Escrow vs deposit: which payment protection fits your work

A deposit is money the client pays you up front, before work starts, and you hold it. Escrow is money the client pays to a neutral third party that releases it to you when the work is approved. Both protect you against non-payment. For most service work a deposit is the simpler and stronger choice, and escrow earns its place on large projects with new clients who need reassurance.

How a deposit protects you

A deposit is the oldest defence against a client who does not pay. The client pays a share of the fee before you begin, commonly 25% to 50%, though there is no fixed rule and the right figure depends on the project and how well you know the client. That payment does three things. It shows the client is serious, it funds the start of the work, and it means part of your fee is already in your account and cannot be withheld later.

A deposit also reduces exposure to disputes. Card disputes are a large and growing cost: Chargebacks911's statistics page forecasts US consumers filing $37.07 billion in disputes in 2026 and merchants recovering a net 10.7% of contested payments. Those are consumer card figures, and business clients dispute less often, but the lesson carries over. Money you collected up front and delivered against is far less exposed than a full fee billed only on completion.

If you want the mechanics, our guide on collecting a deposit before a project covers amounts, wording and timing.

How escrow protects you

Escrow adds a neutral middleman. The client funds the project, or one milestone of it, into a holding account before work starts. The funds release to you on approval. Your assurance is that the money exists and is committed. The client's assurance is that it is not handed over until they approve the work.

Work marketplaces use this model as standard. On Upwork, a client funds a fixed-price milestone up front and the funds release after approval, with a review window of around 14 days and a short security hold before you can withdraw, according to Upwork's help centre.

The trade is that escrow puts a third party between you and your money. It adds a release delay and often a fee. It is worth it when a new client is nervous about paying a stranger up front, or when the project is large enough that both sides want a structured, milestone-based release. Our milestone payment schedule guide shows how to build those releases.

The two compared

A simple rule for each type of client

Use this and you will rarely need escrow.

• A repeat client you trust. A deposit plus your normal invoice covers you. Do not add friction to a relationship that already works.
• A new client with an ordinary-sized project. Take a quarter to a half up front, bill the balance on delivery, and back it with a signed contract. That protects the bulk of your risk.
• A large first-time project, a client where enforcement would be hard, or a client as nervous about paying you as you are about being paid. This is where escrow earns its cost.

The reason deposit plus contract handles most cases is that the contract carries weight on its own. Some places now give independent workers a statutory right to payment, which brings us to the law.

The law already backs you in some places

Before you reach for escrow, check whether your location gives you recourse. New York's Freelance Isn't Free Act requires a written contract for work worth $800 or more, sets a 30-day payment default, and requires the hiring party to keep the contract for six years, according to New York General Business Law section 1410. California's freelance worker protection law, SB 988, sets a similar 30-day rule with a $250 threshold for contracts from 1 January 2025.

These are US state rules, and your clients and your location may be somewhere else entirely. Elsewhere you rely on the contract and on general contract law, and enforcement across borders is harder. That is the narrow case where escrow is worth more than it looks. Laws and thresholds change, so check them with a lawyer before you rely on them.

The point holds either way: a signed contract with clear payment terms is a protection layer, and a deposit is the buffer beside it.

Get the signature before the work

Whichever route you pick, the foundation is a signed agreement collected before any work starts. Proposify's State of Proposals 2026 reports that proposals with an e-signature close at a 15% higher rate and 60% faster. Getting the contract and the deposit signed up front is quicker to close and safer to deliver. Protection is mostly about what you set up before the first hour of work, not what you scramble for after a client goes quiet.

Who holds your money matters

There is a deeper question under escrow, which is who gets to hold your money. Escrow and many payment platforms mean a third party sits on your funds for a window before you can withdraw. A different model keeps money moving directly from client to you, with no one holding it between. Our article on who holds your money in client payments lays out that argument.

How Delivvo gets the deposit paid before work starts

Delivvo is built around the direct model: the deposit lands in your account, and nobody holds it in between.

1. You send a quote built from packages and add-ons.
2. On the Pro plan, the client picks a package, signs the contract and pays the deposit on one page. Delivvo then creates the client, project, contract, invoice and payment schedule for you.
3. For larger work, you split the fee into up to 12 scheduled payments, so a project can release in milestones the way escrow would, without a third party in the middle.
4. The client pays through your own processor, such as Stripe, PayPal or Square. Delivvo takes 0% and is never the merchant of record.
5. The signed contract carries a signing record (SHA-256 hash, IP address and device) and an archived PDF, and every contract and invoice has a verification code anyone can check at delivvo.io/verify.
6. If the client pays late, reminders go out at 7, 14 and 30 days and stop once the invoice is paid.

The client sees the quote, contract and invoice behind one link, and opens the portal with a one-time code. A client who wants proof you are real can verify the documents themselves, which answers part of the nervousness escrow is meant to solve. Contract templates are a starting point, so check yours with a lawyer.

One practical detail a lot of tools skip: the deposit invoice and the contract are created from the same quote, so the amounts cannot disagree. That avoids the usual mess of a deposit paid against one version of a price and a contract signed against another.

See payment schedules and contracts and e-signatures.

This sits inside Delivvo's CRM for service businesses. More on how payments work.

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