Comparing online payment fees for small businesses
SEE THE 2023 UPDATE HERE - https://filnenna.com/blog/2023/11/7/credit-card-payment-fees
THIS INFORMATION FROM JUNE 2021 IS OUTDATED, BUT PRESERVED FOR REFERENCE.
There are a few payment-processing companies offering ways for small businesses to accept credit card and online payments without the traditional monthly fees of a full-blown merchant account.
These services usually charge the seller a fixed-fee per transaction and a percentage of the total sale. I created a simple table to show the fees incurred for different transaction amounts.
The table below shows popular payment services from PayPal, QuickBooks, Square and Stripe, though there are more out there (comment below if there are other services you think I should include).
In general, taking credit cards in person incurs the lowest fees. Invoicing online is slightly more costly, and keying in a card number without the card present incurs the highest fees because it is the riskiest transaction type for the payment processor.
A general trend is that for payments in the order of $50 and under, PayPal Here is the least expensive because there is no fixed fee, only a slightly higher-than-average percentage fee. Square comes a close second. This explains why you see so many coffee shops using Square, because they have lots of sales for relatively small amounts.
For sales in the order of $100 and above, QuickBooks Go becomes the least expensive because they have the lowest percentage fee. This payment service is only available for QuickBooks users (and it integrates with the accounting software seamlessly). PayPal Here and Square follow closely in price.
One important thing is that the fee difference for card-swipe transactions is minimal between companies. For example, the difference between the highest and lowest fees for a $1000 transaction is $3.75. Not a massive amount in the grand scheme of things. Invoicing your client online adds a few dollars to that fee. However, manually keying-in a card number comes with the highest fees.
NOTE: comparing the fees between these companies is only one metric. Other considerations might include customer reviews of the service, the ways you can integrate the service into your workflow and your personal preferences for certain companies compared to others. These companies also have different card readers in capability and price.
