The Best Way to Accept Payments for Remote Freelancers
Once you start working with international clients you'll run into many issues you will never experience when contracting for clients in the same country.
Language barriers, time zone differences or different cultures which could lead to different styles of communicating or different expectations to name just a few.
But the biggest one might be accepting payments. Cross-border payments are usually costly (both in fees and unfavorable exchange rates), take a long time to be processed and are sometimes even just hard to make as it's not a very common use case for most business owners. There's also different laws, taxes and payment methods.
The pandemic has made remote work a lot more common and many freelancers now have to deal with this new set of problems.
I have been working remotely since 2016 and worked for clients all over the world, used dozens of payment methods and dealt with both major and smaller currencies and want to share what I've learned over this period in terms of accepting payments.
Before we start, it's important to know there's no single best option as each situation is different. Payment frequency, invoice size, where each party is incorporated and many other variables might play a role in which payment method is best for your situation.
That being said, in every situation we want the same things. Make it easy for the client to pay you, make it easy for yourself to receive the money and do both of these in a timely and inexpensive way.
International Bank Transfers
By far the most common payment method for domestic payments is to use a wire transfer. This works well for domestic payments but is very expensive and slow for cross-border payments.
Most banks charge a flat fee for processing international transfers but will also convert the money from the client's currency to yours at an exchange rate that is more expensive for you than the actual current exchange rate. My post about international transfers explains the hidden costs of these payments more in-depth.
So before you ask your clients to transfer the money to your account, check with your bank what fees and exchange rates they use for the transfer. Some banks also give you the option to open a foreign currency account, if you regularly take payments in the same currency this could save you a lot in currency exchange fees.
One of the best alternatives I found is to use TransferWise. TransferWise allows you to hold and accept multiple currencies and have local bank details in many different countries. You can then transfer the money you received at the mid-market exchange rate into your own currency and pay it out to your own bank account with low fixed fees.
Your client can thus transfer the payment to a local bank account like they would normally do for domestic payments. You can exchange this at a much better rate than banks would offer you and withdraw it to your own bank account for a low and transparent fixed fee.
This method offers the advantages of bank transfers without the downsides and has in my experience been both the cheapest and best way to accept payments for most situations.
If you are your client are in a country that is not supported by TransferWise you can also use Payoneer which works in a very similar way and supports more countries around the world, albeit with higher fees than TW offers.
Another very common payment method and one that is incredibly easy to pay with for your clients, credit cards.
Using online payment processors like Stripe, you can easily create an invoice along with a payment link where you client can pay using their credit card. The fees are pretty high, 3.4%+$0.50 per successful card charge and an additional 2% fee is applied if currency conversion is required so you have to be willing to accept high fees for speed and convenience.
Accepting credit cards is usually only worth it if you sent lots of small invoices and want a convenient way for you clients to pay these.
PayPal was one of the pioneers in the payments industry but I'd strongly recommend using another option whenever possible.
Accepting payments via PayPal is easy. You can quickly generate a payment link for the client to sent with your invoice and you can easily create a PayPal account, no matter what country you are located in.
Unfortunately, their fees are very high (both the fixed fees and the currency conversion cost) and they are known for arbitrarily holding funds without good reason. Which they are allowed to do under their own ToC for up to 6 months(!).
If some of the better payment methods aren't available to you, PayPal might be the best option you have available but for most people it's probably better to steer clear of them. Even banks usually offer a better exchange rate than PayPal does.
Most people outside of the US probably have never used a check to receive or make a payment so this could be quite a shock when your US client offers you to pay you using one.
My advice is to avoid these at all costs and talk to your client about setting up an alternative payment method.
Most non-US banks do not even have the option to cash these out and if they do it's very expensive. Checks, especially international ones, take a long time to arrive after they are mailed to you, they might get lost in the mail or sent to the wrong address, you (likely) need to mail these to your bank once you receive the check to cash it out and you still have to pay the unfavorable exchange rate.
In my personal experience, it will take around 4-6 weeks in total before the money from the client arrives in your account and you'll pay a very high fee for it.
Luckily these are becoming less common and I've head the good fortune of not having to deal with one of these for 2 years already.
Escrow transfers are usually only worth it for selling big-ticket items where you need to transfer digital assets such as a domain. The fees are very high but it removes a lot of the risk when you work with a client that you haven't built up any trust with.
You should view Escrow as taking out an insurance, you accept a higher fee for less risk.
Last time I wrote an article about cross-border payments some people commented that crypto was the obvious solution here as there is no currency conversion and the transfer fees are very low.
I'd figure it's best to address this head-on this time; Although I love the concept of cryptocurrency, it's just not practical to use it for most freelancers.
Unless you work for a very high-tech startup, it's extremely unlikely someone in the company knows how to use one of these cryptocurrencies or will get permission to buy crypto and transfer it.
They are also extremely volatile, even though the transfer fees or currency exchange fees of conventional payment methods will cost you more, I have also never lost 10% of my company's liquid assets in a few minutes.
As remote freelancers we are spoiled for choice nowadays and we have many different options to use depending on what situation we find ourselves in.
I have used every single option I discussed in the article and they all have their own pros and cons. There is no "one size fits all" solution here and you'll need to do some research to see what works best for the type of business that you run.
I've found that for my situation I most often end up using TransferWise to accept payment, convert the currency and deposit it to the bank account where my company is incorporated.
Whether this works best for you is something you will need to research for yourself based on your company and location.