Understanding Payment Processing Fees
Every online payment goes through a processor that takes a cut. Whether you use Stripe, PayPal, or Square, the fee structure is similar: a percentage of the transaction plus a small fixed fee. Understanding these fees is essential for pricing your products and services correctly.
Fee Structures (2024–2025 US)
- Stripe: 2.9% + $0.30 (online payments)
- PayPal: 3.49% + $0.49 (standard), 2.99% + $0.49 (PayPal Checkout)
- Square: 2.9% + $0.30 (online), 2.6% + $0.10 (in-person)
On a $100 payment through Stripe, the fee is ($100 × 0.029) + $0.30 = $3.20. You receive $96.80.
Pro Tip: The effective fee rate is higher on small transactions. The $0.30 fixed fee on a $5 transaction is 6%! For microtransactions, consider processors with lower fixed fees or batch small payments.
Passing Fees to Customers
Many sellers want to receive exactly $100 and charge the customer $100 + fees. But you can't simply add 2.9% + $0.30 to $100, because the fee is calculated on the higher amount. The correct formula:
To receive $100 on Stripe: ($100 + $0.30) ÷ (1 – 0.029) = $103.33. The fee on $103.33 is exactly $3.33, leaving you with $100.00.
Watch Out: Some card brand rules (Visa, Mastercard) restrict or regulate surcharging customers for credit card fees. Check your processor's terms and local laws before adding a "processing fee" line item. Many businesses instead build the fee into their base price.
Reducing Your Processing Costs
- Negotiate volume discounts: Processing 50K+/month? Ask for custom rates (interchange-plus pricing).
- Accept ACH/bank transfers: Stripe ACH is 0.8% (capped at $5). Great for large invoices.
- Use in-person rates: In-person card readers have lower fraud risk, so fees are 0.2–0.5% cheaper.
Use the calculator above to see your exact fee for any amount, or flip to "charge" mode to find the right price that nets you your target amount.