Square VS PayPal: Which Is Best For Small Business?
Square and PayPal both have mobile card readers, but there’s a lot more to both platforms. This Square VS PayPal comparison will help you understand which is right for you.
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Table of Contents
Square VS PayPal: At A Glance
PayPal and Square are two of the most prominent names in payment processing for small businesses. While they have similar payment processing features, they differ significantly when it comes to eCommerce and POS features.
Most merchants will find Square offers an all-in-one experience that works out of the box. Square offers an impressive feature set and free add-ons. It also has industry-specific features for restaurants, retail, and service businesses that rely on appointments. It has a range of proprietary POS hardware options, including Square Stand, Square Register, and Square Terminal.
You’ll also find free eCommerce tools, including a free virtual terminal and buy now, pay later (BNPL). Square generally charges less for online payments, but has more tools for in-person sales. However, Square isn’t ideal for international sellers or high-risk businesses (with the exception of CBD). And as with other payment services providers, account stability issues may pop up.
PayPal offers a choice of integrations to build a custom solution tailored to merchants’ needs but has fewer capabilities on its own. PayPal is a better option if you have international sales. It has extensive integrations and solid developer tools. It is also slightly cheaper than Square for in-person transactions.
Similar to Square, PayPal is not for high-risk sellers, and also has account stability issues, as it’s also a PSP. Online processing fees are also higher than Square’s, especially for businesses with small average ticket sizes. PayPal also adds in charges for a virtual terminal, chargebacks, and recurring billing, which could drive up your costs.
Where Square Wins
- Array Of POS Tools Available: Square is far more than just a payment processing company. If you also need point of sale tools, Square has you covered with software options that include payroll and eCommerce capabilities.
- Offline Payments: Square lets you accept payments without an internet connection, an area where PayPal has lagged.
- Multi-location management: Square gives you the ability to use its services across multiple devices and locations, although its fees can add up in these instances
Where Square Falls Short
- Fund Holds: This is a common complaint with some Square users. While there has been some improvement over the years, there are still instances of holding fees or freezing accounts, particularly if you’re a high-risk merchant.
- High fees for high-volume sellers: Square’s rates are industry standard, but they can add up if you sell at a high volume and are higher than PayPal’s for in-person payments.
- Not Best For International Selling: Square is slowly expanding its services, but it is still not the best processing option if you are selling overseas.
Where PayPal Wins
- In-person PayPal Payments: As you would expect, PayPal accepts in-person PayPal payments, while Square can only offer this feature through online payments
- Strong Developer Tools: PayPal has an open API and lets you customize your own experience if you’re tech-savvy
- Discounted rates for non-profits: PayPal is an excellent choice if you run a non-profit, as it comes with lower processing fees.
Where PayPal Falls Short
- Online Payments: While PayPal is excellent for person-to-person payments, its online processing fees are higher than Square’s.
- Average Customer Support: Reviews of PayPal’s customer support are hit and miss, with some customers complaining about long wait times and unhelpful reps.
- Additional Fees: PayPal’s costs can add up if you need things like a virtual terminal or if you have chargebacks, as PayPal has fees for both.
Square VS PayPal: Pricing Comparison
| Square | PayPal | |
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| Monthly Fee | $0 - $149/month | $0/month; $5/month for Payments Advanced; $30/month for Payments Pro & the virtual terminal |
| Online Transactions | 2.9% - 3.3% + $0.30 | 2.99% + $0.49 for standard credit & debit transactions; 3.49% + $0.49 for PayPal & Venmo payments |
| In-Person POS Transactions | 2.4% - 2.6% + $0.15 | 2.29% + $0.09 |
| QR Code Payments | 2.9% - 3.3% + $0.30 | 2.29% + $0.09 |
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| Chargeback Fee | None | $20 per chargeback |
| Recurring Invoice (Subscription) Billing | $0/month – $49/month; 2.9 - 3.3% + $0.30 | $10/month on Payments Advanced & Payments Pro plans; 3.49% + $0.49 per invoice |
| Keyed/Virtual Terminal Transactions | 3.5% + $0.15 | 3.49% + $0.09 for keyed-in mobile & in-store transactions; 3.09% + $0.49 for virtual terminal transactions |
| Micropayments (For Transactions Under $10) | No available micropayment rate | 4.99% + $0.09 per transaction (only available to certain merchants) |
Regarding PayPal vs. Square fees, the condensed story is that most merchants will save money on online transactions with Square, while PayPal charges less for in-person transactions. PayPal’s complex pricing structure means that your per-transaction fee will vary by several factors.
As for monthly fees, both Square and PayPal offer free plans in which you only pay for processing and any POS equipment you need. While both Square and PayPal offer packages with monthly fees, Square’s premium plans give you advanced POS functionality, while PayPal’s premium plans give you advanced eCommerce features like customizable checkout options, a virtual terminal, and recurring billing (the latter two of which come free with Square).
A few caveats:
- The $20 per chargeback fee PayPal charges merchants per chargeback is waived if the merchant enrolls in Chargeback Protection, but this means you’ll be charged an extra 0.4% to 0.6% for all transactions.
- Only certain merchants are eligible to enroll in PayPal’s Micropayments plan, which automatically charges you a low fixed fee for each transaction under $10. Periodically, I have seen reports from merchants claiming to have been denied the ability to enroll in this plan.
- The pricing listed here is US-specific.
- To list every possible charge would be beyond the scope of this article. We have additional guides that take you through Square pricing and PayPal pricing in greater detail.
Square VS PayPal Features
| Square | PayPal | |
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| Mobile POS | Square POS | PayPal Point of Sale |
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PayPal Card Reader: Contactless (NFC) + chip + PIN |
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| Inventory Count | (only with PayPal Point of Sale) | |
| Low Stock Alerts | (only with PayPal Point of Sale) | |
| Item Variants | (only with PayPal Point of Sale) | |
| Downloadable Reports | (only with PayPal Point of Sale) | |
| Advanced Inventory Features | (with premium iPad POS subscription) | |
| Hosted Website | ||
| eCommerce/POS Inventory Sync | (depends on eCommerce platform) | |
| Unlimited Products | Depends on the eCommerce platform | |
| Buy Buttons | ||
| Payment Links | ||
| Virtual Terminal | (available for free) | (available with PayPal Payments Pro) |
| Recurring Payments | (available with a recurring subscription fee) | |
| Invoices | ||
| Invoice Templates | ||
| Job Quotes | ||
| Gift Cards | (only with PayPal Point of Sale) | |
| Social Selling | ||
| CBD Sales |
While PayPal Point of Sale is a step up from PayPal’s previous mPOS offering, it simply can’t match the feature depth of Square’s POS system, which provides specialized features for retailers, restaurants, and offices that need appointment scheduling.
Smaller mobile merchants who don’t require specialized features will find the PayPal Card Reader to be a very capable device. What’s more, PayPal’s in-person transaction fees are a bit lower than Square’s.
For full feature rundowns, our PayPal review and our Square review will take you through every facet of these two payment platforms.
PayPal VS Square: Which Is Best For My Business Needs?
We’ve examined each facet of both contenders in the Square vs PayPal debate, but which of these services best suits your business needs?
Choose PayPal If…
- You sell mostly online. With features such as multichannel selling (eBay, Amazon, etc.), cryptocurrency payment acceptance, and, most importantly, support for international sales, PayPal has Square beat.
- You want the brand recognition of the PayPal name. Consumers are simply more likely to go through with an online purchase when they see the PayPal name.
- You deal in low-ticket or occasional in-person sales. PayPal doesn’t offer the same degree of POS services as Square, but PayPal’s in-person transaction fees are lower than Square’s, and PayPal Point of Sale is well-suited to smaller merchants.
- You want to accept in-person PayPal payments. With Square, you can accept PayPal payments online but not in person.
- You already have a payment processor but want to add a supplemental payment option for online sales. Only PayPal can fill this role.
Choose Square If…
- You sell primarily in person. Square offers four different full POS systems along with smart terminals and advanced industry-specific features. PayPal offers a POS app, a mobile card reader, and a smart terminal, but with fewer features and no industry-specific options.
- You’re a small domestic (US) online seller with a very small average ticket size. When your average transaction size is very low, the difference between PayPal’s and Square’s fixed fees can be significant.
- You don’t have an online store and want to get one up quickly. With Square Online, you can have a basic eCommerce website up and running in very little time, all for free. For advanced features, however, you’ll need a paid Square Online subscription.
- You want the potential to scale premium add-ons and integrations easily. Compared with PayPal, Square has more third-party software integrations and more in-house add-ons, both free and paid.
- You have a CBD business. Though neither Square nor PayPal accepts businesses typically considered high-risk in the processing industry, Square carves out an exception for CBD businesses. PayPal does not.
Square VS PayPal Comparison: Final Verdict
While we won’t proclaim Square as the unequivocal winner for every small business use case, its robust and ever-improving feature set just can’t be denied. Over the last several years, we’ve seen Square’s features and services expand and improve, which speaks volumes about the overall quality of the platform. You won’t quite find an equivalent set of features, freebies, and business-scaling tools with PayPal, particularly if you sell in person and need robust POS functionality.
However, if you need support for international sales and want the brand recognition of one of the most popular names in online payments, PayPal may better satisfy your business needs. Plus, it’s always easy to add PayPal buttons to your online store to provide an additional checkout option. With over 400 million PayPal users worldwide, many customers prefer the convenience of clicking that familiar PayPal button at checkout.
Along with their respective feature and service offerings, both Square and PayPal offer the freedom to change processors without being bogged down by a binding contract, which is an important consideration for growing businesses with evolving needs.
For a broader look at the current payment processing scene, check out our overall rundown of the best credit card processing companies.
Jason Vissers
Expert Contributor at Merchant Maverick
Jason has been writing about small business software platforms, services, and financing since 2015. Jason’s expertise has been featured in Yahoo Finance, Time/NextAdvisor, Home Business Magazine, CreditCards.com, GoBankingRates, TheLadders.com, and other publications. He has a bachelor’s degree in Political Science from San Diego State University.
View Jason Vissers's professional experience on LinkedIn.
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