Stripe is one of the most appreciated online payment processors. It is fast and stress-free to implement and relatively cheaper compared to boot! Stripe charges reasonable processing rates and quite small amounts in added costs.
Stripe works with a flat rate pricing method. So, no matter the card’s cost, you pay 2.9% + $0.30/transaction as long as you do under $1million in sales volume per year. Also, businesses with monthly sales volume above $80,000 are eligible for enterprise volume discounts.
If your company is a nonprofit with a 501c3 status, you are also eligible for reduced rates. The standard processing rate for nonprofits is 2.2% + $0.30/ transaction, except for American Express payments, which still incur a 3.5 % fee per transaction. Also, non-profit organizations won’t incur processing fees for their first $15,000 in sales volume.
Stripe is an internet payment processor used by small and big businesses alike. Stripe enables you to send or receive payments over the internet. Stripe was founded 11 years ago, in 2010, by John and Patrick Collison as a financial services company to help businesses and organizations send and receive money online.
Now, it has branched into software, too, with its APIS (Application programming interfaces). This is used in various e-commerce websites to manage revenues, keep fraud at bay and take business internationally. However, currently, Stripe doesn’t process payments for offline stores.
Stripe payment processing services are gaining in popularity. It’s especially a favorite among the code-savvy teams because they can leverage the free API to create a unique e-commerce experience. Stripe, like PayPal and Braintree, apply a flat charge pricing as opposed to interchange pricing.
Flat Rate vs. Interchange Pricing
Flat Rate pricing is becoming a popular trend among online payment processors. It is a simple and attractive way of charging payment processing costs as opposed to interchange pricing.
With flat charge pricing, your payment processing fee is simply a proportion of the full transaction value plus a small fixed fee per transaction. On the other hand, the interchange pricing model is a bit complicated. The per-transaction cost charged depends on the interchange fee set by card networks and a fee charged by the credit processor, usually measured in basis points. Flat rate pricing is easy to understand; merchants can easily tell the cost of processing their payments.
But that’s just about the limit of the advantages of a flat-rate payment processing fee structure. In fact, while a flat-rate pricing structure is simple and attractive on the surface, it is expensive compared to interchange pricing. A flat rate applies a fixed rate to all merchants, which means those with small transactions pay more than they should.
How much can you expect to pay Stripe for credit card payment processing?
To help you understand how Stripe calculates its fees, here are a few scenarios involving three merchants with different transaction volumes assuming a $100 average transaction size.
- Merchant X monthly transaction volume: $100
- Merchant Y monthly transaction volume: $1000
- Merchant Z monthly transaction volume: $10000
Admin commission: 5%
If the merchants were all put on the standard 2.9% + $0.30/transaction flat rate with no discounts for high volume sales, their Stripe Costs would be as follows:
- Merchant X: 2.9% of $100 +0.30 of $100 = $3.20
- Merchant Y: 2.9% of $1000 +0.30 of $1,000 = $29.30
- Merchant Z: 2.9% of $10000 +0.30 of $10,000 = $290.30
After subtracting the admin commission and stripe fees, each party will get the following:
- Merchant X: $100-$3.20-$5=$91.80
- Merchant Y: $1000-$29.30-$50=$920.70
- Merchant Y: $10000-$290.30-$500=$9209.70
What’s meant by the admin commission fee?
For every successful transaction in your online marketplace, the market admin will collect a percentage of its value as a fee. It’s charged on every successful transaction that gets qualified in your account.
Admin commission fee is usually decided by the admin when you join the marketplace and can never be modified from the admin dashboard. There is an option to contact Zendesk and submit information about your marketplace URL, Login Email, and the new marketplace admin commission fee percentage.
What other costs can you expect from Stripe?
In addition to transaction fees, Stripe also charges for other services, albeit at a low rate, making it a beneficial payment processor. Here is a breakdown of other fees you can expect from Stripe:
- RADAR fees
Stripe Radar is a feature for catching credit card fraud in real-time. It uses advanced machine learning algorithms so that the protection adapts to your business.
Radar utilizes numerous signals from the Stripe network to scan and verify transactions. Stripe charges a $0.05 fee for every transaction attempted even if the payment doesn’t go through. For example, the platform will charge you if you input an incorrect expiry date, and every time you try again, you will incur a fresh Radar fee.
Merchants with standard 2.9% + $0.30/transaction accounts won’t incur Radar charges. However, nonprofits can expect the charge.
- Chargebacks and refunds
Sometimes someone may not agree with a transaction or perceive it as fraudulent and therefore contact their bank to reverse it. Chargebacks aim to protect Stripe cardholders. However, sometimes, cardholders over-utilize chargebacks, and it’s your business that pays the price. Stripe charges a $15 fee for charge reversals. Additionally, if the bank refunds your customer, Stripe won’t give you back the processing fees.
Stripe has different rates for transactions with values less than $10. The micropayment rate is 5% + $0.05 fee per successful transaction. The Radar fee in case of micropayments is $0.05 per attempted transaction.
- International cards
Stripe does not charge for international cards. However, a 2 % currency conversion costs apply if, for example, you connect your GBP bank to Stripe but charge customers in USD. The platform will charge a 2 % fee to convert USD payments to GBP and deposit them in your account. If you don’t want currency conversion fees, accept GBP payments or sign up for a USD bank account and connect it to Stripe.
Stripe is one of the most appreciated online payment processing platforms because it charges fair rates with very few added costs. Stripe is transparent about its fee structure. The platform uses a flat-rate pricing model that means that regardless of your card’s cost, you will incur a fee equal to a percentage of your total transaction value plus a small fixed fee per transaction. The flat-rate pricing model is appreciated because it’s simple to calculate payment processing charges.
However, in some cases, it is expensive than interchange-plus pricing. Still, Stripe comes with a collection of APIs that allow merchants to provide customized e-commerce experiences. Indeed, some merchants and their developer teams are willing to overlook the platform’s higher processing prices to get their hands on its cool APIs for developing custom packages for their e-commerce needs.