Square and PayPal are popular tools for accepting payments and work well for most small businesses. Both can be used as merchant services in addition to point-of-sale (POS) and ecommerce sales. The primary difference lies in use. Square, with its POS system and add-ons, is best for in-person sales and growing a business. Meanwhile, PayPal’s Zettle is a strong POS system but has a stronger focus on online and international payment processing. It’s also a great addition to other payment processing, unlike Square.
When to use an alternative: If you process over $20,000 monthly, you can get lower rates by using a traditional merchant account instead of Square or PayPal. Our recommendation for cheapest credit card processing is Payment Depot.
Square vs PayPal At-a-Glance
 |  | |
Payment Processing monthly fees | $0 | $0 for Standard account $30 for Pro account |
POS monthly fees | $0 for basic $60 for Pro | $0 |
Virtual terminal | $0 | $30 (needs Pro Plan) |
In-person payment processing fees | 2.6% + 10¢ per transaction | 2.29% + 9¢ per transaction |
Keyed-in fees | 3.5% + 15¢ per transaction | 3.49% + 9¢ per transaction |
Online and invoice fees | 2.9% + 10¢ per transaction | 3.49% + 49¢ per transaction |
ACH fees/e-check fees | 1% (Min $1) | Varies |
Chargeback fees | Waived up to $250/month | $20 |
Custom pricing | Discounts for >$250,000/month in sales | Not listed |
Discounts for nonprofits/education | None | 1.99% + 49¢ per transaction |
Card Reader | Free magstripe reader, $49 for chip and contactless reader | $29 for your first reader, $79 for subsequent readers |
QR codes for contactless payments | 2.9% + 10¢ per transaction | ($10.01 and up) 1.90% + 10¢ per transaction ($10 and below) 2.4% + 5¢ |
Deposit times | 1–2 business days, or same-day for 1.5% fee | Immediately in PayPal account, approximately three business days to a bank account |
Additional sales tools | Loyalty, employee, marketing, appointments, payroll | Customer retention |
Business tools | Working capital, savings account, product photography, business events | Working capital, business loans, credit cards |
Takeaway: Square and PayPal are two of the best credit card processing companies. PayPal’s transaction fees are lower than Square’s and it has wider global reach. Meanwhile, Square has the stronger business tool set for small businesses with in-person sales. (See our article on what Square is and why small businesses love it.)
When to Choose Square
| PROS | CONS |
|---|---|
| Reliable and easy to use | Reports of frozen funds |
| Flexible POS system that grows with your business | Not suited for large businesses |
| Price and software good for solopreneur or SMBs | Not for high-risk businesses |
| High customer satisfaction rate | No discounts for nonprofits, educational institutions |
| Bank deposits in 1-2 days | |
Square is better than PayPal for small businesses that sell products or services in person, whether in-store or via mobile. In particular, it works extremely well for:
- Brick-and-mortar stores
- Farmers market or booths
- Restaurants, food trucks, quick-serve restaurants
- Beauty salons, spas, gyms
- Repair shops
- Smaller B2B businesses
While its online component is not as extensive or popular as PayPal’s, it nonetheless offers a synchronized online store, buttons and links for social selling, invoices, and a virtual terminal for phone orders.
With your free Square account, you get access to all payment options plus a full suite of inventory, sales, customer, and employee management tools. You even get a free magstripe credit card reader upon signup. If you’re looking for a payment solution that lets you start with zero cost, supports all types of sales, and helps you manage your entire business, Square is the best solution for you. However, if as you grow, you need more advanced tools, Square offers over 100 integrations as well as paid additions to its plans—even payroll and banking.
While Square’s free tools are impressive, its payment processing fees are more expensive than PayPal’s (except when it comes to invoices.) Further, Square does not offer discounts to nonprofits like PayPal does. It’s also more limited in the countries it serves.
When to Choose PayPal
| PROS | CONS |
|---|---|
| Takes PayPal, PayPal Credit, and Venmo payments | Bad reputation for frozen accounts |
| Instant deposits to your PayPal account | $20 chargeback fee |
| Easy to sell online or through social | Complex international fee structure |
| Widely used globally | Not for high-risk businesses |
| Discounted fees for nonprofits | E-check only for invoices |
PayPal beats Square when it comes to online or international payment processing. It’s also the best choice as a supplemental payment provider. PayPal’s rates are cheaper, and it has deep discounts for nonprofits.
An IPSOS study commissioned by PayPal of people across the US, UK, Germany, Australia, Italy, Spain, and Brazil showed a 54% increase in consumer willingness to buy when PayPal is available as a checkout option.
PayPal recently acquired a new POS system, Zettle, which has been widely used and well-regarded in Europe, to replace PayPal Here. Like Square, Zettle covers the most important retail functions and has impressive inventory management. However, it lacks some of the tools and integrations, which makes Square so suited for small businesses and the best bet for in-person sales. See our full review to learn more on PayPal’s POS solutions.
However, if your primary sales occur online, then PayPal is the better choice. Widely trusted by consumers and with programmable links and buttons that fit from Facebook to emails to the customer support chat, it’s a versatile system. Read more about the pros and cons of PayPal for small businesses or visit PayPal to create a free account.
PayPal’s and Square’s Reputations for Holding Funds
All credit card processors reserve the right to hold funds or cancel accounts at will. This might happen if you misrepresent your business, have excessive chargebacks, experience a sudden surge in frequency or amount of payment processing, and more.
Both Square and PayPal have a high number of complaints concerning held funds. However, PayPal has the worst reputation of the two, not only for the number of complaints but also for how unhelpful customer support was in resolving the situation. Even so, both providers rate high in customer satisfaction.
Best for Affordability: PayPal
| | |
Payment Processing monthly fees | $0 | $0 for Standard account $30 for Pro account |
POS monthly fees | $0 for basic $60 for Pro | $0 |
Virtual terminal | $0 | $30 (needs Pro Plan) |
In-person payment processing fees | 2.6% + 10¢ per transaction | 2.29% + 9¢ per transaction |
Keyed-in fees | 3.5% + 15¢ per transaction | 3.49% + 9¢ per transaction |
Online and invoice fees | 2.9% + 10¢ per transaction | 3.49% + 49¢ per transaction |
ACH fees/E-check fees | 1% (Min $1) | Varies |
Chargeback fees | Waived up to $250/month | $20 |
PayPal’s rates are generally better than Square’s, even with the changes implemented in August 2021 (which are reflected in this article). Not only is the percentage part of the fees lower, but so is the flat added amount. This makes a big difference with smaller-ticket items. Square may be cheaper on invoices. This is a comparison of US prices. If you do business elsewhere, PayPal has different flat added amounts for different nations. In addition, PayPal offers significant discounts for nonprofits, making it a better choice for many 501(c)3s.
While both offer free POS versions, PayPal requires you to have a paid account for using its virtual terminal, hosted checkout pages, and chargeback protection. Square does not charge for these.
Square’s card readers are cheaper, but PayPal’s simplest model does more. When you start looking at POS systems, the prices are close enough to be negligible.
Best for Mobile: Square
 |  | |
User score on Android | 4.4 - 134,000+ reviews | 3.9 - 38,000+ reviews |
User score for iOS | 4.8 - 271,000+ reviews | 3.7 - 20+ reviews |
First card reader | Free—magstripe only | Swipe, dip, tap—$29 |
Subsequent readers | $49 | $79 |
Full POS on mobile | ✔ | ✔ |
Backend on mobile | ✔ | ✔ |
Offline mode | ✔ | No |
Digital receipts | ✔ | ✔ |
Takeaway: Square’s mobile app is better than PayPal Zettle because it does more. Real-world users also rate Square more highly on iOS and Android.
Why Square Is Better than PayPal for Mobile Payment Processing
Square’s POS system and credit card processing make it the better choice for mobile sales. Optimized so you can easily ring up sales on a smartphone or tablet, the POS system does everything on mobile that it does on desktop, including reports. The offline mode lets you continue to take payments and have them sync when the internet is back. Square took the top spots on our list for best mobile POS and best mobile credit card processing.
Square’s chip and tap reader is simpler than Zettle’s, but costs $49 each.
(Source: Square)
When to Use PayPal for Mobile Payment Processing
Zettle is also on our list for best mobile POS, with PayPal itself among the best credit card processors for mobile, so if you prefer PayPal to Square, you are still getting a great system. This is especially important if you want to offer Pay by PayPal as Square can’t handle this. While you can put the same Zettle account on multiple systems, it does not distinguish locations like Square can.
Zettle’s card reader is more sophisticated than Square’s simple version. To get pin pad capability, you’d need to upgrade Square to its $299 card reader terminal.
Zettle’s card readers cost $29 for the first one, then $79 for subsequent ones.
(Source: PayPal)
Best for POS: Square
| | |
Average user score on third-party sites | 4.68 out of 5 | 3.7 out of 5 |
POS hardware starting at | $299 | $249 |
Register | Excellent | Excellent |
Virtual terminal | ✔ | $ |
Accept PayPal? | Online only | ✔ |
Inventory tracking | Excellent | Very Good |
Clock in/out | $ | None |
Offline mode | ✔ | None |
Appointments/ reservations | In Square Appointments | None |
Restaurant tools | In Retail and Square for Restaurants | Basic |
Customer loyalty | $ | ✔ |
Multi-location management | ✔ | No |
Integrations | 19 POS, 11 restaurants, 10 inventory, 4 rewards, 22 marketing, 35 delivery, 14 booking and scheduling | 9 ecommerce and accounting |
Add-on more features | Advanced POS, Loyalty, Team Management, Marketing, Payroll | Third-party apps |
Takeaway: Square’s versatility and breadth of features for specialty stores put its POS system ahead of PayPal Zettle.
Why Square Is Better Than PayPal Zettle
Square offers POS systems for a variety of industries. For example, while the main version has some tools for ringing up restaurant items, like open checks, its free Square for Restaurants software includes clock-in, table management, and auto 86ing of items. Meanwhile, the salon version, Square Appointments, lets you set up an appointment calendar. Zettle does not have anywhere near this breadth of capability.
Square easily integrates with over 100 apps that are geared toward all levels of business. It even has some for the health industry, insurance, and fieldwork. Plus, it has some add-ons of its own. Meanwhile, we found nine integrations for Zettle.
In addition, Square comes with a free virtual terminal. This is great for taking payments over the phone or managing a mail-order service. PayPal only provides this with its Pro plan, which costs an additional $30 per month.
Square offers hardware and software for retail, restaurants, and spas.
(Source: Square)
When to Use PayPal Zettle
Like the mobile version, Zettle is a good alternative to Square, especially if you want to offer payment through PayPal. The system has a modern interface that users say is simple and easy to work with. The European version of Zettle had a restaurant version, but PayPal does not mention it on its US website.
Zettle does not have cross-border sales capability at this time, but works within a multitude of countries. Square, by contrast, only works in six nations.
What about PayPal Here? PayPal is driving new customers to Zettle. While PayPal’s US site said it would continue to support Here users, there are reports from users in Australia that Here’s service has been canceled.
PayPal is replacing PayPal Here with Zettle.
(Source: PayPal)
Best for Ecommerce and Online Payments: PayPal
| | |
Accept PayPal | ✔ | ✔ |
Social selling | Products, subscriptions, appointments | Products, subscriptions |
Buy buttons | ✔ | ✔ |
Multi-channel (eBay, Amazon) | No | ✔ |
Hosted checkout | ✔ | $ |
Subscriptions/Recurring | ✔ | ✔ |
Ecommerce integrations | 32 ecommerce, 35 delivery, 21 invoicing, 9 ticketing and events | 33 online stores, 18 marketplaces, 17 website design systems, many more not mentioned on the website |
Marketing | Square Marketing, 22 apps | Store Cash programs, Smart payment buttons |
Takeaway: This was close, but PayPal is still the better choice for online sales. It has the greater reach, is accepted by multichannel sales like eBay, and can integrate with a multitude of apps.
Want more customizability? Consider Stripe. Its API and SDK programming are excellent, making it the best for standalone online payments and specialty cases, like monetizing an app. Check out how Stripe compares to both Square and PayPal.
Why PayPal Is Better Than Square for Ecommerce
While Square ties tightly to its POS tools, PayPal can work as an independent payment gateway. This means you can have customers pay by PayPal just about anywhere, even third-party sales sites like eBay. Its ability to handle cross-border payments and make currency exchanges is also important when selling on the worldwide web.
One standout feature for PayPal is its “layaway” or partial payment systems. For example, you can set up high-ticket items with the PayPal Pay in 4 system. This lets customers pay for an item in four installments. PayPal handles this for you. Alternately, it can offer customers credit. Some charges may apply.
PayPal Checkout offers two partial-payment options for your customers.
(Source: PayPal)
In the News
Square has plans to acquire Afterpay, one of the original buy now, pay later (BNPL) platforms. After the acquisition, it’s likely Square will offer more competitive consumer-facing payment plan options that would rival PayPal’s Pay in 4 offering.
PayPal is not as thorough as Square when listing all its integrations, but if you search for a particular ecommerce software, chances are it will list a PayPal integration. However, you can always program your buttons to add to any site. (Square has button programming too.)
When to Use Square for Ecommerce
PayPal charges extra for hosted checkouts. If hosted checkouts is something you want, choose Square. Square also integrates with over 100 applications for online sales. Of special note are all the third-party delivery options. If you run a restaurant, this is a good way to expand your customer base. (Learn more about the best delivery services.) Also, while PayPal has programmable buttons, Square has a website builder to help you design a beautiful online store that integrates with your Square POS system.
Square has an easy-to-use website builder.
(Source: Square)
Best for Invoicing: Square
| | |
Request deposits/down payments | ✔ | Can request partial payments |
Partial payments | ✔ | ✔ |
Automated payment reminders | ✔ | ✔ |
Recurring invoices | ✔ | ✔ |
ACH/E-checks | ACH only: 1%, min $1 | E-checks only: 3.49% + 49¢ |
Takeaway: Both of these systems are good for invoicing, allowing you to create and send custom invoices, handle recurring payments, and send reminders. Square, however, is the cheaper choice.
Why Is Square Best for Invoices
Square is best when you want a completely free invoicing system that accepts ACH transfers. It lets you send multiple estimates, request a deposit, set partial payments by milestones, and more. When paying by ACH, it charges 1% of the invoice, a minimum of a dollar, making it cheaper than PayPal. Otherwise, it costs 2.9% + 10 cents per invoice.
Square lets you make invoices for multiple estimates, split payments, and more.
(Source: Square)
When to Use PayPal
Like Square, PayPal lets you generate attractive, branded invoices for full, partial, or recurring payments. It boasts a 76% paid rate within the first day of sending the invoice. Unlike Square, it accepts e-checks rather than ACH transfers. Regardless of how your customer pays, it charges 3.49% + 49 cents. This makes it more expensive than Square.
PayPal says 76% of its invoices are paid within a day.
(Source: PayPal)
Best for Payment Processing: Square
| | |
Reputation for paying merchants | Not great—many complaints | Bad—most complaints |
Average user score on third-party sites | 4.7 out of 5 | 4.63 out of 5 |
International commerce | 6—also not US territories such as Puerto Rico, Guam, the US Virgin Islands, American Samoa, and Northern Mariana Islands | 100 currencies, 200 + markets |
RChargeback Protection | Free—Up to $250/month | 0.4% on transactions—unlimited for qualifying chargebacks |
Fraud prevention | Machine learning, dispute management, risk manager program ($) | Machine learning, seller protection, dispute management |
Card on File | ✔ | Upgrade |
Partial Payments | ✔ | ✔ |
Accounting software integrations | 4 | 12 |
Administrative integrations | 4 | 24 |
Business Solutions | Working capital, checking and savings account, product photography, business events | Working capital, business loans, credit cards |
Takeaway: Both of these payment processors are secure and easy to use. Taking price out, Square simply beat PayPal on features, especially protection and versatility, as well as having fewer complaints about held funds. Despite PayPal’s popularity and international scope, Square is the better payment processor for small businesses doing domestic sales.
Why Square Is Best for Payment Processing
Square tops our list of best merchant services for 2021. While its fees are higher, it makes up for it in the versatility and tools it includes. Plus, it continues to expand its offerings, not only by introducing a kitchen display system and contactless QR coding, among other features, but also in business services. Most recently, it added banking, making it possible to have checking and savings accounts. You can get your money paid out faster to these accounts as well.
Square also stands out in its chargeback protection. In addition to working with you to manage disputes, it forgives the first $250 a month in chargeback fees. If you are an occasional seller, this is probably more than sufficient, and if not, it’s still a big help. Speaking of help, Square has a risk management program for an additional charge if you are concerned about chargebacks and transaction issues.
Square also offers banking and HR services.
(Source: Square)
When to Use PayPal
PayPal, hands down, is the best choice when selling internationally or when offering PayPal in addition to another payment processor. It also provides seller dispute help and protection. It has a chargeback protection program for physical items at an additional 0.4% per transaction.
An interesting difference between Square and PayPal is that PayPal does not share customer credit card information with you (although you do get data like contact and shipping information). This can be reassuring to your customers, who may not want their card numbers widely shared, but if you need this information, you can pay to access it.
PayPal also has some financial programs for its users. It offers a business credit card and a working capital solution. With working capital, you take an advance on anticipated credit card sales. Then you pay this “loan” back with a percentage of those future sales.
PayPal Working Capital is a viable alternative to credit or loans for some companies.
(Source: PayPal)
Best for Customer Support: Tied
| | |
Capterra user Customer Support-specific review score | 4.4 - 1,700+ reviews | 4.3 - 1,600+ reviews |
JD Power Customer Satisfaction Index Ranking | 870 | 871 |
Live support | Extended hours, chat | Extended hours, message or phone |
Live hardware support | 24/7 phone | Extended hours, message or phone |
Online knowledgebase | Good | Good |
Takeaway: Despite complaints of frozen funds and canceled accounts, customers are overall satisfied with both PayPal and Square customer support. Both also offer good user knowledge bases with an extensive, searchable database of tips, how-to articles, and more. There are a few illustrations and some videos in each as well.
A 2020 study by JD Powers concerning customer satisfaction for merchant services in the US placed PayPal in third place and Square in fourth. Only BB&T Merchant Services and US Bank Payment Solutions beat them out, and they won over most major banks, QuickBooks, and popular services like First Data.
Still not convinced either is right for your business? Check out our list of best merchant accounts for other great alternatives.
Bottom Line
Whether you use Square or PayPal, you are going to get a strong payment processor with a free, fully-featured POS system and online sales tools that include social selling. Both have complaints about held funds but strong customer satisfaction, nonetheless.
While PayPal’s rates are cheaper than Square’s, Square is overall the more robust solution. It has free specialty POS software for restaurants and salons, add-ons for all aspects of business from customer loyalty to payroll, and banking services. It’s the most complete solution at an excellent price. Sign up for a free Square account today.
