Square vs. PayPal: Full Review and Comparison

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This article has been reviewed and deemed factual by our content auditor with 8 years of banking experience.

Article Approved By Banking Expert

This article has been reviewed and deemed factual by our content auditor with 8 years of banking experience.

Finding a reliable and affordable payment system is critical for the success of your business. Being able to quickly and easily process a wide range of payment forms is going to help you deliver a better customer experience, and it will also make it easier for you to manage your business’ finances.

Square and PayPal are the leaders of the online and in-person POS world. But what’s the difference? Which is best for your business?

To help you answer these questions, we’ve done a comparison of the two, and here’s what we found:

  • Square is best for businesses specializing in in-person sales and that rely only partially on eCommerce
  • PayPal remains the best solution for eCommerce and other online-only businesses
  • Square has superior hardware options and it offers many additional services, such as marketing and payroll management, making it a great option for businesses looking for help in more than just processing payments.

To learn more about what sets these services apart and which is best for your business, here’s our full review:

 

What Do Square and PayPal Have in Common?

No matter which one you choose, Square or PayPal, you’ll be able to do the following things:

  • Process all forms of credit (swipe, dip, tap, keyed entry, etc.)
  • Record cash transactions
  • Apply discounts as well as full and partial refunds
  • Maintain an item library that includes product descriptions, images, and variants.
  • Use barcodes and SKU’s
  • Issue receipts through email and SMS
  • Manage a cash drawer
  • Send invoices and receive payments.

As you can see, in terms of core services, both Square and PayPal offer similar things. But once you get past basic functionality, they begin to differentiate themselves. Let’s jump into more detail about each one.

 

How We Conducted This Review

To accurately compare and contrast Square with PayPal, we looked at the following criteria:

  • Hardware
  • eCommerce integration
  • In-Store Processing
  • Service Fees
  • Additional Features/Services

Comparing Square and PayPal

Let’s dig into our review, starting with taking a look at the various hardware each service provides.

 

Hardware

Both Square and PayPal offer different hardware options for processing payments. Overall, Square has more options. Square still offers a free magstripe reader to users, but more advanced pieces of hardware are available. Square’s basic chip readers are slightly cheaper, but not by much.

With Square, your options are:

  • Square Reader for magstripe (Free). Allows you to swipe all major credit cards without limitations. Cost: free
  • Square Reader for chip cards ($35). Gives you the ability to accept both credit and debit card transactions
  • Square Reader for contactless and chip ($49). Accept EMV chip cards and NFC payments such as Apple Pay.
  • Square Stand for contactless and chip ($199). Essentially an iPad stand, the Square Stand comes with a chip Reader and a dock. It swivels so that you can easily accept signatures, and you can also hook it up to your cash drawer, receipt printer, and more. If you don’t already have an iPad, you can buy one from Square at the time of checkout.
  • Square Terminal ($399 or $37/month for 12 months). The Square Terminal is a cordless device that can process swipe, dip, and tap payments, as well as print receipts. It has a slightly different fee schedule (see below), but its main advantage is the convenience of being able to process all types of payments no matter where you are.
  • Square Register ($999 or $49/month for 24 months). A custom Android tablet that has additional inventory and security features, the Square Register also has a different fee structure (see below). This makes it a good option for businesses processing lots of large transactions.

With PayPal, your options are:

  • Mobile Card Reader ($15). A magstripe reader, this device is exactly the same as the Square Reader for magstripe. But one big difference with PayPal’s reader is that it withholds payments of more than $500 for as much as 30 days to verify them, which could delay access to your funds.
  • Chip and Swipe Reader ($24.99). This is the best option from PayPal as it doesn’t limit your account (a result of the increased security from chips), and it allows you to process both Tap and Swipe payments.
  • Chip and Tap Reader ($59.99). Use this to accept all types of payment, such as chip, swipe, and tap, as well as other contactless payment methods such as Google Pay or Apple Pay. Upgrade to the Chip and Tap Bundle ($79.99) to get a charging stand with it, but you can charge the Chip and Tap Reader with a regular USB cord, so this might not be necessary.
  • Chip Card Reader ($99.99) This device allows to accept all forms of payment, but it comes with a keypad so that you can also process PIN transactions.

PayPal also offers you the chance to buy pretty much any other piece of POS hardware you can think of, such as stands for your devices, receipt printers, and cash drawers.

However, as you can see, Square has the slight edge in this category. The free magstripe option is great for businesses looking to keep expenses down, and the Square Reader for chip and contactless is slightly cheaper than PayPal’s product.

 

Service Fees

The fees for each service are very similar, which means you’ll probably wind up making your choice more on features than price. However, some of the different hardware options offered by Square allow you to access different fee structures, and it’s important you know this before you make a decision.

But first, we should point out that neither service charges a monthly service fee for its basic services. Instead, fees are charged on a per transaction basis.

Plus, there are no contracts or commitments required for either service.

For PayPal, the per-transaction fees are:

  • Swiped/dipped/tapped transactions: 2.70% (For every $100, you receive $97.30)
  • Keyed transactions: 3.50% + $0.15
  • Online and invoiced transactions: 2.9% + $0.30

With Square, the per-transaction fees are:

  • Swiped/dipped/tapped transactions: 2.75% (For everyone $100 you earn, you take home $97.25)
  • Keyed transactions: 3.50% + $0.15
  • Online and invoiced transactions: 2.9% + $0.30

Here are the fees should you decide to use one of Square’s more advanced pieces of hardware or one of their specialized services:

  • Square Terminal and Square for Restaurant: 2.6% + $.10 (For every $100 in sales, you take home $97.40)
  • Square Register and Square for Retail: 2.5% + $.10 (For every $100, you earn $97.30)

As you can see, the difference in fees is nominal. Only when you start accepting a high volume of transactions will it make much of a difference.

For example, if you process 500 transactions of $20 each, that’s $10,000 in sales. The fees for each service would be:

  • PayPal: $270
  • Square: $275
  • Square Terminal and Square for Restaurant: $310 ($260 in fees plus 500 x $.10)
  • Square Register and Square for Retail $300 ($250 in fees plus 500 x $.10)

In this instance, there is only a $5 difference between both Square and PayPal’s services.

But you may be wondering what you’re getting by paying extra for the Square Terminal and the Square Register.

With the Square Terminal, you’re paying for:

  • Convenience. The Square Terminal is a cordless, handheld credit card processing machine that allows you to accept all types of payments, as well as print receipts, on the spot.
  • Security. Because the Square Terminal uses Square’s proprietary software, it’s considered more secure.
  • Better fees for large transactions. If in the example above you instead processed 50 transactions of $200, then your total fees using the Square Terminal would be $265 as compared to the $270 that you would be charged for using the normal Square reader.

When you get the Square Register, you’re paying for:

  • Convenience. The Square Register comes completely ready to use, so all you need to do is plug in and go. The stand is built to swivel, so you can easily spin the device around to collect signatures.
  • Security. The Square proprietary software will keep you safe and secure.
  • The best fees for large transactions. Continuing our example from above, Square register fees would total $255 if you processed 50 transactions of $200 each.
  • Additional device capability. The Square stand comes equipped with a USB hub so that you can hook up your receipt printer, cash drawer, and even your computer.

In-Store Processing

Square has a slight edge over PayPal in terms of hardware, and the two services are a wash in terms of fees, but what about the in-store experience?

With either service you can:

  • Accept all forms of credit as well as cash. However, PayPal allows you to also accept PayPal payments and checks, something Square does not.
  • Manage your register
  • Associate purchases with a specific customer, information you can use for sales and marketing purposes, and which you can use to build loyalty and rewards programs.

However, Square pulls ahead in that it works as a full-fledged POS system. More specifically, it allows you to:

  • Track inventory
  • Set low-stock alerts
  • Bulk-upload your inventory
  • Adjust for returns, damage, and theft.
  • Continue processing payments offline. If something happens with your network connection, you don’t need to stop what you’re doing.

If you subscribe to “Square for Retail,” then you can do this across multiple locations, but if you have just one store, you can do all of this with the basic version of Square.

One thing PayPal does do slightly better, however, is that it makes funds available the same day through your business’ PayPal account. With Square, you need to wait for the next day to access the money you’ve collected. Same day deposits come with a 1 percent processing fee.

eCommerce Integration

Nowadays, being able to process payments online is just as if not more important as being able to process them in-person. This is what PayPal was built to do, and it remains the best option for businesses operating mostly or entirely online.

Here’s a summary of the different eCommerce integrations available from both PayPal and Square:

  • PayPal can easily be integrated into almost any eCommerce platform. Square integration is also popular, but you will have fewer options than with PayPal.
  • Using PayPal allows you to accept PayPal payments. Square does not give you this option.
  • Square allows you to make your own eCommerce website, a feature PayPal doesn’t offer. But the site you can create is rather primitive and offers few customizations. It will probably not meet the standards of most eCommerce business owners.
  • Both Square and PayPal allow you to send and collect invoices online. You can design invoices using your company logo for a custom and more professional look.

Overall, PayPal ends up being a better option for processing online payments largely because it’s become such a household name. Millions of people around the world use PayPal and offering your customers the chance to use it as a payment option can be a real advantage.

Additional Features/Services

When it comes to processing payments, Square and PayPal are very similar. We’ve established PayPal has a slight edge in eCommerce whereas Square is better for traditional brick-and-mortar businesses who may also operate online.

However, something else that sets Square apart is its additional services.

Here’s a quick list of what Square offers, as well as the fees associated with these services:

  • Square for Retail: Allows you to take advantage of a different fee structure while also giving you additional inventory, catalog, customer, employee, and customer tools designed specifically for a retail business – Starts at $60/month
  • Square for Restaurant: Does something similar as Square for Retail, except, as the name suggests, Square for Restaurant is designed to help businesses in the food service industry.
  • Loyalty Programs: Create campaigns designed to encourage customers to return – $45/month
  • Marketing: Design and implement email and Facebook campaigns with targeted customers – Starting at $15/month
  • Employee management – Handle onboarding, eLearning, communications, and more – $5/month per employee
  • Payroll – let Square deal with your payroll operation – Starting at $5/month.

As you can see, Square offers are a variety of different services to help you run your business better, but they can quickly add up and become expensive. However, it’s still nice to have the option.

PayPal doesn’t offer any of these additional services on its own. Instead, it makes use of partnership relationships to provide additional features, such as:

  • Vend. Use this if you want to use PayPal for your retail store. It offers powerful inventory management, eCommerce and customer loyalty solutions.
  • Lavu. This is a great option for restaurants
  • io. Designed for both retail and restaurant businesses, this is a great service for those dealing with a high number of daily transactions.

Others include Talech, Brightpearl, and TouchBistro. Overall, these options are great, but Square’s services are all integrated, which can make it easier to manage.

Conclusion

Both Square and PayPal are great options for processing your business’ payments. The fees are similar, and both allow you to take in the most commonly used forms of payment.

For those who rely most on in-store sales, and who are looking for help in other areas of their business, such as inventory management and marketing, Square is probably the best option.

However, for eCommerce businesses operating mostly online, PayPal is still going to be your best bet. It’s a household name amongst online shoppers, and it can easily be integrated into whichever eCommerce platform you’re using.

We hope this review has helped you clarify which service is best for your business, and please do not hesitate to reach out with any questions or concerns.

 

 

 

Ryan Friend

Ryan Friend

Ryan Friend

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