I’m new to freelancing. It’s hardly been six months since I earned my first dollars! I started out with writing articles (for dirt cheap rates as I realize now) and then I proceeded to graphic designing and then I combined writing with graphic designing and started writing tutorials about graphic designing. I don’t really earn much through all of this since I’m yet to invest time and effort into building up articles in blogs to earn passive income, but it is enough to fulfill my needs since I’m still a student.
Since the payment for freelancers is in a foreign currency, largely in dollars, Indians have to bear the pain of watching their hard earned money being slashed by small amounts in the form of fees by the e-commerce sites such as Paypal and Moneybookers. I end up cringing numerous times as I watch hundreds of rupees being slashed from the money I earned. One thing is for certain though – you shall have to lose some amount of money. It’s not much, but for larger amounts it can be substantial.
So how do you maximize the money that is reaching your bank account? Since Paypal and Moneybookers are the two major e-commerce sites in the world and many top freelancing sites advocate only these two services, I shall be talking only about them here. Here is a comparison of the two and you can be a better judge of which one suits your needs.
You can have only one currency for your account in Moneybookers which you can NEVER change unless you request them to close your account in order to open a new one with a different currency. However, in Paypal, you can have multiple secondary currencies.
It is important to first understand the concept of Currency Conversion Fees so that you don’t lose money in multiple currency conversions:
Currency conversion fees are charged at the rate of 2.49% by Moneybookers and at the rate of 2.5% by Paypal and are incorporated in the exchange rate. For example, if the exchange rate is 55 INR for every 1 USD, then the exchange rate shown shall be 53.625 INR for every 1 USD (55 – 55*0.025).
Now, if you always receive money in a single currency then Moneybookers would be the better option since they don’t levy any currency conversion fees if the payment is received in the currency registered for the account. You shall only be charged a onetime withdrawal fee of 1.80 EUR (as of AUG 2012) while withdrawing the money to your bank account and that’s all.
However, if you receive your payment in another currency, then the currency conversion fee will be applicable. Thus, if your account currency is USD and you receive money in GBP, then it shall first be converted into USD after deducting the fee and then again you shall be charged a withdrawal fee of 1.80 EUR at the time of withdrawing the money to your bank.
It is to be noted that the money will be converted into INR by your bank and they shall charge their own rates. Right now, SBI charges 25 INR + taxes for every transaction.
When it comes to Paypal, you shall always be charged a currency conversion fee at the time of withdrawal and there’s no escaping it. Unlike Moneybookers, where you can withdraw the money to your bank in USD, Paypal allows withdrawals only in INR.
However, in Paypal you can receive the money in any currency (among the list of currencies supported by Paypal) and it will make no difference since currency conversion fee is applied at the time of withdrawal. So, when it comes to receiving money in a different currency in Paypal, it’s almost the same asMoneybookers except that you won’t have to pay the 1.80 EUR withdrawal fee in Paypal.
So, it would be a lot cheaper to use Moneybookers if you are anticipating money in only one currency. Otherwise, Paypal is marginally cheaper since they do not charge any withdrawal fees. However, I find that Moneybookers is the better option since we shall benefit if the payment is substantial and in the same currency as the account currency.
Moneybookers allows users to have an account balance while Paypal does not. With Paypal, you shall have to withdraw your balance every single day failing which it shall be withdrawn automatically to the bank account that you have registered.
The advantage with Moneybookers is that you can hold your balance until you feel that the exchange rates are the best and then you can withdraw the amount to get the best exchange rate. With Paypal, you shall have to accept the exchange rate of the day.
The verification process of Paypal is much easier and hassle-free as compared to Moneybookers. All you have to do in Paypal is to provide your bank details and they shall deposit two small amounts in your account which you shall have to enter correctly during the bank account verification process. However, in Moneybookers, you shall have to perform the task of uploading money to a certain account in a foreign bank.
Moneybookers also requires that the users have a bank account in a branch which has a SWIFT code. It is an international bank identification code and is required for transactions involving foreign exchange. If your branch doesn’t have a SWIFT code then you might have to go and talk to your bank’s officials and ask for their advice on what action to take.
Paypal asks for no such code – just the IFSC code which every single bank branch in India possesses. This makes it easier to complete the verification process with Paypal while that of Moneybookers may seem lengthy and might prove to be slightly inconvenient.
An unverified Paypal account has monthly receiving and sending limits of 500 USD each. An unverified Moneybookers account has no receiving limits but has sending limits of 0 USD for a 90 day period – i.e. you cannot send money using Moneybookers if your account is not verified.
Considering the above points, Moneybookers definitely seems to be the better option but many shy away from using Moneybookers because of the long verification process. I would definitely advise freelancers to use Moneybookers if they have the option to do so. Moreover, the strict policies of Moneybookers also make it seem quite trustworthy and secure.