Selecting a payment processor for your small business is a big decision, and fees play an important role in that choice. Here’s what you should consider when you’re reviewing Stripe. 

Stripe’s Business Plan Options

Stripe is a popular platform for companies that want a reliable payment service provider. It handles over 13,000 requests per second. It has also built transparent pricing strategies so customers know the fees they’ll encounter.  Stripe has two payment plans. Its Integrated Plan is perfect for small businesses who want a pay-as-you-go option. The Customized Plan is best for companies with large payment volumes. 

Stripe Payment Processing Fees

All payment processors come with different processing fees for the types of transactions that are necessary to your business. But Stripe puts the business owners first when it’s creating a pay-as-you-go plan that outlines small business payment processing fees.   Here’s a short list of the most common fees you’ll encounter with Stripe’s Integrated Plan: 

Accepting Payments Online

Stripe has an online payment processing fee of 2.9% + 30 cents per successful card or digital wallet payment. ACH debit, ACH credit, and wire transfers carry a fee of 0.8% per transaction with a $5 cap.  Two additional features included with the Integrated Plan for online payments are the “3D Secure authentication” and “card account updater.” The first feature verifies a customer’s identity before online purchase. The second automatically updates the saved customer’s expired or renewed card information, protecting your business and securing customer satisfaction.

Accepting In-Person Payments

Stripe’s fees for in-person payment (debit and credit cards, including Google and Apple Pay) cost 2.7% plus 5 cents per transaction. You’ll have to purchase Stripe’s $59 Reader M2 or BBPOS “Chipper” battery-powered card reader or the $249 BBPOS WisePOS E with a five-inch touchscreen if you want to accept in-person payments. 

How Does Stripe Charge Its Fees?

You already have to keep up with enough small business taxes and deductions as a business owner. Stripe has considered you with its charging process for the Stripe fees listed above.  The fee amount is immediately reflected as withdrawn upon the transaction being successful. Stripe has already deducted the fee from the total by the time the money hits your account.

Understand the Impact of Refunds

Stripe fees may become a nuisance when your customers have refunds. Let’s say a customer is unhappy with the product they purchased using Stripe payment processing. Stripe has already deposited the funds minus the fees into your account, but the customer requests a full refund.  You would be responsible for refunding the total amount, including the lost cost in the Stripe fees. Each returned item comes with a negative profit, assuming you don’t charge a fee for returns. 

The Tax Impact of Stripe’s Payment Processing Fees 

It’s essential to understand how Stripe’s fees impact your bottom line as a business owner and your taxable business revenue. You must report to the IRS the total amount of each sale before the fees are subtracted.

Stripe-Issued 1099-K Forms

Stripe provides a 1099-K form at the end of the calendar year. You must meet specific criteria to receive a 1099-K, as required by the Internal Revenue Service:

More than $600 in gross volume in the previous calendar yearAccount is U.S.-based or owned by a U.S. taxpayer. 

The $600 threshold is a dramatic decrease that went into effect on Jan. 1, 2022, under the terms of the American Rescue Plan of 2021. This used to be 200 transactions and $20,000 through Dec. 31, 2021. There is no longer a transaction limit. That’s been eliminated from the equation. The 1099-K shows your total sales activity for the year. Total sales activity would include the cost of each sale before fees, but you may be able to deduct the cost of fees as a business expense if the IRS considers them “ordinary and necessary.”

Alternatives to Stripe

Stripe isn’t the only payment-processing option you have for your business. Alternative companies and fees as of January 2022 include:

PayPal (3.49% + 49 cents per transaction)Square (2.6% + 10 cents for standard card payments) Apple Pay (depends on payment service provider)