Square vs. PayPal

Square vs. PayPal Comparison

square vs paypalSo you are trying to choose between Square and PayPal. Which has the better pricing, customer service, device compatibility, and features for accepting card payments? Figuring all of this out can be a daunting task (this article took over a week to put together), but don’t worry, we’ve done the research and broken it down for you.

This article will help you compare Square and PayPal head-to-head in order to determine which of these merchant account providers offers a more competitive overall credit card acceptance package. The categories listed below will take into account all services and prices offered by both companies, including, but not limited to, the Square card reader and PayPal Here mobile processing apps. For individual reviews of each company, be sure to check out our Square review and our PayPal review.


Square Overview

Founded in February of 2009, Square (squareup.com, square.com) has seen tremendous growth in a very short amount of time. Square is best known for its square-shaped card reader and accompanying mobile app for smart devices. In addition to the mobile reader and app, Square also offers Square Register (a cloud-based POS system), Square Wallet (a mobile payment app for customers), Square Cash (a direct person-to-person cash transfer service), and Square Market (an online marketplace for Square-enabled merchants). In this article, these additional features will be assessed from a merchant’s perspective.

As of this writing, our review of Square awards the company a “D” rating. Square is showing over 1,000 complaints online, and the Better Business Bureau is awarding it a “B+” rating based on 725 complaints filed in the last three years.


PayPal Overview

Founded in 1998, PayPal is a wholly owned subsidiary of eBay and is heavily used for payments between buyers and sellers of eBay auctions. In 2003, PayPal founded its “merchant services” division, which allows businesses of all sizes to accept credit card payments, much like a normal merchant account. Since then, PayPal has expanded its services to include the PayPal Here card reader and mobile app, a Payflow payment gateway, and several PayPal Payments service packages with various added services.

We currently award PayPal Merchant Services a score of “B-.” The company’s massive user base is likely the reason for the thousands of online complaints filed against it, but it’s difficult to determine how many of these complaints are related to PayPal’s merchant services division. The Better Business Bureau is showing an “A+” rating for PayPal despite 6,124 complaints filed in the last three years.

At a Glance: Square vs. PayPal
Category Square PayPal
Mobile Card reader: Free Free
Mobile application: Free Free
Contract length: Month to month Month to month
Monthly fee: None None
Termination fee: None None
Live support: No Yes
Merchant account: Chase Paymentech PayPal


This section compares PayPal and Square in terms of overall compatibility, functionality, ease of use, and customer service.

Compatibility: PayPal Wins

Compatibility: Square vs. PayPal
Category Square PayPal
iPhone/iPad Support: iOS 5.0 or higher iOS 5.0 or higher
Android Support: Version 2.3 or higher Version 2.3 or higher
Other POS integration: No Yes
Website integration: No Yes


Both Square Register and PayPal Here are available on iPads or iPhones running iOS 5.0 or higher, and both services are compatible with Android devices running Android 2.3 or higher. PayPal distinguishes itself, however, through its POS (point-of-sale) integration options and e-commerce compatibility. In addition to offering its own POS system, PayPal is pre-integrated with several other specialty POS providers, providing merchants with more options. In addition, PayPal has been offering seamless integration for online payments for years, while Square can only provide online merchants with payment acceptance through the Square Market. Generally speaking, PayPal offers more payment channels and more streamlined integration.

Reliability: PayPal Wins

Reliability: Square vs. PayPal
Category Square PayPal
Secure data transfer: Yes Yes
Hardware complaints: Few Few
Software complaints: Many Few


Both Square and PayPal offer mobile card readers that are fairly reliable, well-designed, and reportedly secure. However, Square is showing far more complaints about service interruptions and incompatibility issues than PayPal is, despite the fact that PayPal is integrated in a wider variety of machines. Square’s complaint totals are almost certainly inflated by the fact that the company offers no customer support to quickly resolve device malfunctions, but this only makes service interruptions a more serious potential problem for Square users.

Ease of Use: Square Wins

Ease of Use: Square vs. PayPal
Category Square PayPal
Download and go: Yes Most services
Onscreen prompts: Yes Yes
Customizable layout: Yes Yes


PayPal and Square both offer straightforward onscreen guidance during installation and use of all of their payment services. Both companies’ customer-facing features include customizable prompts and simple instructions, largely sparing merchants the trouble of explaining these services to customers. Although the setup for PayPal’s traditional online payment option is slightly more involved than a simple “download and go” model, its business solutions generally require nothing more than a PayPal account for the merchant or customer. Square gets the nod in this category, though, for its simple, sleek card reader and its no-frills Register application, which is clearly designed with an eye toward easy setup and use. Convenient sign-up and installation is without a doubt the primary innovation offered by Square, and it’s enough to beat PayPal in this case.

Customer Service: PayPal Wins

Customer Service: Square vs. PayPal
Category Square PayPal
Live support: No Yes
Email support: Yes Yes
Premium service tiers: No Yes


This one isn’t even close. PayPal offers live phone support and email support for its merchant services, although merchants do have to pay $159/month for “Enhanced 13×7” support or $495/month for “24×7 Premium” support if they want to avoid the wait times associated with the general customer service lines. Even so, a busy, slow customer service line is still more than Square offers its customers. Square customer support is conducted entirely via email exchange and is notorious for is slow response times and unavailability. In fact, the primary factor cited in merchant complaints about Square is the company’s near-complete lack of customer support.


Features Overall Winner: PayPal

PayPal wins this section due to the company’s support for a wider range of devices and processing options. PayPal also offers live support options and appears to have better hardware and software reliability based on user reviews of both services.



This section compares PayPal and Square in terms of their transaction fees, cancellation fees, recurring fees, and other associated costs.

Transaction Fees: Square Wins

Transaction Fees: Square vs. PayPal
Category Square PayPal
Swiped rate: 2.75% 2.70%
Keyed-in rate: 3.5% + $0.15 3.5% + $0.15
Online rate: 2.75% Between 2.2% + $0.30 and 2.9% + $0.30


Square is renowned for the simplicity of its pricing: 2.75% per swiped transaction and 3.5% plus $0.15 per keyed-in transaction. That’s all there is to it; no monthly fees, setup fees, cancellation fees, or other bogus fees. Interestingly, though, PayPal Here slightly undercuts Square with a swiped rate of 2.7% and the same keyed-in rate as Square. When used in conjunction with the PayPal Payments Standard Pricing plan, PayPal Here also includes no other monthly costs.

However, Square takes a slight edge in overall transaction fees with its Square Market service, which allows Square merchants to sell their products online for the same flat rate of 2.75% per transaction. PayPal’s online transaction rates, on the other hand, run from 2.2% plus $0.30 to 2.9% plus $0.30 depending on a merchant’s monthly sales volume. PayPal also includes monthly fees of $5 and $30 for its Advanced and Pro plans, respectively. For e-commerce merchants who process under $10,000 in monthly sales, Square Market is likely to be the cheaper online payments option, while PayPal is the better choice for larger businesses that can afford to pay a monthly fee and need more e-commerce features.

Termination Fees: PayPal Wins

Termination Fees: Square vs. PayPal
Category Square PayPal
Termination fee: No No
Contract length: Month-to-month Month-to-month
Reserve upon cancellation: Yes Yes


Neither Square nor PayPal charges an early termination fee for canceling service, but both providers may hold any unprocessed payments at the time of cancellation to ensure that the merchant’s contractual obligations are met. According to the companies’ cancellation policies, these withheld funds should be returned to the merchant in accordance with the merchant’s payout schedule and there are complaints filed against both Square and PayPal alleging that these holds can last much longer. However, Square is showing a much higher number of such complaints and the issue is seemingly exacerbated by the company’s lack of a live customer support department. Although both companies offer free cancellation, the potential fund holding times with a Square merchant account appear to be much higher.

Recurring Fees: PayPal Wins

Recurring Fees: Square vs. PayPal
Category Square PayPal
Monthly fee: None $0, $5, or $30
Total cost for $3,000 in sales in one month: 2.75% per swiped transaction 2.9% + $0.30 per transaction
Total cost for $10,000 in sales in one month: 2.75% per swiped transaction 2.5% + $0.30 per transaction
Total cost for $25,000 in sales in one month: 2.75% per swiped transaction 2.2% + $0.30 per transaction


Square and PayPal both offer service plans with zero monthly fees, so merchants can sign up for either service without facing any recurring costs. The potential monthly costs, though, vary depending on what additional services a merchant is interested in.

Square has announced recently that it will discontinue its monthly pricing plan after January 2014. This pricing option was intended for larger merchants and cost $275 per month. Under this plan, all transaction fees were waived for the first $250,000 processed in a year, and this plan only saved merchants money if they were swiping over $10,000 per month. In the wake of its discontinuation of this plan, Square will offer its flat 2.75% (3.5% plus $0.15 keyed) to all merchants.

PayPal’s per-transaction costs vary depending on a merchant’s monthly sales volume and the method of payment acceptance. Any payments swiped through the PayPal Here reader will receive the 2.7% rate, while online payments are scaled as follows:

  • Up to $3,000 in monthly sales: 2.9% plus $0.30
  • Between $3,000 and $10,000 in monthly sales: 2.5% plus $0.30
  • Over $10,000 in monthly sales: 2.2% plus $0.30

PayPal also offers three pricing plans with added features for each price increase: Standard (free), Advanced ($5/month), and Pro ($30/month). Overall, Square and PayPal both offer free monthly plans, but PayPal offers a greater degree of flexibility for larger merchants depending on sales volume and desired features.

Other Costs: PayPal Wins

Other Potential Costs: Square vs. PayPal
Category Square PayPal
Hardware costs: Free Low
Chargeback fee: Variable $20
Monthly minimum fee: No No
PCI Compliance fee: No No


Aside from transaction fees or optional monthly fees, the only other true costs of a merchant account through Square or PayPal are hardware costs and chargeback fees. PayPal charges a $20 fee per chargeback, while Square’s chargeback policy is vaguely outlined in its terms of use. It seems Square may either create a reserve account or deduct the necessary amount from an existing reserve account in order to cover the costs of a chargeback incident, but the company does not specify a typical or maximum chargeback fee. In other words, Square’s chargeback fee appears to be variable and without a clearly defined limit. This makes the company’s potential chargeback costs higher than PayPal’s fixed amount of $20.

Neither Square nor PayPal charges PCI compliance fees or monthly minimum fees. The only hardware costs for mobile processing are the smartphone or tablets needed to use the apps. PayPal charges $79.99 for a USB card reader that can be used to swipe card via desktop computers for use with its virtual terminal. Square does not provide such an option. PayPal wins this section due to having more processing options at a relatively low cost.


Pricing Overall Winner: PayPal

Although Square has simpler per-transaction pricing, PayPal wins this section due to more transparent cancellation reserve policies and lower costs in relation to a wider variety of services.


Policies, Provisions and Contract Conditions

This section compares PayPal and Square in terms of their reserve policies, payout schedules, and fraud policies.

Reserve Policy: PayPal Wins

Reserve Policies: Square vs. PayPal
Category Square PayPal
Weekly keyed-in limit: None $2,500
Reserve period: None 30 days
Holds suspicious transactions: Yes Yes


It is common within the industry for credit card processors to establish cash reserves as a defense against chargebacks or fraud, but these policies can sometimes cause confusion among merchants. Until November 2013, Square’s policy was to withhold all keyed-in payments above $2,002 in any rolling seven-day period for up to 30 days. The company has since discontinued this policy, stating that there is no limit for all transaction types and deposit amounts. PayPal currently has a policy that is similar to Square’s previous policy, but with a slightly higher limit of $2,500. Both processors also freeze large payments that have been flagged as suspicious according to their own internal algorithms. Both companies reserve the right to hold funds for much longer periods (up to 180 days) if transactions meet certain undisclosed risk factors.

Both Square and PayPal suffer from numerous complaints about large, sudden fund holds, often without advance notice or explanation. Regardless of whether these merchants have had legitimate transactions frozen or have actually been violating Square’s and PayPal’s terms of use, reserve account disputes are best resolved through an available and capable customer service channel. Due to its lack of customer service, Square has seen a much higher volume of complaints regarding its reserve account policy than has PayPal, and PayPal therefore takes the win in this section.

Payout Schedule: Square Wins

Payout Schedules: Square vs. PayPal
Category Square PayPal
Payments processed: 1-2 days Immediately
Deposited to: Bank account PayPal account
Funds accessible: Immediately 3-day withdrawal


This category is essentially a toss-up. Square offers next-day deposit of funds into a merchant’s bank account, while PayPal makes funds available to merchants almost immediately within their PayPal accounts. In order to withdraw money from their PayPal accounts, merchants must make a transfer request and wait approximately three days for the funds to be deposited. They may also be subject to ATM fees when making withdrawals using a PayPal debit card. Because of this, Square is the better option for merchants willing to wait a day for their money, while PayPal is the better option for merchants who don’t mind keeping most of their funds in their PayPal accounts and paying for or withdrawing money using a debit card. We’ll give this category to Square because the company doesn’t automatically impose an extra step between merchants and their money.

Fraud Policy: PayPal Wins

Fraud Policies: Square vs. PayPal
Category Square PayPal
Approval process: Instant Instant except Payments Pro
May cancel accounts: At own discretion At own discretion
May freeze accounts: At own discretion At own discretion
Fund hold inquiries: Via email Via phone


Both Square and PayPal have very low barriers to entry and emphasize their easy sign-up processes. This ease of setup comes at the cost of a lack of underwriting and approval processes that could save high-risk or ineligible merchants the trouble of sudden cancellation or fund holds down the line. PayPal edges Square on this front, though, for two reasons. For one, the PayPal Pro virtual terminal requires an additional application process for merchants, which marks the only service offered by either company that subjects merchants to review before signup. Also, as with so many other potential issues, reliable customer service can be invaluable to merchants in the event of cancellation or fund withholding. As noted repeatedly, Square does not offer live customer service.


Policies Overall Winner: PayPal

Square has the slightly more attractive payout schedule thanks to its next-day deposit into a merchant’s bank account, but PayPal appears to do more overall to protect merchants from sudden cancellations or fund holds.


Other Payment Services

This section compares several services offered by Square and PayPal as alternatives or complements to standard credit card processing.

Square Register Beats PayPal Here

In-Store Payments: Square vs. PayPal
Category Square Register PayPal Here
Analytics Yes No
Check Scanning No Yes
Receipts Physical or digital Physical or digital


The Square Register POS app offers analytics and payment reports, a customizable layout, loyalty programs, Square Wallet compatibility, multiple user support, and limited hardware compatibility (for receipt printers, etc.). PayPal Here offers check scanning, integration with multiple POS systems, and PayPal Mobile compatibility. Despite the greater potential compatibility and customer support offered by PayPal Here, Square appears to supply the more robust, ambitious free point-of-sale app at this time. PayPal may be a better option in Square in this section depending on which specialty POS systems merchants choose to integrate it with.

PayPal Mobile App Beats Square Wallet

Mobile Wallet Apps: Square vs. PayPal
Category Square Wallet PayPal App
Pay via debit: No Yes
Pay via credit: Yes Yes
Pay via bank account: No Yes


Both the Square Wallet and the PayPal mobile payments app provide a free mobile wallet service to users. On the customer’s end, there’s very little distinguishing one service from the other, except for the fact that Square Wallet links to a customer’s credit card while the PayPal app can link to a customer’s PayPal account, credit card, debit card, or bank account. Both Square Wallet and PayPal are making inroads among merchants and gaining popularity, as Square recently signed a POS agreement with all Starbucks locations and PayPal continues to push its PayPal-linked payment card. Merchants will want to pay careful attention to the growth of both services before deciding to offer one or the other in their stores, but PayPal gets the nod for now due to its name recognition and wider array of payment options for customers.

Square Market Beats PayPal

Online Marketplaces: Square vs. PayPal
Category Square Market PayPal
Free online store: Yes N/A
Transaction fee: 2.75% N/A
Site hosted: In Square Market only N/A


One of the more intriguing services offered by Square is the Square Market, an online marketplace where Square merchants can establish a store profile and sell their products online for a rate of 2.75% per transaction. Although these online stores are fairly simple in layout, they may be a very desirable option for merchants who simply want to make their products available online rather than fully commit to an e-commerce operation. PayPal does not offer a comparable service at this time, although it does offer solutions for already established e-commerce merchants through various service packages. At this time, Square wins this category for offering a free online store with easy setup and transparent pricing.

Square Cash Beats PayPal Transfer

Peer-to-Peer Payments: Square vs. PayPal
Category Square Cash PayPal Transfer
Debit transfers: Free 2.9% + $0.30
Credit transfers: N/A 2.9% + $0.30
Bank account transfers: N/A Free
PayPal account transfers: N/A Free


Square Cash is a new service offered by Square that allows for free peer-to-peer fund transfers from an attached debit card. Like PayPal’s traditional transfer service, Square sends payment information via email and takes about one to two days to process. PayPal’s transfer service, perhaps the best-known service of its kind, allows for peer-to-peer transfers between PayPal accounts, linked bank accounts, credit cards, and debit cards. However, PayPal charges a fee of 2.9% plus $0.30 per transaction for debit and credit card transactions. Because of this, Square just barely wins this category. For users who simply want to send money to a friend or associate, Square makes this possible through a free debit card transfer. For users who don’t mind the extra setup necessary for a PayPal account or linked bank account, PayPal is also a good option for free cash transfers.


Other Services Overall Winner: Square

PayPal’s cash transfer service, mobile wallet app, and point-of-sale solution are reliable services for merchants and customers alike, but they lack the innovation and ease of use offered by comparable Square services.


Bottom Line: PayPal Beats Square Head-to-Head

When it comes to the full suite of services and pricing models offered by both companies, PayPal is a better overall merchant services provider than Square as of this article. Thanks to its live customer support, wider range of services, time in the industry, and offerings for larger businesses, PayPal has avoided many of the problems that plague Square.

Square, on the other hand, edges PayPal in a handful of categories but ultimately cannot overcome its most glaring deficiency: poor customer support. Square’s commitment to transparent pricing and innovation for smaller merchants and individuals may someday make it an ideal payment processor for all merchant types, but not until the company builds a strong customer support system and clearer policies and practices regarding funding holds. For now, PayPal is the better option on the whole.

Which do you prefer, PayPal or Square? Tell us why in the comment section below.

Thank you for reading my review. I hope that it has helped you with your research.

Why I'm Qualified to Write About Credit Card Processing and Merchant Account Services

I'm a former credit card processing sales director who left the industry because I didn't like how it takes advantage of small business owners. It feeds like a leech on businesses and thrives by imposing fees that are nearly impossible to comprehend. Seeing a need for change, I left and built this website help business owners better understand the industry, research merchant services providers, and get refunds of excessive merchant account fees. My experience of working "behind the curtain" in the industry, and using that knowledge for good, has resulted in millions of dollars returned to hard-working small business owners as well as enterprise-level companies.

From the time that I starting working in the merchant services industry to when I left to create this website, I've been on the pulse of payments for nearly 15 years. It didn't seem fair to keep this "insider" knowledge to myself. To lift the fog, I've reviewed hundreds of companies, read thousands of user reviews, and learned the pricing tricks of every provider. If you have questions about credit card processing, you can find the answers on this website.

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1 Review Leave Your Review Below

  1. I have been a customer of Square for five years up until February 2, 2017. However, recently my account was deactivated by Square without a proper notice. They sent me an email on February 2, 2017 and I my account was unusable. I found out when I was in the process of taking a payment form a customer on Feb 3, 2017 which is truly unacceptable. The email I received stated that they reviewed my account and found that my business was prohibited by section 3 of the payment terms and/or section 4 of the general terms. I read this document and it doesn’t make any sense. I have tried to contact a representative from Square by phone so they could further explain this document and so we can make sure they understand what my business sales but you can’t reach a customer services rep unless you have a code which you get from your log in, but since my account was deactivated I can’t get a code. I have since received the same emails from square apologizing for dropping my account but I have yet to talk with someone in person to explain this who fiasco. At this time square has an “F” rating from based on the way they do business.

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