I've used both Stripe and PayPal in real business contexts, and my experience is that the difference matters more than it appears from a quick comparison of the headline rates.
Stripe and PayPal are the two most commonly used payment processors for freelancers and small businesses in the UK. Both are reliable, widely accepted, and well-integrated with invoicing tools. Their fee structures are different in ways that matter depending on how much you invoice and at what transaction sizes. Here is an accurate comparison of what you actually pay.
Fee Comparison
Stripe (UK standard rates, 2024):
- UK card payments: 1.5% + £0.20 per transaction
- European card payments: 2.5% + £0.20
- Non-European card payments: 3.25% + £0.20
- BACS Direct Debit: 1% + £0.20, capped at £4
- Bank transfers (Stripe Invoicing, pay by bank): varies by setup
PayPal (UK business account, standard rates, 2024):
- PayPal balance or bank account payments: 2.9% + fixed fee (approximately £0.30)
- Card payments via PayPal: 2.9% to 3.4% + fixed fee depending on card type
- International transactions: additional 1.5% currency conversion fee applies
- Invoicing (standard): same as above rates for the payment method chosen by the client
For the majority of domestic UK invoicing, Stripe is consistently cheaper. At £1,000 invoice value: Stripe charges £15.20; PayPal charges approximately £29.30. At £5,000: Stripe charges £75.20; PayPal charges approximately £145.30. The percentage gap is consistent across transaction sizes because both have percentage-dominant fee structures at higher values.
Use the Invoice Fee Impact Calculator to model the annual fee cost of your specific invoice volume and values under each processor. The cumulative difference at typical freelance revenue levels is often several hundred to over a thousand pounds per year.
Hidden Costs
The published per-transaction rates are not the complete picture. Several additional costs affect the true fee comparison.
Currency conversion: PayPal applies a currency conversion markup of approximately 3 to 4% above the mid-market rate when receiving or sending international payments. Stripe's currency conversion is typically 1.5% to 2% above mid-market. For freelancers with international clients, this difference can be material — a £3,000 invoice paid from a US client in dollars involves a significant currency conversion either way, and the difference between processors at this stage can exceed £50 on a single transaction.
Dispute and chargeback fees: Both processors charge for disputed transactions. Stripe charges £15 per dispute (refunded if you win). PayPal's dispute process is more complex and the outcomes less predictable, with potential for funds being held for extended periods during investigation. For most freelancers the frequency is low, but it is worth knowing the policy before it becomes relevant.
Payout timing: Stripe pays out on a rolling two-day schedule (funds received today are available in two business days). PayPal holds funds in a PayPal balance by default, with bank transfer taking one to three business days from the point of initiating the withdrawal. For cash-flow-sensitive freelancers, the extra day or two in PayPal's payout cycle is a minor but real consideration.
Refund fees: Stripe does not return the fixed fee portion (£0.20) on refunds — the percentage is returned but the fixed component is retained. For high-refund businesses this adds up; for most freelance services it is negligible.
Volume Impact
The fee gap between processors scales with revenue. At £40,000 annual UK card revenue:
- Stripe (1.5% + £0.20 × 40 invoices): approximately £616
- PayPal (2.9% + £0.30 × 40 invoices): approximately £1,172
- Annual difference: £556
At £100,000 annual revenue:
- Stripe (1.5% + £0.20 × 80 invoices): approximately £1,516
- PayPal (2.9% + £0.30 × 80 invoices): approximately £2,924
- Annual difference: £1,408
Neither platform is optimal for every business. PayPal has advantages in consumer familiarity (some clients are more comfortable paying via PayPal), in certain international markets where PayPal trust is higher, and in one-off payment scenarios where the client does not want to enter card details. For ongoing professional invoicing to business clients, Stripe's lower domestic rate and more transparent fee structure typically make it the better choice.
The most cost-effective approach for most freelancers: use Stripe for regular business invoicing, offer bank transfer as an option for retainer clients, and reserve PayPal for clients who specifically request it or for low-value international transactions where its existing balance functionality is useful.