What Is an Escrow?

How escrow works

Escrow holds a client's payment in a neutral third-party account until you deliver work that meets the agreed terms, protecting both sides from default. The client funds the account before you start, the holder confirms the money exists, and you release it only after the client approves the deliverable. Upwork builds escrow into fixed-price contracts and charges the freelancer a service fee of 10% on amounts up to $500, dropping to 5% on the next portion. For independent contracts outside a platform, Escrow.com handles transactions starting around $100 and charges roughly 3.25% on a $5,000 deal, a fee you split or pass to the client by contract. Escrow matters most on large projects where a client could vanish after receiving files or where you fear nonpayment on a $10,000 build. It pairs naturally with milestone payments: you fund and release escrow in stages so neither party carries the full risk at once. The pricing implication is direct. Escrow fees cut your take, so you raise your rate to absorb them or write the cost into the contract as a line item. A 3.25% escrow fee on a $5,000 project costs $162.50, which you recover by quoting $5,168 instead of $5,000. Escrow also lets you charge premium clients confidently, because the protection removes their excuse to delay a deposit. You trade a small fee for guaranteed funding, faster starts, and a documented release trail that resolves disputes without litigation.