The first time a US client wired me $5,000, I received $4,612. Wire fees ate $35. The intermediate correspondent bank took another $20. The receiving bank in the Philippines took 2.7% as an "FX conversion fee" that wasn't disclosed anywhere on the wire instructions. The client paid $5,000 thinking that was the cost. The actual cost was $5,388 once you count what we both effectively lost.
This is how most international contractor payments work: the headline fee looks small, the actual all-in cost is much larger, and neither party realises it because the markup is buried in the FX conversion. Knowing where the leakage happens saves real money for both sides.
Here's how the four common payment options actually compare in 2026, with realistic numbers for a typical $1,000 monthly contractor payment from US/UK/AU to common offshore destinations (Philippines, Argentina, Eastern Europe, India).
The four options
Wise (formerly TransferWise)
The cleanest option for most international contractor payments.
How it works: you fund a transfer in your local currency, Wise converts at the mid-market rate (or close to it), the contractor receives in their local currency or their own Wise account.
Fees: typically 0.5–1.0% of the transfer amount, plus a small fixed fee ($1–$5 depending on the corridor). For a $1,000 transfer US→PH, expect total fees around $7–10. Same for UK→PH, AU→PH.
FX markup: minimal. Wise uses the mid-market rate (the rate you see on Google) and only adds the disclosed conversion fee. This is the cleanest FX in the consumer/SMB market.
Speed: 1–3 business days for most corridors. Often same-day for major routes.
Best for: regular monthly payments to direct-hired contractors. The math is good for any amount above $200.
Watch out for: Wise Business accounts (recommended for any company paying contractors regularly) require business verification. The verification can take 3–10 days, so set up before you need it, not when you need it.
Stripe
Underrated for contractor payments. Most people think of Stripe as a payment processor for selling to customers, but Stripe also offers Stripe Connect and ACH for paying freelancers and contractors, and for many B2B relationships it's cleaner than Wise.
How it works: depends on the product. Stripe Invoicing lets you receive invoices from contractors and pay them via card or ACH. Stripe Connect is for marketplace-style payouts where you're paying many people. For most direct-hire situations, the contractor sends you a Stripe invoice and you pay it with a card or ACH.
Fees: 2.9% + $0.30 for card-funded payments (the contractor receives less). 0.8% capped at $5 for ACH (much cheaper, but US-only on the receiving side). International card payments add another 1% cross-border fee.
FX: Stripe handles FX at near-mid-market rates with a 1–2% markup, depending on the corridor. Cleaner than PayPal, slightly worse than Wise.
Speed: card payments are instant. ACH takes 2–3 days.
Best for: businesses that already use Stripe for their main revenue and want a single billing system. Contractor invoices showing up alongside customer invoices is operationally clean.
Watch out for: contractor needs to be set up to receive Stripe payments (a Stripe account in their country, or a workaround through a US/EU entity). Not every offshore contractor has this set up. Confirm before you start.
PayPal
The default option, and usually the worst.
How it works: you send via PayPal to the contractor's PayPal email, often with a "send to friend or family" or "goods and services" choice that changes the fee structure.
Fees: 4–5% for international transfers when sent as "goods and services" (the recommended choice for business). Plus FX markup that's often 2.5–4% — and this is the part that's not on the receipt.
FX markup: PayPal's FX rate is consistently 2.5–4% worse than mid-market. On a $1,000 payment, that's $25–40 of hidden cost on top of the disclosed 4% fee. All-in real cost: 6.5–9% per transaction.
Speed: instant, which is the only real advantage.
Best for: small one-off payments where the convenience justifies the cost. Generally not for ongoing contractor relationships.
Watch out for: PayPal disputes / chargebacks are stacked against contractors (especially offshore ones) and PayPal sometimes freezes funds without warning. Many senior offshore contractors refuse PayPal for any payment over $200 because the freeze risk is real.
Bank wire (SWIFT)
The expensive default that most companies use for large payments because they think it's "more professional."
How it works: your bank initiates a wire to the contractor's bank, routed through one or more correspondent banks, with each bank in the chain potentially taking fees.
Fees: $25–50 outgoing fee from your bank. $15–35 receiving fee on the contractor's side. Correspondent banks may take $10–20 each from the wire en route.
FX markup: this is where the real damage happens. Banks typically charge 2–4% over mid-market for currency conversion, and they don't disclose it as a fee — it just shows up as a worse exchange rate than expected. On a $5,000 payment, that's $100–200 of hidden cost.
All-in cost: typically 3–5% for medium-sized transfers, plus the unpredictable correspondent fees.
Speed: 2–5 business days for most corridors.
Best for: large lump-sum payments ($20k+) where the relative cost of fees is small, or in jurisdictions where Wise and Stripe aren't available.
Watch out for: the FX markup. Always ask your bank what FX rate they'll apply before sending. Many will quote it grudgingly, and you can sometimes negotiate a better rate for larger amounts.
Side-by-side: paying $1,000 monthly to a Philippines-based contractor
| Method | Disclosed fee | FX markup | All-in cost | Speed | |---|---|---|---|---| | Wise | $7–10 | <0.5% | ~$10–15 | 1–3 days | | Stripe (ACH) | $5 | 1–2% | $15–25 | 2–3 days | | Stripe (card) | $29 + 1% cross-border | 1–2% | $50–60 | Instant | | PayPal (goods/services) | $40 | 2.5–4% | $65–80 | Instant | | Bank wire | $35–50 | 2–4% | $55–90 + correspondent fees | 2–5 days |
For monthly contractor payments under $5,000, Wise wins comfortably. For larger payments, Wise still wins, but the relative spread tightens. Bank wires only become competitive at $50k+ where you can negotiate the FX rate directly with your bank.
The mistakes that quietly cost the most
Mistake 1: ignoring FX markup
This is the big one. Most companies look at the disclosed fee ($35 wire fee) and ignore the FX markup (3% buried in the rate). The FX is usually 5–10x the size of the disclosed fee.
The fix: always check the rate you're sending at against Google's exchange rate. The difference is the markup. For a single payment it's small. For ongoing monthly payments it adds up to thousands per year.
Mistake 2: paying in the contractor's local currency
When you let the bank or PayPal convert from USD to PHP (or whatever), you're paying their FX rate. When you pay USD and let the contractor convert, they pay the FX rate (usually through a much cheaper service like Wise on their end).
The fix: pay in USD, EUR, or GBP — whatever currency the contractor invoices you in. Let them handle the conversion to local currency. They'll do it much cheaper than your bank will.
Mistake 3: using PayPal for ongoing relationships
PayPal's combination of high fees, hidden FX markup, and freeze risk makes it a bad choice for any contractor relationship that lasts more than a few payments. Many companies stay on PayPal because it's familiar; the cost of moving to Wise or Stripe is paid back within 2–3 transfers.
The fix: switch to Wise for direct-hire relationships, Stripe Invoicing if you're already using Stripe for revenue, or platform escrow (Upwork, Toptal) for marketplace relationships.
Mistake 4: paying inconsistently
Late or unpredictable payments are the #1 reason good offshore contractors fire their clients. (Yes, contractors fire clients — the good ones do, often.) Setting up automated weekly or monthly payments via Wise or Stripe makes the relationship predictable, which keeps the contractor working at the rate they originally quoted instead of building a "client risk premium" into future invoices.
The fix: automate the payment as much as possible. Same day each month, same currency, same method. The contractor stops thinking about whether they'll get paid on time and starts thinking about their work.
Mistake 5: trying to avoid the receiving fee
Some companies negotiate "the contractor pays receiving fees." Mathematically this just transfers cost to the contractor, who builds it into their rate over time. You're not saving money; you're hiding it. Better to pay all fees on the sending side, agree on a clean net amount the contractor receives, and have a clean working relationship.
What I recommend for most situations
For an SMB paying one or two offshore contractors $500–$5,000/month: Wise Business. Set up the account once, transfer monthly, fees stay under 1% all-in. Contractor receives clean amounts they can predict.
For an SMB already using Stripe for customer revenue: Stripe Invoicing for contractor payments, ACH-funded. Keeps everything in one billing system.
For one-off payments under $200: PayPal is fine, the fee structure is regressive at small amounts but the convenience is real. Don't make this your default for ongoing work.
For large lump payments above $20k: bank wire with negotiated FX rates. Ask your bank specifically for "the rate, not the fee" before sending.
For marketplace-found contractors: the marketplace's built-in payment system (Upwork's Wise integration, Toptal's payments). The platform handles everything; you don't need a separate setup.
What to do next
The next pieces of the working relationship are time-zone overlap and management practices. See Time Zones for Offshore Work: What Overlap You Actually Need and Treating Offshore Hires as Colleagues vs. Vendors.
If you'd like to start a working relationship and the Lead Steer monthly retainer sounds like the right shape, send a request through the homepage.
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Part of the Offshore Hiring pillar guide. Fee figures accurate as of early 2026 — verify current rates before relying on them.