Stripe vs PayPal: Who should you choose? [Updated: January 2023]

Stripe fees vs PayPal fees

This piece was originally written in 2016 and has now been fully updated.

Let's do a thorough review of Stripe vs PayPal. Nowadays, both have a trusted brand and a long history of processing payments on the web: Stripe was founded in 2010 and PayPal in 1998. We'll compare each payment processor in six key categories and we'll point out some of the important differences, which should help you make a more informed decision.

Transaction and service fees

There is a simple approach when it comes to Stripe fees. Stripe charges you a flat rate of 2.9% + 30¢ per successful charge as long as you're doing under $1 million in volume per year. This rate varies country to country, but it's always flat. They don't disclose any special high volume rates.

However, in November 2022, there will be a few changes to this structure: there will be +0.5% for manually entered cards starting November 10, 2022; +1% for international cards; and +1% if currency conversion is required.

You can accept large payments or recurring charges securely with ACH debit, ACH credit, or wire transfers: Stripe's fees are 0.8% with a $5 cap.

For PayPal, there are some complications. There's an additional percentage-based fee for international commercial transactions of 1.50%. PayPal also throws in some extra service fees that make things a bit more complicated. Let's compare Stripe's fees and PayPal's fees at a glance:

Service PayPal Stripe
Transaction fees [1] 3.49% + 49¢ 2.9% + 30¢
Charge cards from your website $30 / month [2] Free
Chargeback $20 $15
American Express 3.5% [3] Same flat rate
Micropayments (less than $10) 5% + .05¢ Same flat rate
Refund Fixed fee only returned [4] Fees not returned
International cards 1% [5] Free [6]
Authorize card 30¢ [7] Free
Recurring Billing $10 / month (Optional recurring payment tool: $30 / month) Free
Fraud Protection Basic free; Advanced $10 / month [8] Free [9]
  1. United States transaction fees. Stripe and Paypal transaction fees vary by country.
  2. PayPal Payments Pro allows you to provide a fully customized checkout experience on your site and includes Virtual Terminal.
  3. American Express fee is only charged for PayPal Payments Pro, PayPal Payments Advanced, and Virtual Terminal, which is required for certain features (see note 2).
  4. Fixed fee portion of the original transaction fee (for example, the refund fee is $0.30 for domestic payments).
  5. PayPal cross border fees.
  6. International cards are free, but currency conversion costs 2%. Example: You connect a GBP bank account to Stripe, but charge in USD. Stripe will automatically convert your funds to GBP (for a 2% fee) and deposit them into your GBP bank account. If you instead charged in GBP (or connected a USD bank to Stripe), it would be free.
  7. PayPal charges 30¢ for uncaptured authorizations and card verification transactions.
  8. $10 monthly + $0.05 per transaction. Excludes Express Checkout transactions.
  9. See Stripe Radar.

You'll notice that PayPal fees are far more complex and nuanced. For example, they only charge extra for American Express when you're on one of the paid plans, which seems a bit counterintuitive. In almost all cases, Stripe is the cheaper option because of lower service fees (unless you're exclusively processing micropayments).

When do I get paid?

PayPal usually pays out within one business day. Stripe has rolling two-day transfers in the United States and Australia, and rolling seven-day transfers in most other countries (see the Stripe automatic transfer schedules. If fast access to your funds is important and you're outside the United or Australia, keep this in mind.

paypal mobile app Someone using PayPal on their mobile device © PayPal.com

Security

Both Stripe and PayPal take security seriously. At the core, they're both very stable and secure platforms. Let's talk about how they're different, and how Stripe intrinsically encourages good security.

Stripe's killer feature when they first launched was its browser-side JavaScript library Stripe.js. When you use Stripe.js on your website, the credit card data entered into your payment form is never sent to your server. Instead, the data is sent directly to Stripe. Why is this so important?

  • Automatically PCI compliant because you don't handle any sensitive credit card data on your servers.
  • More secure because a breach of your servers won't result in any stolen credit card data.
  • You're not tempted to store credit card data on your servers, which you really shouldn't be doing unless you're a big business and want to pay for PCI compliance.

If you follow the normal flow with Stripe, you'll just automatically store your cards in their vault. You'll never touch the sensitive data. This encourages good security.

stipe fees and payment system The Stripe payment flow © Stripe.com

PayPal now has a way to store cards in a vault, but it isn't quite the same as Stripe.js. The sensitive card data still has to go through your server first, and this puts a big security burden (see PCI compliance above) on the software developer or the customer.

In summary, Stripe.js encourages good developer security practices, while PayPal gives developers room to make bad decisions. They've recently taken steps to provide better options, but these options still aren't as secure as Stripe.js.

PayPal API vs Stripe API

When Stripe first launched to the public, the Stripe API was a difference-maker. It's clean, well documented, and extremely easy to use. Payment processor APIs of the past were buggy, inconsistent, and poorly documented. In fact, PayPal was one of the worst offenders.

stripe api The Stripe API © Stripe.com

Stripe forced PayPal to up its game and it has. The documentation and organization of their RESTful PayPal API is vastly improved and modeled after Stripe (coincidentally). This is an example of competition benefiting customers. Stripe has set a new standard for a clean and well documented API, and the rest of the industry (including PayPal) is catching up.

Data portability

This is an area where PayPal falls flat on its face. Imagine you've built a successful membership site over the years, and you powered it with PayPal subscriptions. If you want to move to another payment processor (like Stripe), you can't transfer that credit card data. PayPal simply won't give it you. All your existing customers would have to sign up again and you'd probably lose some of them during the process.

Stripe, on the other hand, values data portability. If you decide to leave Stripe they'll help you migrate your credit card data in a secure and PCI-compliant way. This over accommodating stance on data portability is certainly worth noting. It's refreshing to know you have a choice, and won't be locked in forever.

Integration with WordPress and WooCommerce

At Memberful, we believe insight is most valuable when it's specific and when we can add most value to our readers. Given that one of our main products is a WordPress plugin, we thought it also made sense to evaluate PayPal versus Stripe for those of you looking to use WordPress and its ecommerce plugin, WooCommerce. For both, you'll need to install and activate the WooCommerce Payments plugin.

All you have to do to integrate PayPal with WooCommerce is verify your PayPal account with the API, through the WooCommerce settings page. If you use PayPal Standard, you don't need to install another plugin. But there are extensions you can download to improve the user experience: for example, the PayPal Express Checkout plugin lets users purchase directly from your WooCommerce store instead of redirecting to PayPal first.

woocommerce payments

For Stripe, it's easy to connect with WooCommerce. But it may take a little time to fully activate Stripe on WooCommerce platform, especially if you are building the website for someone else. The WooCommerce Payments plugin will ask you for the details (such as date of birth and postal address) of any major stakeholders in the company so you may need to speak to any directors and founders. But once the payment gateway is activated, you won't need to do it again.

Note: For all WooCommerce payment gateways, even if your deposits are set to daily, your first deposit per processor is held for seven days. This means that, for example, even if you have been using PayPal on your WooCommerce site for a year, if you activate Stripe too you'll need a wait a week for that first Stripe payment to go through to your bank, once a transaction has been completed.

Customer service

We here at Memberful haven't used PayPal in years, so we don't have any recent experience with their customer service. Back when we did use PayPal, email support was slow and unreliable, and it was nearly impossible to get someone on the phone. At one point, we had a running joke because PayPal's phone system kept hanging up on us before we could ever talk to anyone. This went on for months. There are also countless horror stories of PayPal freezing funds for no reason.

Stripe has open channels for email support, and they also have an IRC channel (#stripe on Freenode) where developers can chat and get live help from real engineers. This is invaluable if you're working through a tough problem and need some live help. Stripe also recently introduced 24/7 live chat and phone support, which should further improve the customer service experience.

When I first wrote this post, PayPal was suffering from scale, age, and bureaucracy. Stripe was new and hustling for market share and they were working hard to differentiate with great customer service. The real test will be over time. Stripe will find it more and more challenging to provide top-notch customer service as they get larger and larger but the future still looks bright for the now very established payament processor.

Stripe vs PayPal - competition is good

For Memberful, we chose Stripe, and we couldn't be happier with that decision. It's made everything we do easier from an engineering perspective, and we've been thrilled with the service and support. With that being said, PayPal has taken steps to respond to upstarts like Stripe, and has already improved their API significantly.

It will be interesting to see how these two companies continue to evolve and compete. In the end, we'll all enjoy better service because of it.

Subscribe for updates

Stay up to date on Memberful's latest product updates, insights, and teaching centered around growing your community.

Terms

Have an audience?

Customers like Mythical (28+ million subscribers) rely on Memberful to power their membership communities.

Get started for free