Problem Summary
Choosing between Stripe and PayPal for your small business payment processing can feel overwhelming when you’re trying to understand their complex fee structures. Making the wrong choice could cost you hundreds or even thousands of dollars annually in unnecessary transaction fees, especially as your business grows in 2025.
Step-by-Step Fixes
Step 1: Calculate Your Average Transaction Size
Start by looking at your typical sale amount. Open your current sales records or accounting software and find your average transaction value over the past three months. If most of your sales are under $10, PayPal might save you money. For transactions above $50, Stripe often works out cheaper. Write this number down – you’ll need it for the fee calculators.
Step 2: Use Both Fee Calculators Side by Side
Open two browser tabs. In the first, go to Stripe’s pricing calculator at stripe.com/pricing-calculator. In the second, visit PayPal’s fee calculator at paypal.com/us/webapps/mpp/merchant-fees. Enter your average transaction amount and monthly volume in both. Screenshot the results for easy comparison.
Step 3: Check for Hidden International Fees
Look at where your customers are located. If you sell internationally, this changes everything. Stripe charges an additional 1% for international cards plus 1% for currency conversion. PayPal charges 1.5% for cross-border transactions plus 3-4% for currency conversion. Add these percentages to your base calculations if more than 10% of your sales are international.
Step 4: Test Both Checkout Experiences
Set up test accounts with both services – this is free and takes about 15 minutes each. Create a simple checkout page and process a test transaction. Pay attention to how many steps customers need to complete. Stripe typically requires fewer clicks, but PayPal offers the trusted “Pay with PayPal” button that some customers prefer.
Step 5: Compare Monthly Account Fees
Check if you’ll need any premium features. Stripe charges no monthly fees for basic processing. PayPal’s basic service is also free, but features like advanced fraud protection or phone support require PayPal Payments Pro at $30 per month. List the features you actually need before deciding.
Step 6: Calculate Platform Integration Costs
Look at your existing tools. If you use Shopify, WooCommerce, or Square for inventory, check which payment processor integrates more smoothly. Some platforms charge extra fees for certain payment gateways. WordPress sites often work better with Stripe’s cleaner API, while eBay sellers might prefer PayPal’s native integration.
Likely Causes
Cause #1: Micro-Transaction Business Model
If you’re selling digital downloads, coffee, or anything under $10, those base fees hit hard. PayPal charges $0.49 + 3.49% for standard transactions in 2025. Stripe charges $0.30 + 2.9%. On a $5 sale, PayPal takes $0.66 (13.2%) while Stripe takes $0.45 (9%).
To check: Calculate what percentage of your sales are under $10. If it’s more than 50%, you have a micro-transaction business.
What to do: Consider PayPal Micropayments (5% + $0.05 per transaction) for sales under $10, or look into Stripe’s custom volume pricing if you process over $80,000 monthly.
Cause #2: High-Risk Industry Classification
Certain businesses face higher fees regardless of processor choice. CBD products, cryptocurrency services, adult content, and travel bookings often get classified as high-risk. Both Stripe and PayPal may add 1-2% to their standard rates for these categories.
To check: Review your business category in your current processor’s dashboard. Look for terms like “high-risk” or “special category” in your account details.
What to do: Get quotes from high-risk specialist processors like PaymentCloud or Durango. Sometimes their specialized rates beat general processors for these industries.
Cause #3: Subscription-Based Revenue
Recurring billing changes the fee game completely. Stripe shines here with sophisticated subscription tools built-in. PayPal requires their separate subscription product with different pricing. Monthly subscriptions under $10 face the same micro-transaction challenges mentioned earlier.
To check: Count what percentage of your revenue comes from recurring payments versus one-time purchases.
What to do: For subscription-heavy businesses, Stripe typically wins on features and total cost. Their dunning management (failed payment recovery) alone can save 5-10% of recurring revenue.
When to Call a Technician
Contact a payment processing consultant when your monthly processing exceeds $50,000. At this volume, you qualify for custom interchange-plus pricing that could save thousands annually. Also seek professional help if you’re dealing with complex scenarios like marketplace payments (paying multiple vendors), regulatory compliance requirements (HIPAA, PCI-DSS Level 1), or if you’ve been declined by both Stripe and PayPal.
A good payment consultant charges $500-1500 for a full analysis but typically saves businesses 0.5-1% on processing fees. That’s $5,000-10,000 saved annually per $1 million processed.
Copy-Paste Prompt for AI Help
“I run a small business processing approximately $[X] per month with an average transaction size of $[Y]. About [Z]% of my customers are international. I sell [product/service type] primarily through [platform/website]. Currently using [current processor] but considering switching. Can you help me calculate whether Stripe or PayPal would be more cost-effective for my specific situation? Please include all fees: transaction, international, currency conversion, monthly account fees, and any platform-specific charges. Also factor in the value of features I might need like subscription management, invoicing, or fraud protection.”