Understanding Payment Processing Fees: A Complete Guide
Every payment processor — Stripe, PayPal, Square, Wise, and the rest — takes a cut of the money that moves through it. On paper the math looks trivial: a percentage plus a small fixed fee. In practice, the moment you need to work backward from a target payout instead of forward from a sticker price, that simple-looking formula gets confusing fast. This guide walks through exactly how Gross, Net, and Processing fee relate to each other, how domestic and international rates differ, how the major processors stack up side by side, and how to choose (and minimize) the fees that apply to your business. This guide focuses on PayPal's fee structure, but the underlying math — and the comparison below — applies to every processor you might weigh PayPal against.
Gross vs. Net: the two directions of the math
Gross is the total amount charged to the payer — the number on the invoice or checkout page. Net is what actually lands in your account after the processor takes its cut. The Processing fee is the difference between the two: Fee = Gross − Net. Most calculators (and most people doing this by hand) only ever compute the fee moving forward: you know the Gross amount you're charging, and you solve for what you'll actually receive. That direction is simple:
Fee = (Gross × Rate) + Fixed Fee
Net = Gross − Fee
The harder, more useful direction is the reverse: you know the exact Net amount you need to walk away with — say, to cover a contractor invoice or hit a specific payout — and you need to know what Gross amount to charge so the fee doesn't eat into it. Because the fee itself is calculated as a percentage of the Gross amount (the number you're solving for), you can't just add the fee rate on top of your target Net — that undercharges every time, since the fee grows as the Gross amount grows. Solving the equation algebraically for Gross gives:
Gross = (Target Net + Fixed Fee) / (1 − Fee Rate)
For a $1,000 target net on Stripe's US domestic rate (2.9% + $0.30), that's Gross = ($1,000 + $0.30) / (1 − 0.029) = $1,030.18, with a $30.18 processing fee — charge $1,030.18 and exactly $1,000.00 lands in your account. FeeWise runs both directions of this formula for you, so you never have to do the algebra by hand.
Domestic vs. international: why interchange rates differ
Every card-network transaction routes through an interchange fee set by the card-issuing bank, plus assessment fees from the network (Visa, Mastercard, etc.) and a markup from your processor. Domestic transactions — where the card, the merchant, and the bank are all in the same country and currency — carry the lowest interchange rates, because fraud risk and settlement complexity are lowest. Cross-border transactions add extra cost on three fronts: higher fraud risk (cross-border card-not-present fraud is measurably more common), currency-conversion overhead when the card's currency differs from the settlement currency, and higher interchange rates that card networks charge specifically for cross-border interchange. That's why Stripe's international card rate (3.9% + $0.30) runs a full percentage point above its domestic rate (2.9% + $0.30), and why PayPal, Square, and every other major processor follow the same pattern.
Comparing Stripe, PayPal, Wise, and Square
Rates below reflect each provider's standard published pricing for card and transfer payments as of this writing. Providers change pricing periodically and offer custom rates to high-volume merchants, so treat this as a starting point and confirm current pricing directly with each provider before making a pricing decision.
| Provider | Transaction type | Typical rate |
|---|---|---|
| Stripe | US domestic card | 2.9% + $0.30 |
| Stripe | International card | 3.9% + $0.30 |
| Stripe | ACH bank debit | 0.8% (min $0.30, max $5.00) |
| PayPal | US domestic checkout | 2.89% + $0.30 |
| PayPal | International checkout | 3.49% + $0.49 |
| Square | Online / card-not-present | 2.9% + $0.30 |
| Square | In-person (card present) | 2.6% + $0.10 |
| Wise | International transfer (varies by corridor) | ~0.4%–2%, often no fixed fee |
Wise's pricing model is structurally different from card processors — it is typically quoted per currency corridor and payout method rather than as a single flat card-processing rate, so the range above is illustrative, not a quote.
Choosing the right processor
For US-only card payments, Stripe and PayPal land within a few basis points of each other, so the tiebreaker is usually your typical transaction size: PayPal's slightly lower percentage plus higher fixed fee tends to win on larger invoices, while Stripe's lower fixed fee edges ahead on smaller ones. Square is worth a look if you also take in-person payments, since its card-present rate (2.6% + $0.10) undercuts both Stripe and PayPal's online rates. If you're paying international contractors or getting paid by clients abroad in a different currency, Wise's transfer-based model frequently comes out cheaper than routing that money through a card network at all — it's worth comparing the actual quote for your specific corridor against the international card rate before deciding.
A note on estimates and rate changes
FeeWise's calculator applies each provider's standard published rate to the amount, currency, and transaction type you select, and reconciles the three figures so Gross minus Processing fee always equals Net exactly, down to the cent. What it can't account for is a rate that's specific to your account: negotiated interchange-plus pricing, promotional rates, non-profit discounts, or a processor updating its published pricing since this guide was last reviewed. Treat every figure here as a close estimate for planning and invoicing purposes, and confirm the exact rate on your account before finalizing a price that depends on it.
Tips to lower your processing costs
- Prefer bank-to-bank transfers (like ACH) for large invoices — the capped fee is far cheaper than card rates at scale.
- Batch smaller charges where possible to reduce the number of fixed per-transaction fees.
- Price in the amount you want to receive using FeeWise's "I want to receive" mode, so fees never eat into your margin.
- For recurring cross-border payouts, get an actual quote from Wise or a similar transfer service and compare it against your card processor's international rate — the cheaper option can vary by corridor and amount.
- Once your monthly volume climbs into the tens of thousands of dollars, ask your processor about interchange-plus or custom pricing — published rates are a starting point, not a ceiling.