Payment Processing Fees Compared: Stripe, PayPal & More

The headline rates (UK, 2026)

Payment processors love to quote a single percentage. The reality is always percentage plus a fixed fee per transaction, and the fixed fee is what punishes small orders:

• Stripe: 1.5% + 20p per transaction for UK domestic cards. International cards cost more (2.5% + 20p), and currency conversion adds around 2%.
• PayPal: 2.9% + 30p per transaction for UK domestic sales on the standard rate. Micropayments pricing exists for tiny transactions but you have to ask for it.
• Square: 1.75% per transaction in person, 2.5% for online payments — with no fixed per-transaction fee, which is unusual and matters.

Those fixed fees — 20p, 30p — look trivial until you multiply by 200 orders a month. Then they're £40–£60 a month of pure friction, before the percentage even starts.

£10,000 a month, worked out line by line

Maya's shop: £10,000 monthly revenue, 200 transactions averaging £50. All UK domestic cards. Here's the monthly cost of each:

Stripe: 1.5% of £10,000 = £150.00, plus 200 × £0.20 = £40.00. Total: £190.00 (1.90% effective)

Square (online): 2.5% of £10,000 = £250.00, no fixed fee. Total: £250.00 (2.50% effective)

PayPal: 2.9% of £10,000 = £290.00, plus 200 × £0.30 = £60.00. Total: £350.00 (3.50% effective)

The gap between cheapest and dearest: £160 a month, £1,920 a year. Maya's ceramics didn't change. Her customers didn't change. Only the logo on the checkout changed, and it was worth two grand.

Run your own volume through the Stripe vs PayPal vs Square Payment Fee Comparison Calculator — your transaction size changes the winner more than you'd expect.

Why transaction size flips the winner

The fixed fee punishes small transactions disproportionately. Watch what happens at different order values, same £10,000 revenue:

£10 average order (1,000 transactions): Stripe = £150 + £200 = £350. PayPal = £290 + £300 = £590. Square = £250. Square wins — no fixed fee is gold at small ticket sizes.

£50 average order (200 transactions): Stripe £190, Square £250, PayPal £350. Stripe wins.

£500 average order (20 transactions): Stripe = £150 + £4 = £154. PayPal = £290 + £6 = £296. Square = £250. Stripe wins by a mile — the fixed fee becomes irrelevant and the lowest percentage dominates.

The rule: small tickets favour Square, large tickets favour Stripe, and PayPal's standard rate rarely wins on price at any size. PayPal wins on conversion — customers trust it and check out faster — which is a different calculation entirely.

The fees hiding behind the headline rate

Chargebacks: £15–£20 per dispute on most processors, win or lose. High-dispute businesses (travel, events, digital goods) should weight this heavily — Stripe's dispute tools are the best of the three, which matters more than 0.2% of rate. A single chargeback wipes out the margin on dozens of good sales, so prevention (clear descriptors, delivery tracking, responsive support) beats cure.

International cards: selling to the US or EU adds 1%+ to Stripe's rate and PayPal's cross-border fees run to 3.49%+ fixed. If 40% of your sales are international, recalculate everything — the domestic comparison becomes fiction. Multi-currency pricing, where customers pay in their own currency, also lifts conversion enough to offset the extra fee in most cases.

Currency conversion: getting paid in dollars into a pound account costs ~2% on Stripe. Multi-currency businesses should hold balances in each currency (Stripe and PayPal both allow this) rather than converting every payout.

Payout timing: Stripe pays out in 2–7 days depending on history; PayPal can hold funds for new sellers for up to 21 days. Cash-flow cost is real, even if it doesn't appear on the fee schedule.

PayPal's brand tax: some sellers keep PayPal purely because removing it drops conversion 5–10%. If PayPal costs you £160 more a month but brings £800 of sales you'd otherwise lose, it's the cheapest option you have. Measure, don't assume.

The volume discount nobody mentions

Published rates are starting positions, not final offers — once you have scale. Stripe offers custom pricing from around £80,000 a month in card volume; PayPal's merchant rates kick in at similar levels. A business processing £150,000 a month can typically negotiate Stripe down to 1.2% + 20p or better, saving £450+ a month against the published rate. The processors won't call you to offer it. You have to ask, ideally with a competing quote in hand.

Below those volumes, the lever isn't negotiation — it's routing. Send domestic cards to Stripe, microtransactions to Square, and let customers self-select PayPal at checkout. Most modern checkout setups support this kind of smart routing with a few hours of configuration, and it's the closest small businesses get to enterprise pricing. Review the routing yearly as your transaction mix changes. What was optimal at £50 average orders may not be at £120 — the fixed-fee maths shifts with every price change you make.

The clear winner per situation

Online shop, UK customers, £30+ average order: Stripe. Lowest cost at meaningful ticket sizes, best developer tools, best dispute handling. The default choice for a reason.

In-person sales (market stall, café, salon): Square. 1.75% with free card reader hardware and no monthly fee is unbeatable for face-to-face. The POS software alone justifies it for many small retailers.

Digital products, tiny transactions (£1–£5): Square online or PayPal micropayments. Fixed fees destroy sub-£5 sales on standard pricing — 30p on a £2 sale is 15% before the percentage. Route microtransactions to the cheapest fixed-fee option.

Maximum customer trust, global audience: PayPal (as an option, not the only option). Offer it alongside Stripe at checkout. You pay the higher fee only on the transactions customers choose to route through it — and many will, which tells you the trust is earning its keep.

Subscription billing: Stripe. Its subscription tooling — trials, proration, dunning for failed payments — is a full product, not a bolt-on. Failed-payment recovery alone typically pays for any rate difference.

Buy now, pay later: the hidden checkout cost

Offering Klarna or Clearpay lifts conversion — sometimes dramatically for fashion and beauty — but it costs more than card payments. Expect 3–6% per transaction depending on the product and terms (longer instalment plans cost more), with no fixed fee. On Maya's £50 average order at 4%, that's £2.00 per BNPL transaction versus £0.95 on Stripe.

The maths to do: if BNPL lifts your conversion rate by 10% on the 30% of customers who use it, that's 3% more revenue overall — on £10,000, £300 extra revenue against roughly £200 of extra fees on the BNPL-routed sales. Usually worth it, but measure your own take-up: shops where only 5% of customers choose BNPL are paying premium fees for negligible gain. Enable it, watch the adoption rate for a month, then decide with data.

Your one action this week

Pull last month's processor statement, divide total fees by total processed, and write down your effective rate. Then price the same volume on the other two. If the gap exceeds £50 a month, switch — it takes an afternoon, and it's the highest hourly rate you'll earn all year.