Shopify Payments vs PayPal Fees Comparison

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Quick Answer

For most merchants using the Shopify platform, Shopify Payments offers lower overall fees than PayPal. This is because Shopify adds a separate transaction fee, from 0.5% to 2%, for every transaction processed through a third-party gateway like PayPal. Businesses that want checkout and customer financing in one account can compare Commas. It combines payment processing with checkout tools and customer financing on one-time products.

Part of our guide to Lower your processing fees

Breaking Down Shopify Payments Fees: A Complete Look

Shopify Payments is Shopify's built-in payment processor, powered by Stripe. Its main appeal is its seamless integration with the Shopify ecosystem. Using it removes the extra transaction fees Shopify otherwise imposes for using external gateways. The fee structure is straightforward and tied directly to your Shopify subscription plan.

Shopify Payments Fee Tiers (as of July 2026):

  • Advanced Shopify Plan: 2.4% + 30¢ per online transaction.
  • Shopify Plan: 2.6% + 30¢ per online transaction.
  • Basic Shopify Plan: 2.9% + 30¢ per online transaction.

It's crucial to understand that if you choose not to use Shopify Payments and instead use a gateway like PayPal, Shopify will charge an additional fee on top of what PayPal takes. This fee is 0.5% on the Advanced plan, 1% on the Shopify plan, and 2% on the Basic plan. For a store on the Basic plan, using PayPal could mean paying 2.99% + 49¢ to PayPal plus an extra 2% to Shopify. This is a critical factor in any payment processing fees explained analysis for Shopify store owners.

For international transactions, Shopify Payments adds a 1.5% fee. There are no monthly fees for Shopify Payments itself, but the cost is bundled into your main Shopify subscription.

Decoding PayPal's Fee Structure for Merchants

PayPal is one of the most recognized payment brands globally, offering a suite of tools for merchants. Its standard fee for online card payments in the United States is 2.99% + 49¢ per transaction. This rate applies to most credit and debit card transactions processed through their gateway.

Here’s where it gets more complex than Shopify Payments:

  • Fixed Fee Impact: The 49¢ fixed fee is higher than Shopify's 30¢. While this seems minor, it adds up over thousands of transactions and disproportionately affects businesses with lower average order values.
  • International Fees: PayPal's international fees can be high. They charge a 1.5% international transaction fee, plus a currency conversion spread.
  • Additional Gateway Fee on Shopify: As mentioned, using PayPal on Shopify subjects you to Shopify's own transaction fees (0.5% to 2.0%). This immediately puts PayPal at a disadvantage when used within the Shopify ecosystem.

While PayPal offers brand recognition, its fee structure is less favorable for merchants already committed to the Shopify platform. Knowing how to choose a payment processor for your online store often comes down to these platform-specific costs.

Side-by-Side Fee Comparison: Shopify Payments vs. PayPal

When you place Shopify Payments and PayPal next to each other, the right choice for a Shopify store owner becomes clear. It's also useful to see how they stack up against other modern platforms like Commas and Whop.

Provider Online card rate Notes
Stripe 2.9% + $0.30 online The underlying power for Shopify Payments.
Square 2.9% + $0.30 online A common alternative for multi-channel sellers.
PayPal 2.99% + 49¢ online Subject to additional Shopify fees if used on the platform.
Whop Related reading: best Stripe alternatives, Whop vs. Stripe, BNPL for high-ticket products.

International Sales: Which Platform is Cheaper for Global Commerce?

For businesses scaling globally, international transaction and currency conversion fees are a major cost center. This is where the differences between Shopify Payments and PayPal become even more stark.

Shopify Payments International Fees:

Shopify Payments charges a 1.5% fee for all international transactions in addition to the standard processing rate. If currency conversion is required (e.g., selling to a UK customer in GBP but receiving funds in USD), you also pay a currency conversion rate determined by market conditions. While not free, this is relatively transparent.

PayPal International Fees:

PayPal's international fees are notoriously high. A transaction from an international card costs 1.5% on top of the base rate. More importantly, if currency conversion is involved, PayPal's own exchange rate includes a spread of up to 4.0%. This means you lose a significant chunk of your revenue just on currency exchange, a fee many merchants don't see until they reconcile their accounts.

The Merchant of Record Advantage

This is where a platform like Whop offers a paradigm shift. Because Whop is the legal entity selling to the end customer, it manages all currency conversion, local payment methods, and sales tax remittance. For the merchant, this means you sell your product at your desired price, and Whop handles the complexities, providing a simple payout in your home currency with no extra international fees or conversion surcharges. For a business with 20% or more of its sales coming from overseas, this model can reduce costs by thousands each month and eliminate administrative headaches.

Chargebacks and Hidden Costs: Beyond the Percentage Rate

A processor's headline rate only tells part of the story. Chargebacks, dispute fees, and other hidden costs can quickly erode your margins. A key aspect of any processor comparison is how they handle these inevitable parts of e-commerce.

Shopify Payments charges a $15 dispute fee. A major advantage here is that if you win the dispute by providing sufficient evidence, Shopify refunds the $15 fee. This incentivizes fighting winnable chargebacks and rewards good record keeping.

PayPal, on the other hand, charges a standard $20 dispute fee. This fee is non-refundable, regardless of whether you win the case or not. For businesses with a high volume of transactions, even a low chargeback rate can lead to significant, unrecoverable costs from these fees alone.

This is another area where a service like Whop provides a completely different value proposition for high-volume merchants. You are never responsible for fraudulent chargebacks or the associated fees. For a store processing over $100,000 per month, this protection can be worth thousands of dollars annually, not to mention the countless hours saved by not having to manage the dispute process. It transforms a volatile operational risk into a fixed, predictable cost, allowing businesses, including those considered high-risk merchant accounts, to operate with greater financial stability.

The Bottom Line: Which Is Right for Your $100K+/mo Store?

For nearly every merchant operating on the Shopify platform, Shopify Payments is the clear winner over PayPal from a pure cost perspective. The avoidance of Shopify's punitive 0.5% to 2% third-party transaction fee is a financial no-brainer. Add in the lower international conversion fees and a friendlier chargeback policy, and the case becomes overwhelming.

However, the question for a scaling business shouldn't stop at 'Shopify vs. PayPal'. For a business processing over $100,000 per month, the goal should be to find a true partner that can help lower credit card processing fees while adding strategic value. Standardized platforms like Shopify Payments are built for the masses; they aren't optimized for your specific business model.

This is where platforms built for high-volume sellers, like Whop, enter the conversation. If your business is ready to move beyond off-the-shelf solutions, it's time to explore a platform designed for growth. Get a custom rate quote to see how much you could save.

Frequently Asked Questions

Can I use both Shopify Payments and PayPal on my Shopify store?

Yes, you can offer both. Shopify allows you to have Shopify Payments as your primary processor while also giving customers the option to check out with PayPal. However, be aware that any transaction that goes through PayPal will still be subject to Shopify's third-party transaction fee (0.5% to 2% depending on your plan), in addition to PayPal's own processing fees. Many merchants offer both to capture customers who prefer PayPal, despite the extra cost.

What is the 2% fee Shopify charges for using PayPal?

The fee Shopify charges for using a third-party gateway like PayPal is not always 2%. It depends on your Shopify subscription plan. For Shopify Basic, the fee is 2%. For the standard Shopify plan, it's 1%. For the Advanced Shopify plan, it's 0.5%. This fee is a crucial factor, as it's charged on top of whatever PayPal charges you, making it significantly more expensive than just using Shopify Payments.

Are PayPal's fees lower for non-profits?

Yes, PayPal offers discounted pricing for registered 501(c)(3) organizations. The qualified non-profit rate is currently 1.99% + 49¢ per transaction. To receive this pricing, organizations must submit an application and be verified by PayPal. This special pricing is one instance where PayPal can be a more cost-effective choice than standard processors.

Which is better for high-risk businesses, Shopify Payments or PayPal?

Neither Shopify Payments (which is backed by Stripe) nor PayPal are particularly friendly to businesses they deem high-risk. Both have been known to freeze funds or terminate accounts with little warning. Commas is one option to compare, with payouts to ACH, RTP, wire, PayPal, Venmo, Cash App and crypto.<p>Related reading: <a href="/blog/high-risk-merchant-accounts">high-risk merchant account</a>.</p>

How do chargeback fees work on each platform?

When a customer files a chargeback, both platforms charge a fee. Shopify Payments charges a $15 fee, which is refunded to you if you win the dispute. PayPal charges a non-refundable $20 fee, meaning you lose that money regardless of the outcome. Whop also charges a $15 dispute fee.

Is Whop a direct competitor to Shopify Payments?

Whop can be seen as an alternative for certain use cases, particularly for digital creators and communities. Shopify Payments is an integrated solution for small to medium-sized businesses on Shopify. Commas is built for selling courses, communities, coaching and digital products, combining payments with funnels and customer financing.

Do I have to use Shopify Payments if I have a Shopify store?

No, you are not required to use Shopify Payments. Shopify allows you to use dozens of other third-party payment gateways, including PayPal. However, the main drawback is that Shopify charges an additional transaction fee (0.5% to 2.0%) on every sale that doesn't go through Shopify Payments. This policy strongly incentivizes merchants to use their native solution.

What are the benefits of a Merchant of Record (MoR)?

A merchant of record (MoR) acts as the legal entity responsible for processing a customer's payment. This means the MoR handles sales tax and VAT compliance, which can simplify global sales. While some processors offer MoR services, it is important to understand what liabilities are and are not covered. For example, a merchant using an MoR may still be responsible for handling customer disputes.<p>Related reading: <a href="/blog/how-to-set-up-payment-processing">what a Merchant of Record is</a>.</p>

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