Local Fund Transfer vs Paypal


In an effort to address the clamor of Philippine contractors for a better withdrawal method, oDesk announced the beta launch of the Local Fund Transfer method. This new method is being considered as a low cost, direct (to Philippine bank) withdrawal method. These are the main features of the LFT as claimed by oDesk.

What is Local Funds Transfer:

  • Transfer funds directly to your local bank account. No third-party payment providers are involved. You deal directly with oDesk.
  • Your first withdrawal is Free! Thereafter, each withdrawal is just $1.99.
  • oDesk offers a very competitive exchange rate that in most cases will beat the other payment providers. You can see the last oDesk exchange rate on the withdrawal form before you withdraw funds.
  • You will receive your funds in 5 business days or less.

Since oDesk’s announcement of the beta launch last December 2010, Philippine contractors rejoiced at the promise of savings from withdrawal fees,and for a more efficient payment system with a better exchange rate. Many became curious, tried the new method and had their piece of good and bad experiences.  The “sigurista” in me deemed it best to become a spectator first before diving into the pool.  I’d like to ensure that everything will go as planned. Most of the time there is an advantage at not initiating a particular action unless one is 100% sure that the desired results would be obtained.  Visiting the forum and reading from other contractors’ experiences gave me a better glimpse at the situations I might find my funds into if I decide to use the new method.  Some say the method is confusing…others say there is not a remarkable difference in exchange rate from the other methods like Paypal or Payoneer….and still others say they’re happy as there is another equally good alternative.  Many believe in the saying “experience is the best teacher” and so do I. Okay then…now its my turn to dive.

Step 1 – setup LFT as another payment method with my Bank of the Philippine Islands account.

Step 2 – Withdraw my oDesk funds into my chosen payment method/s.

My first try on the LFT was February 10, 2011. I decided to withdraw from oDesk into both LFT and Paypal at the same time, with equal amounts of $285 each. Here are snapshots showing the exchange rate comparison between the two methods:

For LFT, the rate is higher compared to Paypal – at least by 0.277. On this, oDesk’s promise that the new method offers a “very competitive exchange rate that in most cases will beat the other payment” proved to be true .

From LFT, I should be expecting about P12,145.56 to hit my bank account.  Should there be rate changes from the time the withdrawal is processed up to the day the funds hit my bank account, I believe the amount will not be substantially different.

Paypal on the other hand, will be sending me P12,066.61. There is about P78.95 difference, and LFT at least gave me additional budget for a Jollibee or McDonalds meal….not bad. In this aspect, thumbs up for LFT…it got 1 point score.

How long did I wait for the money to hit my bank?

My estimate from February 10 (Thursday) withdrawal:

LFT – 3 to 5 business days into bank….so more or less by February 17 the funds should have reached my bank account.  And because February 12 & 13 are weekends, therefore not considered “business days,” those were not considered in counting the days. The actual date I receive the funds was February 16 (Wednesday), or 4 days from withdrawal.

PAYPAL – 2 to 4 business days into bank…I should receive the funds more or less by February 16, Saturday and Sunday also not considered in the counting.  I received my money on February 14.

Although with LFT there is longer waiting period, oDesk still delivered its promise for a maximum 5 business days.  But, Paypal proves itself better than the LFT, especially for contractors like me who are in a rush to get their fund transfers. Okay, 1 point for Paypal….they tie in score now…

But wait…..

The actual amount credited into my bank account from Paypal was only P11,916.61, and not P12,066.61.  There was P150 incoming/foreign remittance fee charged by the bank….and that means my daughter will not get her 2 orders of Kiddie meals with free toys.

From the LFT remittance, the actual amount I received was P12,190.41 and not just P12,145.56….a higher rate therefore was used by oDesk which is P42.773 instead of P42.3390 as indicated in the notification. This could be the prevailing rate at the time of the remittance, not at the time of withdrawal, hence rates could vary.

Based from this, the effective exchange rate difference is $0.434.  The total amount difference between the two methods I used is now P273.80. My daughter can have 3 kiddie meals with toys.

In sum:

Now, which payment method is the best?

It will really depend on the contractor’s personal circumstances.

If one is in a rush to get their funds the same day (to pay utilities or bills etc. and avoid surcharges on late payments), Payoneer Debit Card is the best, but the big disadvantage is that the deductions are substantial.

Paypal is the next best alternative for those in a hurry, with shorter waiting time compared to LFT, but still, the disadvantage being the lower exchange rate and bank remittance fee charged by the banks.

LFT is the best when it comes to those who want to save on bank remittance fees since every centavo counts nowadays. One just needs to be patient and be willing to wait for max 5days. This method will prove to give substantial savings if it lowers the withdrawal fee of $1.99 to be at par with Paypal’s $1.

As for me, I’d like to have a payment method added….the COMBI….

It is a combination of the best features of the 3 methods – LFT with Paypal’s Shorter Waiting Period, a choice for Immediate Load like Payoneer at very minimal fee and a Very Competitive Exchange Rate.  Should this improved LFT be implemented in the official launch…..I’m pretty sure that oDesk will get everybody’s…




12 thoughts on “Local Fund Transfer vs Paypal

  1. Thank you so much for this blog post! It’s immensely helpful. I’m new at odesk, and hope to withdraw my first payment soon.

  2. Hi! thanks for this very detailed and informative article. Now I have an idea of payoneer’s fees. ONe thing also, LFT right now only charges $0.99/withdrawal. I use both 3 methods since I have work on odesk, and I have another client that pays me through paypal. And i also affiliate with Clickbank and Amazon, I used payoneer account. So, you’re article really helped me a lot 😀

  3. I did verify my account before since I already had my Payoneer Debit Card which I used.

    Once you’ve confirmed your email address and your PayPal account is activated, you can start receiving payments without being Verified. However, without verification, there is a limit to the amount of money you can withdraw from your PayPal account to your bank account. Verification lifts the sending and withdrawal limits on your PayPal account. You can lift this limit by linking and confirming your bank account or verifying your credit or debit card information.

    Here’s how you can view and lift your withdrawal limit.

    Log in to your PayPal account.
    Click View Limits near your name on your Account Overview.
    To lift your withdrawal limit, click Lift Limit.

    You can use your debit card, credit card, or your bank account to verify your PayPal account. When your account is verified, the sending limit and withdrawal limit on your PayPal account will be lifted.

  4. Great post Verena! Very helpful. My PayPal account was recently hacked and I lost some hard-earned money. Such a hassle as I’m waiting for PayPal to resolve my complaint! I’ll be using LFT moving forward.

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