Trying to decide whether to use Stripe vs. PayPal when it comes to invoicing is a tough decision. Hopefully, today, I can help you decide which is a better fit for you and your needs.
As a freelancer and business owner, invoicing was burdensome for the longest time because I relied on an outdated system and ancient techniques (think pen, paper, envelope, and mail).
All this to say that when it came down to it, I was torn between what is widely regarded as the top two online payment and invoicing solutions — Stripe and PayPal. While both offer the same transaction fees and similar capabilities, the subtle differences between them that I will share will ultimately guide your decision.
Quick Glance Comparison of Stripe vs. PayPal
Free. Learn more here.
Free. Learn more here.
2.9% + $0.30
2.9% + $0.30
Billing & Invoicing
Free to use. The first 25 invoices are free. After that, costs are 0.4% per
Free to use. 3.49% + transaction fee once you’re paid.
“Recurring Series” option
Where are payments handled?
On your website
On PayPal’s website
Monthly fees and contracts
Who wins, Stripe or PayPal?
It’s a toss-up.
If you’re looking for the more popular name, PayPal takes the cake every time as the company has dominated the online payment space for some time, and it doesn’t hurt to be tied to the name Elon Musk (former partner/founder after a merger).
However, the lesser-known Stripe isn’t too shabby themselves. They’re a great solution if you happen to be an eCommerce platform owner who wants to keep payments/clients on your site. Just look at some of their partners here.
Overall, Stripe’s setup and customization might be seen as slightly more complex. Still, on the other hand, PayPal’s pricing structures aren’t as simple to comprehend. There is a good chance you have used both to make payments when purchasing online and before you decide which is better, consider the following about each:
What to know about Stripe
Stripe offers the same payment processor to all of their clients that is embedded into your website and highly customizable (a plus if you’re a tech guru). Known as the behind-the-scenes payment processing company, they offer key differences when compared to PayPal that can guide your ultimate choice.
Other features that stand out when it comes to Stripe include:
- Stripe Billing: Invoicing for businesses with two options, the starter option being free for the first 25 invoices each month
- Stripe’s Credit Card Support: Includes features that allow for ACH transactions
- Stripe Sigma: SQL business intelligence
- Stripe’s POS: Still in development/beta
Stripe pricing & fees
When it comes to pricing and fees, Stripe earns income when your company gets paid. This is how both Stripe and PayPal make money, so they are incentivized to complete your collection of payments as easily as possible.
Here are some need to know things when it comes to Stripe’s pricing structures:
- Transaction Fees: 2.9% + $0.30
- Online Invoicing/Billing: The starter plan is free for the first 25 invoices, after 0.4% when you get paid.
- ACH Transactions: 0.8% with a cap of $5
- Stripe Terminal (POS) Transactions: 2.7% + $0.5
Pros and cons of Stripe
What to know about PayPal
PayPal is the authority with over 360 million active users when it comes to payment processing and internet shopping. Options like the recurring series and their monthly — easy to use — point of sale plans make PayPal a preferred choice for many still.
The services they offer and are best known for include:
- Checkout: When you have bought something or own an online store, the “Checkout with PayPal” feature is used to process payments.
- Payment Standard: PayPal allows you to easily build a simple payment processor for your website if you don’t have one that can be integrated to your website with a few clicks.
- Payments Pro: This allows you to take advantage of their virtual terminal and hosted checkout page instead of redirecting your customers to the PayPal website.
- Other Services: Online & app invoicing, mass payouts with quick turnaround times, donation buttons, PayPal POS for card processing.
PayPal pricing & fees
Opening the door to Stripe, PayPal’s recent increase in pricing, and the sometimes complexity of understanding how it all works (just look at their fee support page here to catch my drift), PayPal is the slightly more costly of the two overall. However, you have to compare individual features to see what is best for you.
- Online Transactions: 2.9% + $0.30
- Online Invoicing & Billing: 3.49% + transaction fee
- POS (PayPal Here) Transactions: 2.7%
Pros and cons of PayPal
Stripe vs. PayPal: Who takes the prize when it comes to pricing?
Sharing identical transaction fees might make it seem as easy as a flip of the coin when it comes to selecting Stripe or PayPal, but the devil is in the details. Let’s take a look below:
- Online Checkout: The pricing structure is the same based on the standard transaction fee
- Invoicing: With PayPal, invoicing is super simple, and you can set up recurring series for monthly invoices. They also have no limit to the number of invoices you send, and the cost is 3.49% + $0.49 per transaction. On the other hand, Stripe has a Starter plan which gives you 25 free invoices per month. After 25, each invoice is assessed a 4% fee per paid invoice.
- Point of Sale: Stripe’s card POS rate is 2.7% + $0.05, whereas PayPal’s is 2.29% + $0.09 per transaction, making PayPal the less expensive option here.
- Money hitting accounts: PayPal gets the nod here with money reaching your account quicker (they have the option for instant transfer for a 1% fee)
Stripe, you can select between Starter and Plus plans for your invoicing. Starter gives you 25 free invoices per month, after which you’re charged 0.4% per paid invoice. Plus provides some automation and advanced collection features and costs 0.5% per invoice. PayPal has no limit on the number of invoices you send, but you’ll pay the standard online transaction fee of 3.49% + $0.49 for each paid invoice.
Who are Stripe and PayPal for?
If you send a bill, invoice, or need to collect payment of some sort, then your perfect solution is either Stripe or PayPal.
Typically, you will find anyone who uses a “Checkout” feature on their website will provide uses with one or the other. Still, all sorts of business owners and companies use either or, including:
- eCommerce platform owners
- Stores that also sell online
The Verdict: Which is better for your needs?
What it all boils down to is genuinely uncomplicated:
Do you prefer Stripe’s logo on your website, or do you prefer PayPal’s?
I kid, but aside from some minor differences, your choice boils down to what fits you best. Truth be told, either decision you make in settling the Stripe vs. PayPal debate will work out just fine.
Key takeaways to help you with your decision:
- Pricing structures are nearly identical when it comes to transactions
- PayPal is considered the more reputable brand and domestically a great fit
- Stripe takes the nod when it comes to online platform transactions & any foreign billing fees. However, PayPal is more known worldwide.
- PayPal’s ease of use and setup is slightly more user-friendly. However, Stripe has more customization and options.
- If you’re just starting out and have less than 25 invoices, Stripe might be a great place to start.
- PayPal does not let you take your data with you if you decide to switch.
My Personal Take: I use PayPal for invoicing. However, after writing this article and knowing I send out less than 25 invoices a month, I might have to test the waters with Stripe since their starter package is free!