Deposit vs Retainer: Which is Better for Your Contract?

Last updated: 3/21/25

“What is the difference between a deposit and a retainer? Which term should I use in my client contracts?” As a lawyer, I get these questions often from freelancers and service providers like photographers, graphic designers, and copywriters.

Some professionals believe that the terms “retainer” and “deposit” are interchangeable. Both a “deposit” and a “retainer” are fees a client pays in advance for services. However, legally speaking, a retainer is NOT the same as a deposit. They have special legal meanings that can impact your business. 

My name is Paige Griffith, and I am the CEO and lead attorney behind The Legal Paige. We help you get Legally Legit® without the overwhelm. Our contract templates are written to help you set clear expectations with your clients and run your most profitable business.

Let’s talk about the key differences between a retainer vs deposit so you can use the terms correctly in your client contracts.

The Meaning of a “Deposit” vs Retainer”

The term “deposit” is historically rooted in landlord-tenant law. Most people are familiar with paying a “security deposit” to secure a rental. The security deposit is held in case of any damage to the property. It is usually refunded upon checkout (as long as no damages have occurred and all rent has been paid.)

In service industries, a deposit is usually applied toward the total fee, or refunded once services are complete. If a client cancels or reschedules, a deposit is also usually refundable. 

A retainer on the other hand, however, secures services in advance and is typically nonrefundable. In the service industries such as photography, event planning, or DJing, clients pay a retainer to “retain” services for a future date. A retainer might cover the cost of initial services, but in most cases, it simply reserves the service provider’s time on their calendar. This way, the service provider receives some compensation even if the client cancels or reschedules.

For more information on retainers and refunds, check out this blog article.

Learn more about the differences between a deposit vs retainer in my YouTube video below.

Retainer Fee vs. Deposit - Photography Contract 101 [2024] 

What is a retainer for professional services?

For most service providers, a client pays a retainer to secure the service provider’s availability for a specific date or time. This guarantees that no one else will take their spot. 

For example, a retainer for a wedding photographer secures a specific date, preventing the service provider from booking other clients for that date. If the client cancels or reschedules the wedding, the photographer has already set aside that time and may turn down other work for that date. A retainer protects against total loss of income for that date if the client cancels. In legal speak, this is called “opportunity cost” and refers to money the photographer would have earned if the client had not cancelled. This is a good legal reason to justify a non-refundable retainer.  The non-refundable retainer should be a flat fee that would compensate you for holding that date.  This applies to many businesses like DJing, live event artists, venues, and event rentals. 

For some service providers, such as planners, virtual assistants, or some photographers, a portion of the retainer may also cover initial service hours. This could include time spent booking the client, setting up questionnaires, back-and-forth communication, and creating initial documents.

Retainers may also function as prepaid access to ongoing services. For example, a freelance copywriter retainer may secure the copywriter’s time for a set period. They may apply the retainer toward a specific number of blog posts, website updates, or email newsletters per month. 

Similarly, a freelance designer retainer might ensure a graphic designer’s availability and a set number of social media graphics or marketing materials.

No matter what, your contract should clearly explain what the retainer is for. If the reatainer is non-refundable, explain whether it is used to secure availability or compensate for initial service hours. (A non-refundable retainer should not go toward the final cost.) 

It’s also a smart idea to emphasize that a retainer is non-refundable by stating the amount as “liquidated damages.” (More on this below!) 

Learn more about how to take retainer payments the RIGHT way in this podcast episode.

Deposit vs Retainer: Why the Right Term is Important

Courts have typically determined that there is a difference between “Deposit and Retainer” in contracts¹.  The Federal Court has ruled that a retainer is to secure availability and, once paid, is no longer the client's money, whereas a deposit is to be applied to the overall cost of the package. 

This is why at TLP, we choose to use the term “retainer” in our contract templates. It’s a safer choice because it’s easier to describe in a fee section and doesn’t have the same complications with refunds as the word “deposit.”

If you use the word “deposit,” a client who cancels may argue that they should be able to receive a refund of their deposit if you didn’t end up providing services. Or, if they reschedule, they might believe they should be able to transfer their deposit to the cost of services for a different date.

We recommend including a sentence or two in your fee & retainer clause explaining that the retainer is for securing services on a scheduled date and time and is non-refundable.

Deposit vs Retainer: It’s Not Just the Label that Matters

Keep in mind that courts will focus more on how you explain your fee in your contract rather than what you label it. 

If you want to charge a non-refundable fee, it’s important to explain that specifically. Clarify the purpose of the fee in your fee clause—such as for booking a specific date or time period on your calendar, ensuring no other client can book you. The more detailed you are, the better off you’ll be in a legal dispute.

The terms “non-refundable reservation fee” or “booking fee” can also work well in service-based contracts. The key is consistency—whatever term you choose, use it consistently throughout the contract. Do not interchange the terms “retainer” and “deposit,” as that could create confusion and could potentially void parts of your contract.

The Golden Rule: Always Use the Phrase “LIQUIDATED DAMAGES” in Your Fee Clause!

Most importantly, include language in your fee clause that states that the retainer will be deemed “liquidated damages” if your client breaches or cancels the contract. 

“Liquidated damages” is a non-refundable amount that a client agrees to pay for failure to perform under a contract. Most service-based contracts will use the term “retainer” PLUS language surrounding “liquidated damages.” This makes it absolutely clear to clients that the retainer amount is only related to the reserving of services on a specific date.

You can also strengthen your client contracts with “no downgrade” language.

The Legal Paige Take: Deposit vs Retainer for Service Contracts

You may still be thinking, “It’s just one word—why does it matter so much in my contract?”

Ultimately, the term you choose to use all depends on the services you are providing and whether or not you want a refund option. 

For all of the reasons we’ve described in this article, we prefer to use the word “retainer.” However, you should take time to consider which option is most beneficial for your business and ensure that the term you choose is used consistently and correctly in EVERY contract you sign. The more detailed and clear you can be in your fee clause, the better!

You can easily integrate a strong fee & retainer clause into your contracts with this fee & retainer clause template.

We also offer full-scale contract templates for specific industries from photographers to wedding planners, DJs, and florists.

If you have additional questions about a deposit vs retainer, check out this episode of Legally Legit podcast. 

You can also submit questions to The Legal Paige Community on Facebook.

THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. EVERY SITUATION IS DIFFERENT & IS FACT-SPECIFIC. A proper legal analysis is necessary based on your location and contract. Consult an attorney in your home state for advice regarding your contract or specific legal situation.

See our full disclaimer here.

More Free Resources from The Legal Paige

• The Legally Legit® Podcast: Episode 108: Are Retainers Really Non-Refundable?

• The Legal Paige YouTube Channel: Retainer Fee vs. Deposit - Photography Contract 101 [2024]

• The Legal Paige Blog: Photographers: How to Structure a Flat Fee Retainers

¹ A classic retainer "is a sum of money paid by a client to secure an attorney's availability over a given period of time. Thus, such a fee is earned by the attorney when paid since the attorney is entitled to the money regardless of whether he actually performs any services for the client…By contrast, a retainer given as an advance deposit against future fees constitutes property held in trust for the benefit of the client and, as such, is property of the client.” By contrast, a retainer given as an advance deposit against future fees constitutes property held in trust for the benefit of the client and, as such, is property of the client.”
77 F.3d 1201