Escrow is a system designed to protect you as a buyer or as a provider. It allows two individuals or companies who don't have a trust relationship the opportunity to do fair & balanced business without either party being ripped off. You are probably saying why you would do business with someone who you don't have a trust relationship with. Well, if you are a freelancer or seek outsourced talent then it's almost inevitable that you will do business with a stranger.

The way escrow works is it puts money in a placeholder. Let's say you are a buyer who just hired a web designer to create you a website. You need to pay the web designer. How will you do that? Online of course, but instead of sending the money directly to the web designer right away, send it via escrow. When you pay using escrow you put the money in a placeholder which is not accessible to the web designer. This allows the web designer to know you have the cash needed to start the project.

Now, you are probably wondering why would the web designer agree to start the project with just having money in a placeholder, since you can easily cancel the payment and get your money back? That is the beauty of an escrow system it protects you as the buyer and protects the web designer as the provider. Once you place money in escrow you are unable to cancel the escrow money or retrieve your money. The placeholder is a neutral location for the money where it is inaccessible by you and inaccessible by the web designer.

Once the money is in escrow you will only have the option to release the money to the web designer while the web designer will only have the option to cancel the escrow, thus returning the money to you. This shared responsibility will protect both parties from being ripped off.

When the money is placed into escrow the web designer know they can begin the project knowing you have the money to pay for the project and without being ripped off. You can feel at ease because you simply will not release any money to the web designer until you have a finished product to your satisfaction. Escrow is the best way to protect yourself when doing business online. If you have any disputes which cannot be resolved between both parties then the mediator will be the site owner which will most likely result in the money being returned to you.