Understanding Freelancer Fees: 3 Costs to Watch Out For

Freelancers run their own show, but enjoy fewer workplace protections and conveniences than W2 workers. One way this really exhibits itself is with fees. Freelancers can find that fees cut into their earnings at an enormous rate. If a freelancer works for 7 clients in one month and pays a 5% fee on each payment, that could end up being hundreds of dollars each month to simply receive their own money. This is on top of the taxes that freelancers pay.

Here are three freelancer fees to keep an eye on, to make sure that they don’t chip away at their profit too much.

3 Freelancer Fees To Watch Out For

Pay processing fees: These are the fees mentioned above. Pay processing fees are fees that you pay to use a platform to receive your money. PayPal fees are possibly the most famous, but most platforms charge some sort of fee to use their service. That’s fair enough, but make sure your fees are as low as possible. 

Platform usage fees: These are fees that you may pay to platforms where you can display your work or search for clients. Upwork, for example, charges 20% of the first $500 billed on its platform.

Instant delivery fee: With some payment processors, there can be an added fee to get your money faster. These can be percentages of what you’re transferring or a flat fee. These can be especially predatory. Someone who is rushing for their money might be particularly desperate and in need of cash, but wind up with even less due to the added fee.

How to Lower or Avoid Fees

The simplest way to lower fees is to use the platforms with the lowest fee schedules. Switching over might be a pain for a day, but in the long run, it can save you thousands of dollars.

The second simplest action to take is to include the fees in your pay rate. If you know that using a specific client’s payment platform will cost you $10 each time you get paid, raise your rate by $15. It’s simple and small enough that it’s an easy raise to ask for.