Stripe’s advanced API technology makes it a top choice among business owners seeking to integrate the payment platform with websites and in-store checkouts. But that level of payment technology comes with Stripe processing fees to be aware of, including credit card fees, ACH debit fees, and more.
Selecting a payment processor for your small business is a big decision and fees play an important role in that choice. Here's what you should consider when reviewing Stripe.
- Stripe is a customizable payment processing platform used by Fortune 500 companies and small businesses.
- Stripe charges various fees based on transaction type, each of which comes out of the customer's payment before being deposited in your account.
- Processing fees may be considered a deductible business expense if reported to the IRS.
Stripe's Business Plan Options
Handling over 13,000 requests per second, Stripe is a popular platform for companies that want a reliable payment service provider. It has also built transparent pricing strategies so customers know the fees they'll encounter.
Stripe has two payment plans. Its Integrated Plan is perfect for small businesses who want a pay-as-you-go option. The Customized Plan is best for companies with large payment volumes.
Contact the Stripe Sales team if you operate with a unique business model or have higher sales volume than similar businesses in your niche. The Integrated Plan is a quick-to-start option, but the Customized Plan may fit your needs better.
Stripe Payment Processing Fees
All payment processors come with different processing fees for the types of transactions your business does. However, Stripe puts the business owners first when creating a pay-as-you-go plan that outlines small business payment processing fees.
Here is a shortlist of the most common fees you'll see with Stripe’s Integrated Plan:
Accepting Payments Online
Stripe has an online payment processing fee of 2.9% + 30 cents per successful card or digital wallet payment. ACH debit, ACH credit, and wire transfers carry a fee of 0.8% per transaction with a $5 cap.
It is crucial to understand how payment processors charge different fees for international cards. Stripe’s 2.9% + 30 cents is a flat fee across only domestic card transactions. You’ll pay a 1% fee for international cards and a 1% fee for currency conversion.
Two additional features included with the Integrated Plan for online payments are the “3D secure authentication” and “card accounting updater.” The first feature verifies a customer's identity before purchase, while the second automatically updates the saved customer's card information, protecting your business and securing customer satisfaction.
Accepting In-Person Payments
Stripe’s fees for in-person payment (debit and credit cards, including Google and Apple Pay), cost 2.7% plus a 50-cent fee per transaction.
To accept in-person payments, you’ll need to purchase Stripe’s $59 BBPOS “Chipper” battery-powered card reader. The company is developing a $249 smart reader with a five-inch touchscreen that has yet to be released.
How Does Stripe Charge Its Fees?
As a business owner, you already need to keep up with enough small business taxes and deductions. Stripe has considered you with its charging process for the Stripe fees listed above.
The fee amount is immediately reflected as withdrawn upon the transaction being successful. By the time the money hits your account, Stripe has deducted the fee from the total.
Stripe users have increased their revenue by 6.7%, even with the fees, according to a Stripe white paper.
Understand the Impact of Refunds
Stripe fees may become a nuisance when your customers have refunds.
Let’s say a customer is unhappy with the product they purchased using Stripe payment processing. Stripe has already deposited the funds minus the fees into your account, but the customer requests a full refund.
You would be responsible for refunding the total amount, including the lost cost in the Stripe fees. That means with each returned item comes a negative profit, assuming you don’t charge a fee for returns.
To cancel your Stripe account, you simply need there to be no existing balance before closing out.
The Tax Impact of Stripe's Payment Processing Fees
As a business owner, it's essential to understand how Stripe’s fees impact your bottom line and taxable business revenue. Simply put, you must report to the IRS the total amount of each sale before the fees are subtracted.
Stripe-Issued 1099-K Forms
Stripe provides a 1099-K form at the end of the calendar year. You need to meet Stripe's specific criteria to receive a 1099-K:
- More than 200 charges in the previous calendar year
- More than $20,000 in gross volume in the previous calendar year
- Account is U.S.-based or owned by a U.S. taxpayer.
The 1099-K shares your total sales activity for the year, but you can access this information through your account dashboard. Total sales activity would include the cost of each sale before fees, but you may be able to deduct the cost of fees as a business expense if the IRS considers them “ordinary and necessary.”
Alternatives to Stripe
Stripe isn’t the only payment-processing option you have for your business. Alternative companies include:
- PayPal (3.49% + 49 cents per transaction)
- Square (2.6% + 10 cents for standard card payments)
- Apple Pay (fees not disclosed)
Frequently Asked Questions (FAQs)
What does Stripe charge for online payments?
The Stripe fees for an online payment depend on the method your customer uses to complete the transaction. A credit or debit card and digital wallet payment have a 2.9% fee plus 30 cents per successful charge. An ACH payment or transfer costs 0.8% with a $5 cap. An international card will be an additional 1% and another 1% if currency conversion is needed.
For taxes, do I claim the full total before Stripe's fees or after?
You must claim the full total of your sales before Stripe's fees when reporting your business information at tax time. It is crucial to confirm that your reported totals are before fees so you aren't misreporting income. However, fees may be considered a deductible business expense, so make sure to share that information with your accountant.
Is Stripe free to use?
Stripe has no setup fees for the Integrated Plan and can be used immediately upon making an account. Yet, the platform can't be considered free to use, as each transaction will have a fee deducted before being deposited in your business account.