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Stripe vs PayPal, which one should I use as a freelancer?

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Updated on:
December 11, 2022
December 11, 2022
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For years, PayPal has made headlines as the most popular choice for freelancers to accept client payments for their submitted invoice templates. Any good business owner should always keep their mind open to other options, however, and Stripe has enough merit to consider it a strong possible contender. In fact, as technology changes to make the business of freelancing easier, PayPal and Stripe have amped up their offerings to remain competitive.

While no one is saying that you have to choose one over the other, it’s wise to know what each brings to the table. Even if you decide to go with both for your invoice processing needs, there is usually a clear winner in most situations. In particular, if you are using client retainers, with monthly recurring payments using such plugins as WooCommerce subscriptions or other similar software, you need to make sure you've worked out all the fees, benefits and drawbacks of using either of these payment gateways. This is because the long-term usage of recurring payments for multiple clients will actually build up over time to significant amounts, and as a freelancer, you'll want to keep your expenses to a minimum.

Here are the facts about Stripe and PayPal for freelancers. Use them to decide how to receive payment for freelance work and which one (or both) is right for you!

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1. PayPal fees explained

PayPal includes everything you’d need to invoice and accept payments as standard for their business owner accounts. The fees for doing business with them varies by country, but for U.S. freelancers, they are 2.9% + $0.30 per transaction. International transactions will have a bit more expense added to them, as PayPal does charge international processing fees and various rates for different countries. You can access their fees and pricing chart to see the exact details for each region/nation.

There is also an additional 3.5% fee for American Express processing (while on a paid plan) and $20 for chargebacks. They charge a monthly flat fee for advanced fraud protection and recurring billing.

PayPal Fees Calculator
Use our PayPal Fee Calculator to better understand how much money you will make.

Freelancers doing smaller, more frequent transactions will obviously feel the fees more than those doing bigger business sales, due to the per transaction fee. PayPal has taken care to think of the smaller sale merchant. They have a “micropayment” fee scale for sales under $10. These sales are subject to a fee of 5.0% of the transaction amount plus a fixed fee based on the currency ($.05 for sales in the U.S.) This means that you can save money on smaller sales, so take this into account before you decide on using PayPal for freelance work.

1.1. PayPal pros

PayPal is widely recognized and accepted. Billing software services have PayPal integrated into their design, so it’s easy to send an invoice and have your payments go directly to your PayPal account. Since PayPal is also a widely used form of consumer payment, you can use the same PayPal account to accept payments, as well as make purchases related to your business (without any additional fund transferring.)

PayPal also has some innovative credit and funding options for small businesses, including their PayPal MasterCard credit account and their PayPal Business Loans. The PayPal Business loan requires no credit checks and is based on past sales. You can apply for and be approved for a line of credit to fund your business, and pay back PayPal directly with a share of each sale until your loan is paid in full (plus fees.)

PayPal’s merchant offerings also offer customer financing. By accepting PayPal payments, your store can invite customers to buy your services via PayPal credit, ensuring you get paid right away. PayPal handles all the financing between customer and PayPal. PayPal users can get their funds transferred to a qualified external account in as little as one business day.

PayPal is also one of the easiest processors to set up. They have a wide range of tools and integrations that play well with most vendor sites and invoicing software solutions. Their ready-made assets and buttons carry the widely-recognized PayPal branding that customers have come to know and trust over the years. Even if you don’t decide to use these tools (or even send an invoice), their easy freelancer payment links make accepting money from clients worldwide easy via PayPal.Me.

1.2. PayPal cons

PayPal, while more affordable for micro-payments, has a few add-on charges that could be cumbersome for the start-up owner, usually charged as a flat monthly fee. These fees could add up to $50 or more for services that are offered standard by Stripe. They also don’t currently accept ApplePay, which Stripe does.

PayPal is also notoriously bad about data portability. As of now, you cannot move all of your customer data over to another payment processor. If you have several recurring retainer charges through them, you’ll have to stop and restart all of those authorizations with a new provider. PayPal won’t let you have that data.

This company usually gets the highest praises for customer support, even though they tend to lean on the side of the client in dispute issues. Their team is usually reachable a number of ways (including phone and online), and their large customer support team has handled most every situation. Some freelancers have also complained that PayPal takes customers away from websites when shopping. Since PayPal payments have to be processed through their own browser window, this can be a confusing process for clients who don’t know to check for a new pop-up window.

2. Stripe explained

So, you're wondering how much does Stripe charge? Like Paypal, Stripe charges a standard 2.9% transaction charge, plus a $0.30 per transaction fee. They don’t give discounts for micropayments, but they also don’t charge monthly fees for things like recurring billing or fraud protection. They currently accept American Express for no additional charge, and they offer ApplePay acceptance.

2.1. Stripe pros

Stripe is more affordable for standard business charges, since they don’t make service providers pay extra for things like fraud protection, American Express acceptance, or recurring billing. There is also no charge for refunds. Stripe lets you take your customer data with you to move to another payment provider. Unlike PayPal, your clients’ payment data is yours to take.

Calculate you Stripe fees using our free calculator.

Stripe doesn’t take clients away from your website or store when they buy. They can enter their info and keep on your site from transaction start to finish. This may provide a more seamless experience for the shopper, and you can keep your branding through the entire buying cycle.

2.2 Stripe cons

Currently, Stripe may be deemed to expensive for the microprocessor. If you are doing services that cost $10 or less, it doesn’t make sense to pay the high per transaction fees offered. Additionally, Stripe isn’t as user-friendly to set up. While it has some very impressive functionality features, the average freelancer who is not working in design or development may need help from a professional to integrate into their invoicing processes. Some sellers have complained that Stripe’s customer service is unresponsive, but the same could be said for PayPal (which has many more customers to care for.)

Overall, Stripe is still relatively unknown to many circles. The trust factor that PayPal has earned just isn’t quite there for Stripe. It’s not unheard of for a freelancer to say that they accept Stripe, and a client to request to send money via PayPal, anyway. PayPal is what most people know, and the transition to something new may be met with difficulty. It also takes a bit longer to get access to your money. Stripe issues funds on a 2-day rolling cycle, so if you request to get your money on a Friday, it may seem like quite a long time to have it show up in your account.

Which is Better For You?

For most freelancers, there is no reason to just pick one processor. Since it’s free to join both, and you only pay fees when you make money, the risk to work with both companies is minimal. Depending on your services, you may find that one works best in some situations, and that you still benefit from having the other as an option for special projects or certain types of clients.

While PayPal is the more widely recognized option, that doesn’t mean you can’t educate clients on the benefits of Stripe. The right choice for you may be a combo of both and a conversation with new clients on why you went the way you did. You always have the choice to invoice clients with your best payment processing option. Feel free to change your methods as needed to keep your business profitable!

Both options are integrated with Bonsai for you to manage your invoicing with ease. Explore that and other features (such as submitting proposals, drafting contracts, and tracking time) by signing up for a free trial.

Craft invoices with integrated payment that get paid faster with Bonsai.
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