
Square vs PayPal: Which Payment Solution Is Better?
Jun 27, 2025 5.5 minutes
Choosing the right payment processor is a decision that affects any business’s bottom line. Two of the most popular options—Square and PayPal—offer free accounts, easy setup, and a slew of features for in-person and online sales.
But how do they compare? Which is best for your business? And what should you consider as you scale?
OPEN A DEDICATED MERCHANT ACCOUNT
Pros of Square
1. Low-Cost Entry and Transparent Pricing
Square is known for its affordable, flat-rate pricing model. There are no monthly fees for basic payment processing—you only pay when you take a payment. This makes it ideal for startups and small businesses that want to avoid upfront costs and complicated contracts.
2. All-in-One Business Tools
Square offers a full suite of business management tools beyond payment processing. These include inventory management, customer directories, sales reporting, invoicing, and even appointment scheduling. For brick-and-mortar businesses, Square’s POS (point of sale) system is intuitive and easy to use.
3. Versatile Hardware Options
Square provides a range of hardware, from simple card readers for mobile devices to fully-fledged terminals and register setups. This flexibility allows businesses of all sizes and types—food trucks, pop-up shops, and traditional retail stores—to accept payments anywhere.
4. No Long-Term Contracts
You can upgrade, downgrade, or cancel your Square account at any time without penalties. This flexibility is especially valuable for seasonal businesses or those testing new markets.
5. Offline Mode
Square allows you to complete sales even without an internet connection, syncing transactions as soon as you’re back online.
*NOTE: Warn your customers if transactions will go through at a later date or time to avoid disputes.
CONNECT WITH A SECURE PAYMENT PROCESSOR
Cons of Square
1. Not Ideal for All Industries
Square’s POS is less specialized than some competitors for certain industries, such as restaurants or high-risk sectors. Businesses in high-risk categories may face account holds or terminations.
2. Flat-Rate Pricing Can Be Expensive at Scale
While Square’s flat-rate pricing is simple, it can become costly for businesses with large transaction volumes or high average ticket sizes. Some competitors offer lower interchange-plus rates for high-volume merchants.
3. Account Stability Issues
Some users report sudden account freezes or holds, often related to Square’s fraud detection algorithms. This can disrupt cash flow and operations.
4. Limited Support
Customer support is not always available 24/7, and some users have reported difficulties reaching support during off-hours.
AVOID ACCOUNT FREEZES OR TERMINATION
Pros of PayPal
1. Security and Protection
PayPal is renowned for its security measures, including encryption, fraud detection, and both buyer and seller protection programs. This helps reduce the risk of chargebacks and unauthorized transactions.
2. Convenience and Ease of Use
Setting up a PayPal account is quick and easy. You don’t need to share your credit card details with every merchant, and funds can be sent instantly to other PayPal users.
3. Global Reach
PayPal is available in over 200 countries and supports multiple currencies, making it a strong choice for businesses with international customers.
*NOTE: Display and charge customers in their local currency to avoid declines and disputes.
4. Integration and Merchant Perks
PayPal is easy to integrate with most e-commerce platforms and POS systems. The PayPal logo adds a layer of recognition for customers, which can increase conversion rates.
5. Recurring Payments
PayPal supports recurring billing, making it a good choice for subscription-based businesses or those with regular invoicing needs.
BETTER RATES FOR INTERNATIONAL SALES
Cons of PayPal
1. Transaction Fees
PayPal’s fees can be steep, especially for businesses with low margins. Fees are charged on every transaction, and international payments can be particularly costly due to currency conversion charges.
2. Account Holds and Freezes
PayPal has a history of placing holds or freezes on accounts suspected of suspicious activity. This can disrupt cash flow and operations, especially for new or high-risk businesses.
3. Limited Crypto Options
While PayPal allows users to buy and sell cryptocurrency, you cannot transfer crypto in or out of your wallet. This limits flexibility for crypto enthusiasts.
4. Customer Service Challenges
Some users report difficulties contacting PayPal’s customer support team and receiving prompt, helpful responses.
DON’T LET PAYPAL DESTROY YOUR BUSINESS
How Square and PayPal Are Similar
– Free Accounts: Both offer “free” merchant accounts with no monthly fees for basic payment processing.
- Pay-as-You-Go: Neither requires long-term contracts or cancellation fees.
- Easy Setup: Both platforms are designed for quick onboarding and minimal technical expertise.
- Mobile and Online Payments: Both support in-person, online, and mobile payments.
- Business Tools: Both provide invoicing, reporting, and basic business management features.
OPEN A BACKUP PAYMENT PROCESSOR
How Square and PayPal Differ
BETTER RATES DESIGN FOR YOUR BUSINESS
Pricing Comparison
Square
- In-Person Transactions: 2.6% + $0.10 per transaction (varies slightly by region).
- Online Transactions: 2.9% + $0.30 per transaction.
- Keyed-In Transactions: 3.5% + $0.15 per transaction.
- No Monthly Fees for Basic Plan: Free plan available; paid plans start at $35/month for advanced features.
PayPal
- In-Person Transactions (US): 2.7% per swipe for mobile/in-store payments.
- Online Transactions (US): 3.49% + $0.49 per transaction.
- Keyed-In Transactions (US): 3.5% + $0.15 per transaction.
- International Fees: Currency conversion fee of up to 4.5%.
- No Monthly Fees for Basic Plan: Free plan available; additional fees for advanced features.
ONLY PAY FOR SERVICES YOU NEED
Why a Dedicated Merchant Account Is Better for Scaling
While Square and PayPal are excellent for startups and small businesses, they have limitations as your business grows.
1. Lower Fees at Scale
Dedicated merchant accounts often offer interchange-plus pricing, which can be significantly cheaper than the flat rates charged by Square and PayPal—especially for high-volume or high-ticket businesses.
2. Greater Control and Stability
With a dedicated merchant account, you have a direct relationship with an acquiring bank. This reduces the risk of account holds or freezes and gives you more control over your payment processing.
3. Customization and Scalability
Dedicated merchant accounts can be tailored to your business needs, including custom reporting, advanced security features, and support for high transaction volumes.
4. Improved Cash Flow
Many dedicated merchant accounts offer faster access to funds and more predictable settlement times, which is critical for growing businesses.
OPEN YOUR NEW MERCHANT ACCOUNT
When to Use Square or PayPal
Square is best for:
- Brick-and-mortar businesses (retail, food service, appointments)
- Startups and small businesses that need affordable, easy-to-use tools
- Businesses that want all-in-one POS and business management
PayPal is best for:
- Online businesses with global customers
- Businesses that need recurring billing or subscription management
- Merchants who want the trust and recognition of the PayPal brand
Why Start with Square or PayPal?
Despite the advantages of dedicated merchant accounts, Square and PayPal are ideal for gathering a few months of processing history. This history is often required by banks and merchant account providers when you apply for a dedicated account. Starting with Square or PayPal allows you to:
- Test your business model with minimal risk and cost
- Build a track record of sales and chargebacks
- Access business tools that help you manage inventory, invoicing, and reporting
Once you have a solid processing history and your business is growing, you can use this data to negotiate better rates and terms with a dedicated merchant account provider.
Conclusion, Which Is Better?
Square and PayPal are both user-friendly payment processors that make it easy for small businesses to accept payments and manage sales. Square excels for in-person and omnichannel businesses, while PayPal is a top choice for online and international sales.
However, as your business scales, the flat-rate pricing and account limitations of Square and PayPal can become costly and restrictive. Transitioning to a dedicated merchant account offers lower fees, greater stability, and more customization—making it the best long-term solution for growing businesses.
For now, starting with Square or PayPal is a smart move. Use these platforms to build your processing history, prove your business model, and access essential business tools. When you’re ready to scale, you’ll be in a strong position to negotiate the best terms with a dedicated merchant account provider.
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