PayPal has been around for years. While big businesses use it as a payment gateway for their customers to process payments securely, it’s also great for customers as it streamlines the entire process. But what are the advantages of PayPal for freelancers?
What Is PayPal?
PayPal is an online payment platform that allows people to send and receive money with ease. Upon creating a PayPal account, you can link credit cards, debit cards, or a checking account. This allows you to transfer money to your PayPal wallet and pay for goods and services using the platform.
Do take note that PayPal is a payment gateway, not a bank. While you can transfer money to your wallet, you can’t withdraw your online credit directly into hard cash. You will still have to withdraw your PayPal balance to a bank, and only then can you withdraw your funds.
PayPal has both a website and an app. This makes it easy for you to send and receive payments on the go. However, the PayPal app has some limitations, like the inability to convert between currencies.
What Can You Use PayPal for?
Many people use PayPal for shopping or buying things online. After all, PayPal partners with millions of new startups and household names, so you can shop online with ease. PayPal also has a useful feature called peer-to-peer (P2P) transfers. This makes receiving payments much easier, especially for freelancers.
When it’s time for payment, your client can send money directly to your PayPal wallet. All they have to do is type in your PayPal email address, input the correct amount of money, and click send. It’s really simple, and your payment arrives in seconds!
Furthermore, PayPal has an invoicing function, in case you want to document your transactions. It uses a built-in template, which means you only have to type in the details of the invoice and send it to your client. PayPal takes care of everything else for you.
If you don’t need to create invoices, you can simply request payments from your clients. This is just like sending money. You input the client’s PayPal email address, type in the correct sum of money, and send the request!
Finally, you can also integrate a PayPal button into your website and online store. This allows customers to send money to your PayPal balance via credit card – they don’t even need a PayPal account! However, this feature is only available for PayPal business accounts, unless you use third-party plugins on your website.
Different Types of PayPal Account for Freelancers
Before you create a PayPal account, you should know that there are two choices – personal and business. As the name suggests, personal accounts are better for individuals, while business accounts work best for organisations. However, this isn’t always the case. From the perspective of a freelancer, there are times when a business account is actually the way to go.
For example, if you run a content writing business and have writers or employees working for you, a business account will suit you better. This account also has some useful features for merchants. These include the ability to give your employees access to the account. This isn’t possible with a personal account.
Advantages of PayPal for Freelancers
1. Quick Transfers
If you’ve been paid by bank deposit before, you probably know how long it can take. 3-5 business days means you may only receive your payment a full week after your client has sent it!
PayPal sends money from one account to another much faster. PayPal doesn’t have any processing time, and the money just rolls into your wallet in the blink of an eye! For those who need money urgently, PayPal is a lifesaver. However, depending on the transaction and your specific bank, you may see slower payment times. Note that payments you send via PayPal might not come off your bank instantly even though the recipient gets it straight away.
2. Secure System
PayPal is one of the most secure online payment gateways out there. The bank account you link to your PayPal account must be yours. PayPal checks that your legal name matches that of the bank account holder, or the credit/debit card owner. This means hackers can’t just link your bank account to their PayPal account.
PayPal also has a hack-proof login system. Most online payment platforms only require your password to log in to your account. PayPal takes security a step further, by adding 2 Factor Authentication (2FA). 2FA means you have to verify your identity through another device. After typing in your password, PayPal asks to send a verification text to another linked device. The text contains a 6-digit code, which you have to input in PayPal before you can log in to your account.
While this might sound unnecessary, it’s actually very effective. 68% of black hat hackers say that encryption and 2FA are their biggest stumbling blocks. What better way to secure your account than to implement the most “unhackable” feature?
3. Widespread Integration
Big companies like Adidas, iHerb, and even the antivirus software Norton work closely with PayPal. Aside from big, well-known brands, there are more than 17 million merchants out there using PayPal. This widespread integration makes it very easy to buy things using PayPal.
Disadvantages of PayPal for Freelancers
1. High Withdrawal Fees
When you receive money through PayPal, you pay a transaction fee. In the UK and the US, the fees start from 2.9% + £0.30/$0.30, so this really depends on your location, currency, and a few other factors. For international payments, you can expect the transaction fee to increase. Generally, the fee for a foreign transfer is around 5% of the total amount.
2. Poor Exchange Rates
If you receive payments in a different currency from the local currency of your linked bank account, you can’t withdraw the money directly. You have to first convert the money to your local currency before withdrawing, even if you have a multi-currency account.
What’s worse, the PayPal conversion rates are generally on the poor side. For reference, the current USD to GBP ratio is around 1.38:1. PayPal’s rate is less than 1.33:1! That’s a loss of $5 for every $100 transferred, before accounting for any fees. So, if you plan to do a lot of business in other currencies, it’s worth considering some other options. While you won’t find a service without any of these kinds of fees, depending on the currencies and locations you use, some might suit you better than others.
Is PayPal Good for Freelancers?
PayPal is good for freelancers that want a simple way to send and receive money. However, there are still some limitations that you should consider. When choosing which kind of payment system to use as a freelancer, it’s best to do your research to find out which option suits your specific situation best.