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Freelance Editors, Is It Time to Ditch PayPal?

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PayPal is increasing its fees by about 20%. Is there a better payment option out there?

Starting in August, PayPal will charge higher fees for businesses to use its service. That has a lot of freelance editors thinking hard about whether they should use PayPal as their payment gateway.

Other Options

Digital payments themselves have been a tough sell among some freelance editors. The idea of paying a fee to receive money electronically is a big stumbling block when other options, like checks and direct deposits, are free.

I love direct deposit, and a few of my regular corporate clients have added me to their direct deposit list. It takes a certain amount of work to set up, so it’s not something all clients offer. It’s often not an option for individual clients.

Checks are still a viable option for many companies and individuals, at least in the United States. Outside the US, checks are becoming increasingly rare. But even here, fewer people are using checks in favor of other options. This is because checks:

  • take more time to arrive and clear the bank;
  • can get lost in the mail;
  • are more work to send than electronic payments;
  • are more work to track than electronic payments; and
  • must come from a checking account, not a credit card.

I prefer payment gateways when direct deposit isn’t an option. Payment is immediate and easy to send, receive, and track, and clients can choose to use a credit card. But because payment gateways are providing a service, they charge businesses receiving money a fee. How else can the business continue to offer the service?

The good news is that those fees are likely tax deductible for your business (check with a tax accountant to confirm your situation). And, often, there’s no fee for your client. That’s a baseline for good customer service. A fee to make a payment for a service is a disincentive to purchasing that service. Successful freelancers clear obstacles for clients rather than create them.

Fee Increases

But what about PayPal’s fee increase?

The variable fee will rise from 2.9% to 3.49%, a 20% increase. The flat fee will rise from $0.30 to $0.49, a 63% increase. That’s quite a hike—and a significant gap with some of its top competitors (see table).

Payment GatewayVariable fee (%)Flat fee ($)
Square2.900.30
Stripe2.900.30
Wave2.900.30
Venmo*1.90.10

* Venmo will start charging fees for products and services on July 20. Venmo is owned by PayPal.

No wants to pay more in fees than they have to. I certainly don’t, even if I can expense the fees. But I wonder how long before other payment merchants follow PayPal’s lead. If you can charge more because the industry leader does and customers seem to have accepted it, wouldn’t you do it?

Complicating the situation is which payment gateways your invoicing app partners with. If you want to move to Wave, for example, does your invoicing app accept it, or will you need to track payments separately?

You can work with as many payment options, including checks, direct deposit, and other methods, as you want. I’ve found that each payment option needs managing, and the more I offer, the harder it is to reconcile all my accounts. I want options I can manage with minimal help from an accountant.

Too, you want to consider what’s easiest for your clients. How devoted are they to using PayPal? Would they be willing to switch to an alternative, or would you lose clients because you no longer offer a popular gateway?

All of this will depend on how you run your business and who your clients are. You’re balancing your needs with your clients’. Making it easier to run your business means more time for the work itself. Making it easier to pay your invoice means more prospects signing on with you.

What to Do

It may take experimenting to find out what the right mix of payment options is.

Consider:

  • What payment gateways your invoice app partners with
  • What other services each payment gateway offers that will benefit you or your client
  • The number of payment options you can reliably keep up with
  • Your clients’ preferences and needs

Only you can determine what works best for your business. If PayPal otherwise works for you and you can expense the fees, it may still be the right solution for you. If it doesn’t work, feel free to kick it to the curb.

This article has been updated to correct math errors.

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