PayPal For Freelancers: Should You Use It? (Pros & Cons)

PayPal is one of the most common payment methods freelancers (and indeed anyone) will come across. It’s an incredibly popular tool, and it’s used for payments all over the world.

But is PayPal good for freelancers?

In this article, I’ll talk about why PayPal can be a good option for freelancers, but also why it’s not the best option in a lot of cases. At the end, I’ll also discuss a few alternatives to consider using instead.

Is PayPal Good For Freelancers?

PayPal is a convenient and widely-used platform for freelancers, primarily due to its ease of use and widespread acceptance. It’s a tool that many clients are familiar with and trust, making transactions straightforward. The platform’s ability to handle multiple currencies and its presence in many countries around the world are significant advantages for freelancers working with a global client base.

But while PayPal offers convenience, there are noteworthy drawbacks to consider. One major issue is the fee structure, which can take a significant cut from a freelancer’s earnings, especially when dealing with international clients or currency conversions.

But these are not the only two points to consider. Let’s take a closer look at the pros and cons of using PayPal as a freelancer.

Pros & Cons Of PayPal For Freelancers

Pros	Cons
Widely accepted	High fees
Easy to set up and use	Potential account limitations
Multi-currency support	International conversion costs
Instant invoicing and payment tracking

The Pros

Widely Accepted

One of the biggest advantages of PayPal is its universal recognition. Many clients prefer it for transactions, making it easier for freelancers to conduct business with a broad range of clients, both locally and internationally. This wide acceptance can open doors to more job opportunities and simplify payment processes with your existing clients.

Easy To Set Up And Use

PayPal’s user-friendly interface is another major draw. You can set up an account, send invoices, and receive payments with minimal hassle. This ease of use saves time and makes managing financial transactions less daunting.

This accessibility allows freelancers to start accepting payments almost immediately, which is particularly beneficial for those just starting out or looking to quickly adapt their payment methods.

Multi-Currency Support

PayPal supports transactions in multiple currencies, which is great for freelancers working with international clients (it’s why I used it so often at the beginning of my freelancing career). This feature simplifies the process of receiving payments from different countries, although it’s important to be mindful of the associated conversion fees (more on them below).

Instant Invoicing & Payment Tracking

PayPal offers robust tools for creating invoices and tracking payments. This functionality is particularly useful for freelancers who need to manage multiple clients and projects, ensuring they can keep track of their finances efficiently.

Note: While PayPal is useful for this, I recommend checking out dedicated invoicing software for a more customizable approach

The Cons

High Fees

A significant downside of PayPal concerns the fees they charge for transactions. These fees can be especially steep when dealing with international payments or currency conversions, which can quickly eat into your profit margins. Understanding these fees and their impact on overall earnings is crucial for financial planning.

PayPal’s fee structure varies depending on where you are. You can find an up-to-date list on PayPal’s website. If it’s an international transfer, the exchange rate can take even more off your earnings.

Potential Account Limitations

PayPal sometimes imposes limitations on accounts, like freezing funds or restricting access, often without prior notice. These actions can disrupt a freelancer’s cash flow and business operations, requiring time and effort to resolve.

I had this happen recently, and I had to jump through multiple hoops within the PayPal dashboard just to receive my money. However, this is something that could happen on other platforms too, not just PayPal.

International Conversion Costs

While PayPal’s ability to handle multiple currencies is a pro, the associated conversion costs can be a major drawback. These costs can be substantial, especially for freelancers who frequently work with international clients—like I do.

This last point is key for me as a UK freelancer with many clients based in the US. It’s the main reason I switched to Wise with many of my clients (although I still use PayPal for some), and I discuss that more in my article about Wise for freelancers. I’ll also give a brief outline at the end of this article.

Can You Use PayPal For Free As A Freelancer?

You can use PayPal for free as a freelancer in the sense that there are no upfront costs or monthly fees for setting up and maintaining a basic PayPal account. Freelancers can send invoices, receive payments for services, and withdraw funds to their bank accounts without paying any account fees.

However, while the account itself is free, PayPal does charge fees for certain transactions. As I’ve outlined above, when you receive payments for goods or services, PayPal takes a percentage of the amount as a fee, plus a fixed fee per transaction. These fees vary depending on the country and the type of transaction. And there are also the currency conversion costs to consider too.

So, while the use of the PayPal platform doesn’t come with a subscription cost or anything like that, the transaction fees mean that it’s not entirely free when it comes to actually receiving payments for your freelance work.

Personal vs Business: Which PayPal Account Is Best For Freelancers?

As a freelancer, you can choose between a personal and a business PayPal account. Let’s take a brief look at each to understand which is the best option for you.

PayPal Personal Account

• Best for individuals: Designed for individuals who shop online or wish to send or receive personal payments
• Basic transactions: Ideal for freelancers who handle a low volume of transactions and primarily work with clients who prefer to pay via PayPal
• Send and receive money: Allows you to send and receive money from friends and family, as well as payments for goods and services
• Simpler features: While it offers basic features necessary for transactions, it lacks the advanced tools and capabilities that a business might require
• Fee structure: Personal accounts are subject to standard PayPal fees when receiving money for goods or services

PayPal Business Account

• Best for business entities: Tailored for businesses, including freelancers who require more functionality in managing their transactions
• Advanced features: Offers features like the ability to accept payments on your website, operate under your business name, and accept debit and credit card payments
• Multiple users: Enables you to set up access for multiple users, which can be beneficial as your business grows (although not that beneficial if you’re a solo freelancer)
• Customization: Allows for the customization of invoices and provides more options for customer interactions (although not
• Fees and limitations: Similar to the Personal account in terms of transaction fees, but with a different structure for things like chargebacks and disputes

The Verdict

When choosing between a Personal and Business PayPal account, consider the following:

• If you’re a freelancer with a low volume of transactions and simple invoicing needs, a Personal account might suffice
• However, if you’re looking for more professionalism in your transactions, plan to expand, or require more detailed tracking and invoicing capabilities, a Business account may be more suitable
• Keep in mind that both account types incur fees for receiving payments for goods or services, and it’s essential to understand these fee structures when choosing the account that best fits your freelancing needs

Alternatives To PayPal For Freelancers

Wise (Formerly TransferWise)

Low fees and mid-market exchange rates: Wise is renowned for its transparent fee structure and use of real, mid-market exchange rates for currency conversions, which can be more cost-effective than PayPal. That’s the main reason I use it!

Borderless account: Freelancers can hold and manage money in multiple currencies, making it an excellent option for those working with international clients.

Debit card: Wise also offers a debit card, which is handy for freelancers who travel or need to make business purchases in different currencies.

Stripe

For online businesses: Ideal for freelancers who work primarily or entirely online, especially those who run their websites or online services.

Customizable payment solutions: Stripe offers a range of tools for customizing payment solutions, such as recurring payments and subscription models.

Integration capabilities: It seamlessly integrates with various ecommerce platforms and provides robust APIs for custom development (for example, if you run a website and want to take orders through that).

Is PayPal Worth It For You?

While I still use PayPal for some freelancing transactions, I’ve generally moved to other payment solutions with the majority of my clients. It’s a convenient choice, but their fee structure and exchange rates usually lead to me looking elsewhere.

For more guidance on my favorite alternative, check out my guide to choosing the right Wise account as a freelancer.

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