to the commission which they take. There are also many online scams, so you should be very careful when choosing such a company. Being scammed won’t be nice neither for you nor for your customer.

One of the very few reputable credit card processors, which don’t charge monthly fees is 2CheckOut. The other fees are not low however – you will have to pay $59 registration fee. Then, there is 5.2% commission on each payment you receive. Then, after you accumulate enough funds in your account, you will have to pay bank wire fees.

Bank wire – the universal solution for large payments

For your relief, there is a secure payment method which work for any freelancer in any country. The international bank wire is the most professional and secure way to receive a payment. There are no “wrong” wires – in 99% of the cases even if you give a wrong account number, the money won’t be lost, because the receiving banks compare both the account number and the beneficient’s name provided.

The problem with the wires is their cost. An international wire will cost you about $30 – $50, depending on the correspondent bank, your bank and the sender bank fees. If you have to receive only $50 you may end up getting just a couple of bucks in your account.

On the other hand the bank wires are very cost effective way of payment if you are receiving $500 or more, because the fees are increasing very little for larger sums.

Checks/Cheques – cheap but sloooooooow

The bank checks (cheques) are probably the oldest way of sending money domestic and worldwide. Presumable every bank in the world should be able to accept and pay checks. Unfortunately, many banks in Europe (and probably in the rest of the World) do not find this profitable and refuse to clear checks. So, you may have a bit of trouble before you find a bank near you which to accept checks.

The checks are usually cheap – it costs $1-$3 to be sent with snail mail. You may eventually pay more if you want to be sure that your checks will be delivered or if you want them faster (the snail mail may take up to 3-4 weeks). With DHL or other courier service the cost of sending a check will be about $35.

Then, the banks will charge you some bucks to clear the check. This varies a lot in the different banks so make sure you ask first! In most cases it will be $10 – $15 regardless of the check amount. But the first time I cleared a check I ended up charged with $52.

The bigger issue with the checks is the long time you need to wait. 2-3 weeks for snail mail and then most banks will require from 2 to 4 weeks to clear it. So in fact it may take 2 months before you can use your money.

Moneybookers – cheap for some, boring for all

Moneybookers is a service similar to Paypal. They have some very tempting features like very low comission (only 1% and never exceeds EUR 1) and domestic wires in many countries. So basically, if you reside in a place where domestic wires are available for Moneybookers you can get any amount of money for just 3-4 EUR total.

There are some negative things with them however. They have very strict policies and may block your account for whatever reason they decide. They are very picky to credit cards – to deposit funds with credit card you’ll have to pass a very boring verification procedure. You may don’t need to deposit funds, but your customers will.

Similar boring procedure is in place for withdrawals. You need to verify your bank account by receiving a small wire with a special code. You will have to ask for full statement from your bank in order to see this code.

IKobo – convenient but risky

IKobo is another similar to paypal service where one account holder can send money to another account holder. Their fees are also low – around 4%-5% (it seems to depend on the amount). They can be funded with credit card and bank wire.

The advantage of IKobo is that they send you a free debit card and you can withdraw your funds in any ATM worldwide. Basically IKobo works great… for some freelancers.

Word of warning: Ikobo ripped me off. I signed up, received a payment and the debit card arrived. The first day I withdrew just a small part of the money. The second day it did not worked and I received email from them asking me to send ID scans and utility bill. I did it and received an automated response that they couldn’t serve me anymore. The funds were returned to the payer without asking (fortunately that buyer was serious and sent me the money again in another way). So be cautious with them!

E-gold – costly but works almost everywhere

E-gold is a bit weird system. The money which sit in your account there are calculated in weight of gold or other precious metal. So when you receive money, you in fact receive grams of gold. Therefore the dollar amount of the funds is changing all the time with the price of the gold.

The internal fees of e-gold are very low – only 1% and never exceed $1 total, even if you receive thousands. Sounds super, but there is one big disadvantage. E-gold does not send you out real cash. You must use a third party exchange service (You can find a list of such services here. I can personally recommend IceGold) which will usually charge you 2% + the cost of international bank wire. So unless you accumulate several payments in your e-gold account before turning it into real cash, you’ll only lose money.

There are various debit cards working with e-gold, but you should be very careful. Since e-gold is non-rechargeable service there are a lot of scam debit card and scam exchange services. Always choose only reputable ones (with long history and good feedback on the Net).

Users in Russia and Ukraine can use Webmoney and exchange their e-gold there and receive domestic bank wire. The same is available in some Asian countries.

Users from India and Iran may not be able to use E-gold (there were problems at the time of writing this article).

Western Union or Money Gram – probably the best solution but costly too

Western Union is probably my favorite payment method when I have at least $100 to receive. It happens almost immediately – 5 minutes after sending, the money are here. It is 100% secure and reliable.

Like with all payment systems there are some disadvantages. Receiving money by Western Union is costly. They charge $15 for amount up to $100, $22 for amounts between $100 and $200, $28 for amounts between $200 and $300 etc. Commission does not go much lower than 10% even for large sums.

Another issue of course is that you have to physically go to Western Union office to collect your money. It can’t be sent to your bank account.

MoneyGram is a very similar service. Their fees are slightly lower (see their fee calculator), but they are a bit less popular and you may need to look for an office more.

Whatever you choose, make sure you don’t fall for “too good to be true” systems. Sending and receiving money worldwide is costly, regardless what method exactly are you using. Always try to understand all hidden fees and surcharges which may be added. By having proper money management you can afford to collect multiple payments in some online account and withdraw them at once. This way you can save a lot of fees.

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