Understanding the Actual Costs of Money Transfers - The Great American Small Business Challenge | The Great American Small Business Challenge

Summary: The surge of freelancers over the past years have led to concerns about global money transfers and the fees associated.

When a business or company decides to outsource their work to freelancers, they do so knowing that not all of the work will come from their native country. Much of this work comes from various countries all over the world. Now, this means that there will be some currency conversions that will occur during the payment process. This comes at cost however, both the employer and freelancer will be charged specific fees when the money is sent/received.

The Costs of Conversions

When the employer chooses to pay a freelancer through a bank account, the freelancer receiving the money will have to endure the bank’s specific currency exchange policies. Most of the time, banks will mark up the currency and take a small profit of the conversion – this is widely known and common. These costs tend to add up relatively quickly for freelancers, and what sounds like a lucrative project may be much smaller when it’s all said and done. Anytime freelancers accept payments online from the employer, they must be aware that they’re opting to work under these terms and conditions. Some say it’s the cost of working for companies out of their native land. Many freelancers have chosen to seek out a digital wallet instead, which allows for more affordable rates. While the difference may be minimal, it does add up in the long run.

Dealing With Transfer Fees

Freelancers aren’t the only ones getting a cut of their profit. Employers must also pay a transfer fee. Remember, someone always has to pay for the cost of the conversion, and transfer fees reduce the overall amount paid. Transfer fees are tacked onto conversion costs, so if the employer refuses to pay either, the freelancer will end up being hit with twice the charge.

The Bottom Line

In the future, large-scaled businesses could potentially find themselves using alternate methods to pay their freelancers, depending on which one will work best for their budget. While there aren’t as many options available at the moment, its only a matter of time before a new type of global transfer system that accepts credit card processors from all over the world will cause a stir in the international work force. The freelance market is still growing, and while there are still some problems here and there, it’s become a viable source of work that benefits both the employer and the worker.

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