5 Types of Payment Freelance Writers Can Expect – and Their Pros and Cons
July 2, 2008 by Deb
Filed under Freelance Writing
by Deborah Ng
Freelance writers are paid by various methods. Many writers nowadays prefer to be paid via PayPal because it’s so quick and easy, it’s not my preference though and you’ll soon learn why. Below I’d like to throw out some of the various methods of payment and offer up some of the pros and cons.
Checks – Ah yes. The check is in the mail. But is it? Many times I’m told payment is sent out at the end of the month, only to receive it at the end of the following month. Checks are slow. First you have to wait for someone to approve them then you have to wait for someone to send them. And if you’re like me, they sit around on your dresser for months until you remember to deposit them. Did I mention checks bounce? Still, they’re not easily spent. Depositing your checks directly into your bank account rather than opting for cash guarantees you’ll save a little and maybe even build up some interest. I actually prefer a check to PayPal.
Money Orders – A few people pay by money order and this isn’t always the best option. The person paying has to pay a fee and the person cashing has a difficult time tracing and receiving a replacement payment if the money order is lost. Still they deposit just as good as a check and since the money had to be laid out upfront you don’t have to worry about it bouncing.
Direct Deposit – This is my favorite method of payment. The check is deposited into my account on the designated day and all is right with the world. The payer doesn’t have to cut a million checks in one day and the payee receives funds directly into his account without having to pay a fee. It’s a win win situation. Every now and then a payment doesn’t hit, but that’s rare.
PayPal (and similar methods of payment) – Very popular among content writers and bloggers, PayPal provides instant gratification. Your funds are in your account as soon as the payment hits. With the click of a mouse you can immediately transfer to your bank account. If you’d rather a check, no problem but you’ll have to pay a fee. In fact, you probably have to pay fees anyway. If you earn a certain amount each month PayPal will advise you to take out a business account and you will have a percentage deduced.
Cash – I once had a client send cash in the mail. This isn’t recommended for the obvious reasons, though mine came to me with no problem. Still cash is just a bad idea. Cash goes into my pocket or purse, not the bank. It’s too tempting to spend before it gets to the bank.
What’s your preferred method of payment and why?
Checks are fine by me. Real checks. I can make a copy of each and put it with payment records; it’s just something I like to see with my own two eyes.
I refrain from giving out account numbers as much as I can. Not possible in many situations these days, but I’m as careful as I can be about it.
I love PayPal, but I have one client who is based in Australia, and PayPal slaps a fee on his payments to me because it’s an international transaction. It’s not much, but it’s annoying. So just be warned about that if you’re dealing with someone outside the US.
Other than cash in the mail, I’ve received payments through all the methods mentioned here before, although I tend to prefer checks and PayPal. Checks because I don’t get to spend the money at once since I’ve to wait for clearing time, and hence I’m forced to save up (which is good), and PayPal because there are times when I’m in need of money at that very moment.
I very recently (within the past week) had a client’s check for a very large amount bounce, and now I’m in a big uphill battle. I would definitely recommend asking your bank teller to verify the funds before you deposit it so you’re sure that it won’t bounce, especially for smaller firms and individuals. A lot of people who are strapped for cash use ‘psychic banking’ as a method of keeping records – guessing how much is in their account and hoping that their receivables will clear before you cash yours.
Also, make sure that your contract is airtight in case their check bounces and they give you a hassle over it. Luckily I covered myself legally, so I’ll eventually recover
Most of our clients seem to prefer PayPal, although I’m always slightly annoyed at the fees. I know it’s the price of convenience (and knowing the check won’t bounce), but when I add up how much of our earnings PayPal has kept, it kind of makes me queasy.
While PayPal fees are annoying, they can be deducted at the end of the year when you’re doing your taxes. I know that saved me a lot for last year. Then I don’t feel so bad when PayPal takes a bit out of every payment.
I prefer checks. It is the easiest way to track the money I’m owed and when I go to the bank (once a week, on my way to happy hours), it’s routine to put my tax money aside into my business account.
The direct deposit is the easiest, but I only have one client doing this. It makes me really uneasy to give my account information. It is hard to know who to trust. I love paypal, but hate the fees like everyone else. So far checks have been good for me. No bouncing yet. I don’t know that I have a favorite. They all have their positives and negatives. I just like getting paid.
Is it possible to do direct deposit for clients in other countries? I live in Canada and have come across a client in the United States who prefers to pay this way. I am not sure if this can be done. Anyone have any experience with this?
Thanks!
@ Patti: I looked into this for a client of mine and was told it wouldn’t work because I don’t have a bank account with a U.S. bank.
Thanks Jodee! That answers my question. I really did not think it could be done.
Patti
I like Paypal due to having funds quickly that I know are ‘good’, and I figure in Paypal fees when I write up bids. I also write them off (when not covered) as a business expense.
Maybe I have had too many flaky clients, or maybe its because this is my sole means of supporting my family – I like having the ’security’ of Paypal funds.
The downside, for me, is the wait to transfer them to my account free or the fee to pull them other ways (other than using my card). Some bills I have must be paid in ways other than a card, so I have the hassle of transferring funds, or paying a fee to pull them, and then deposit them into my bank, which is on the other side of town. Not a huge issue, but it can be an annoyance to deal with when in the midst of deadlines and bills are due.
I think PayPal is the best. It is easy to track going both ways. I don’t trust the USPS anymore – you could be waiting for a check that really was put in the mail (and got lost, sidetracked, misdelivered), and your client is wondering why you keep bugging them for a check they already mailed. I don’t like direct deposit because I prefer to keep my banking information to myself thank you very much. I don’t accept cash or money orders. No need to have Uncle Sam breathing down my neck.
Another positive for PayPal is that your client can pay by credit card, even if you don’t have a credit card processing account.
I use PayPal, direct deposit, and checks to be paid. I prefer all three. I don’t have to upload money to my PayPal account or to my bank account from PayPal. That leaves only depositing and cashing checks, which saves me time.
For me, PayPal works for having payments immediately. I use the money in PayPal for pay for online things such as my web hosting, domain names, online shopping, etc. Sure there is a fee but it’s MUCH less than the gas cost to drive down the road to my bank.
Direct deposit works great because it’s also instant payment into my bank account. I can pay bills without having to wait for a check.
Checks are wonderful because I always have a steady stream of them coming in throughout the month. This way I am never out of money or broke.
I prefer PayPal for all the convenience reasons, but also because I require a 50% deposit before I turn in any work, usually before I even agree to take on an assignment. With PayPal, my clients can deposit the amount immediately, and I can get started immediately. Also, it’s much more difficult for clients to avoid paying on time, as they know that I know if they had the money, it’d be in my account right now.
I use PayPal and only PayPal, but it´s a pain in the butt. I live in Guatemala, which PayPal doesn´t service, but I´m Canadian, so my account is set up as a Canadian one. I have to send the money earned to my sister´s PayPal and then she transfers it to her bank and sends it via Western Union. So, basically, I´m paying fees three times. :S BUT at the moment, it´s the only way to do things. Hopefully I can get to Canada myself soon and fix up a bank account so I can access everything online.
I’ve only had PayPal fees once, and that was when someone paid me with a credit card. If they use their checking account, and send you money for services and not goods, you don’t have a monthly limit and you don’t need to upgrade.
But the international exchange thing would suck, definitely. So far, my clients are US-based or have US accounts.
PayPal is fine for me, but I’m careful with them. I’ve heard horror stories. Direct deposit is my favorite, but I only do that with companies I know and trust. Checks are fine, because I’m fairly close to an ATM and can go for a walk, get out of the house, and deposit the check. So it’s good for me when I get a check.
It´s strange that we, as Americans, are so tight about our bank accounts. I am too, but here in Europe direct deposit is used for everything including bills and paychecks. For your wedding it isn´t unusual to give out your bank account info for others to deposit their gift of money. I would prefer this method instead of PayPal. I know the fees can be written off, but it still erks me.
PayPal all the way. The fees are tax deductible (3% really isn’t that big a deal compared to some other fees that apply to other options, and it’s actually sort of Canadian friendly, a small miracle in itself.
Cheques? Every single one I’ve received has been incorrectly filled in, has a typo or has bounced. Wrong currency, wrong business name… a mess, in short. We don’t accept cheques, thank you very much.
Bank account and direct deposit? *blink* No friggin’ way. But Interac and debit card transfers are a nice option. Interac transfers may only be a Canadian thing (YAY! For once, something we can call ours!).
Internet merchant accounts are another option not listed. There are many of these that allow people to accept credit cards easily. (But PayPal already does that… 3% really, REALLY isn’t a big deal and you DO need those tax writeoffs…)
I definitely prefer Paypal. If you’ve ever had to deal with a bounced check, you’ll understand why.
I did have one job offer a few months ago where the employer requested I send them a voided blank check so that they could set up direct deposit. I’m not willing to mail this off to some company half a world away.
I do have one employer who pays by check. I’m not thrilled with the situation, and usually they pay a month late. Since starting, they always have some reason why their payment has been delayed a month. I’m happy that I do eventually get paid, but receiving money for work done in May on July 1st is a hassle.
I’ve been using direct deposit for at least 20 years and it’s still my preference. I agree that it’s hard to know who to trust, but I also believe that most employers aren’t going to rip us off. It’s funny because most American writers have no problems with giving up their social security details in order to get paid or forward their banking details to PayPal.
Most of the time direct deposit is only offered through employers with whom you have steady or permanent employment as it’s work to set up – so trust has generally been established.
To me there’s nothing nicer than to look in my bank account and find it a couple of thousand dollars heavier.
PayPal is best for me as I’m in the UK and do most of my work with US sites. US checks take a week or so to clear, plus I’m charged a flat fee ($10 up to $200, $20 above that), so they are slower and usually more expensive than PayPal fees.
Rather than keep a balance in a PayPal account (there’s no PayPal debit card over here), I immediately transfer the money to my bank account and usually have it within a week.
As far as the fees and tax goes, I usually just list my revenue for each payment as the money I get *after* the fee. I figure that’s the cash I actually receive as income – it’s not the same as receiving the full amount and then paying a fee at a later time. It’s never caused me any problems though, touch wood, I’ve not yet had a cavity-search level audit.
PayPal is the best way for me. However,in order to reduce the trauma of their fees I use the debit card with cash back bonus for EVERYTHING I possibly can. I have backup funding activated on my card as well, so whatever funds are not in my PayPal account will come right out of my checking account. This adds back a nice 1% of 90% of the total money that comes into my house. So I am actually only spending about 1% or so of my overall earnings on the PayPal fees once it is all averaged out. I still write off the fees as well for tax purposes to help reduce expenses further also.
Checks rarely seem to work out for me. I just cannot accept them. The real kicker? Some banks are now charging to verify the funds in their patron’s bank account. I’ve been quoted a $3 – 5 dollar charge for this service.
@James – I got charged way more than 3% for a credit card transaction. More like 4-5, if I remember correctly. But I haven’t upgraded my account to a biz account, so that’s probably why.
I’ve had direct deposits from Australia and Canada and never had any problems (I’m in the United States). Both from reputable publications. I personally would be cautious about who I give my account number to.
PayPal is nice, except for the fees. One publication agreed to up my fee just a bit to compensate for that.
Bill
@Ratti and Jodee:
[quote]Patti Says:
Is it possible to do direct deposit for clients in other countries? I live in Canada and have come across a client in the United States who prefers to pay this way. I am not sure if this can be done. Anyone have any experience with this?
Jodee Says:
I looked into this for a client of mine and was told it wouldn’t work because I don’t have a bank account with a U.S. bank.[/quote]
It’s not only possible to direct deposit money internationally but it’s fast and easy. Not to mention cheap. Almost all of my clients are located overseas (mostly Europe), and every single one wires the $$$ directly into my US bank account. All your international clients need to proceed a wire transfer is your account # and your bank’s SWIFT code. International deposits arrive in my account 24 hours after they were wired at no extra fee for me (make sure your bank doesn’t charge you a fortune for incoming international wires).
If, on the other hand, you need to direct deposit money into an international account you need the account holder’s IBAN (= International Bank Account Number) and the bank’s SWIFT code. It’s simple, really. And safe. Hailing from Europe I am used to both pay my bills through direct deposit and receive my paychecks/fees via direct deposit and not once has that caused any kind of problem.
I have learned to hate Paypal, though, and no longer accept Paypal payments after getting screwed three times. Unfortunately, Paypal’s “buyer protection program” is designed to screw the sellers, and it’s easy for buyers to reclaim their money through the protection program even if you’ve delivered what you and your buyer had agreed on. So no more Paypal for me. I strongly prefer direct deposits and gruntily
accept personal checks and money orders. If a client insists on Paypal payments the client has to do without my work.
Either way (and either way of payment
) – reliable clients and well-paid work to all of you!
Best,
Stef
@ Stef – Unfortunately, wire transfers from the U.S. to Canada carry hefty fees – sometimes up to $30, and usually around $15. It’s often not worth it.
James,
I agree. If the related fees are as high as $30 wire transfers don’t make much sense. They certainly don’t make sense for smallish amounts. From Germany, Switzerland and the UK the fee is usually around $10, and my contracts require my clients to pay that fee (which is common in most of Europe anyway).
Best,
Stef
@ Stef – Oh, now that’s smart, making the client pay. Never thought of that. Of course, you must carry that knowledge to your grave. Chartrand doesn’t make mistakes
@The Chartrand:
So far my clients haven’t complained. Not even the American ones. And I guess that if they wouldn’t pay the transmission fee I would simply adjust my fees accordingly… (GOSH, that woman is greedy… 
)
It’s not really smart – it’s just like it is usually done in the German language countries – and I am an animal of habit. I grew up that way, and I am sticking with it.