Stripe explained: What it does, fees, and how it compares to PayPal
by Team Devanta Authority
- December 27, 2025
- Banking
Stripe is a payment processing platform designed for online businesses that need to accept card payments, digital wallets, and recurring charges. It works behind the scenes, handling transactions between customers, banks, and card networks without acting as a consumer-facing wallet. For many businesses, Stripe is less about “holding money” and more about reliably moving money from customers to their bank accounts.
People often compare Stripe to PayPal because both enable online payments, but they solve the problem in different ways. Questions around fees, safety, and whether Stripe works the same way as PayPal are extremely common. This guide explains what Stripe actually does, how its pricing works, and how it compares to PayPal, so you can understand when Stripe makes sense and when another solution might be a better fit.
What is Stripe and how does it work?
Stripe is an online payment processor that allows businesses to accept payments over the internet. Instead of being a digital wallet for consumers, Stripe provides the infrastructure that connects a customer’s payment method with the business’s bank account. It handles card payments, bank transfers, and digital wallets while staying mostly invisible to the end user.
When a customer makes a payment, Stripe securely collects the payment details, verifies the transaction with the card network or bank, and processes the charge. Once the payment is approved, the funds are routed to the business and later paid out to its bank account, minus Stripe’s processing fee. From the business perspective, Stripe simplifies a complex flow that would otherwise require direct relationships with banks and card networks.
This is why Stripe is often described as a “payments backbone” rather than a checkout app. Customers usually don’t know Stripe is involved, but businesses rely on it to manage payments reliably, at scale, and across different countries and currencies.
What is a Stripe payment?
A Stripe payment is a transaction processed through Stripe’s payment infrastructure when a customer pays a business online. This can include credit and debit cards, bank transfers, or supported digital wallets, depending on how the business is set up. From the customer’s point of view, it looks like a normal online payment, even though Stripe is handling the transaction in the background.
When a payment is made, Stripe securely captures the payment information, checks it with the relevant card network or bank, and confirms whether the transaction is approved. If the payment is successful, Stripe records it and schedules the funds to be transferred to the business’s bank account. The customer does not need a Stripe account for this to happen.
This is an important distinction from platforms like PayPal. A Stripe payment does not rely on customers storing money or creating profiles. Stripe’s role is to process the payment itself, not to act as an intermediary wallet between the buyer and the seller.
What does Stripe actually do (in simple terms)?
In simple terms, Stripe helps businesses get paid online. It takes care of the technical and financial steps required to move money from a customer’s card or bank account to the business’s bank account. Without Stripe, a business would need to work directly with banks, card networks, and security systems to do the same thing.
Stripe handles sensitive payment data, checks whether a transaction is valid, and communicates with the banks involved to approve or decline the payment. Once the payment goes through, Stripe ensures the money is transferred to the business, usually within a few days. All of this happens automatically in the background.
The key idea is that Stripe removes complexity. Businesses focus on selling their product or service, while Stripe manages the payment process that makes those sales possible.
How does Stripe work?
Stripe works by acting as the technical bridge between a customer’s payment method and a business’s bank account. When a customer enters their card or payment details on a website, Stripe securely receives that information and sends it to the appropriate card network or bank for authorization. This step determines whether the payment can go through.
If the payment is approved, Stripe processes the transaction and records it in the business’s account. The money is not transferred instantly but is queued for payout. After a short processing period, Stripe deposits the funds into the business’s bank account, minus its transaction fee.
Throughout this process, Stripe also handles security, compliance, and fraud checks. From the business’s perspective, payments appear in a dashboard and payouts arrive automatically, without needing to manage the underlying banking or payment infrastructure themselves.
How Stripe processes payments (step by step)
When a customer starts a payment, they enter their card or payment details on the business’s website or app. Stripe securely captures this information and immediately encrypts it so sensitive data is protected. The payment details are never stored directly on the business’s servers.
Stripe then sends the payment request to the relevant card network or bank to check whether the transaction is valid. This includes verifying available funds, card status, and basic fraud signals. Within seconds, the bank either approves or declines the payment and sends that response back through Stripe.
If the payment is approved, Stripe confirms the transaction and records it in the business’s account. The funds are temporarily held while Stripe completes processing and compliance checks. After the payout period ends, the money is automatically transferred to the business’s bank account, with Stripe’s fee deducted.
From the customer’s perspective, the process feels instant. From the business’s perspective, Stripe manages every step needed to move money safely and reliably from the buyer to their bank.
Does Stripe hold your money like PayPal?
Stripe does not hold your money in the same way PayPal does. PayPal operates as a consumer-facing wallet, where funds can sit in a PayPal balance before being transferred to a bank account. Stripe, on the other hand, is designed to move money directly to the business’s bank account after processing.
With Stripe, payments go through a short processing period, after which funds are automatically paid out to the business according to a payout schedule. This delay is not the same as holding funds in a wallet. It exists to handle settlement, fraud checks, and compliance, not to encourage businesses to keep money inside the platform.
This difference matters for businesses that want predictable cash flow and minimal friction. Stripe is built around payouts to a bank account, while PayPal is built around managing balances. For many online businesses, Stripe feels more like a payment pipeline than a place where money “sits.”
Is Stripe safe and legit?
Yes, Stripe is considered both safe and legitimate. It is a widely used payment processor trusted by businesses of all sizes, from startups to large global companies. Stripe operates in compliance with major payment industry standards and works directly with banks and card networks to process transactions securely.
Stripe is responsible for handling sensitive payment data, which means it invests heavily in security, encryption, and fraud prevention. Businesses using Stripe do not see or store customers’ card details themselves, reducing the risk of data exposure. This setup is one of the reasons Stripe is commonly chosen by companies that handle high volumes of online payments.
From a legitimacy standpoint, Stripe is an established company with a long track record in online payments. Its infrastructure is used by millions of businesses worldwide, making it a standard choice for accepting payments on the internet rather than an experimental or unproven solution.
Is Stripe safe or not?
Stripe is safe for processing online payments. It uses industry-standard security measures to protect payment data and works within the same regulated payment ecosystem as banks and major card networks. For most businesses, using Stripe is safer than attempting to handle payment data on their own.
What often causes doubt is the fact that Stripe operates in the background. Because customers do not log into Stripe or see a Stripe balance, some people assume it is less secure. In reality, Stripe is designed to reduce risk by limiting how much sensitive information businesses ever touch.
No payment system is completely risk-free, but Stripe’s model is built around minimizing exposure and automating security at scale. That is why it is widely accepted as a reliable and secure option for online payments.
Who uses Stripe?
Stripe is used by a wide range of online businesses, from small startups to large, established companies. It is especially common among businesses that sell digital products, software, subscriptions, and online services, where payments need to work smoothly across different countries and currencies.
Many companies choose Stripe because it fits well into modern websites and apps. Businesses that rely on custom checkout experiences or recurring billing often prefer Stripe over more consumer-oriented payment platforms. It is also popular with platforms and marketplaces that need to process payments on behalf of multiple sellers.
Overall, Stripe tends to attract businesses that want control over their payment flow without managing the complexity of payment infrastructure themselves. This makes it a common choice for growing online companies that expect to scale over time.
How much does Stripe charge?
Stripe charges a transaction-based fee for each successful payment it processes. In the United States, this is typically a percentage of the transaction plus a small fixed amount per payment. This means Stripe only charges when a payment goes through, not for setting up an account or maintaining it.
The exact fee depends on the payment method and the country, but for standard online card payments the pricing is consistent and transparent. There are no monthly fees for basic usage, and businesses can see all charges clearly in their Stripe dashboard.
For many businesses, this model is easy to understand and plan around. Instead of committing to fixed costs, Stripe’s fees scale with revenue, which makes it especially attractive for online businesses that are still growing or have fluctuating sales volumes.
How much is the Stripe fee for $100?
For a standard online card payment in the United States, Stripe’s fee is typically 2.9% plus 30 cents per transaction. On a $100 payment, this means Stripe would charge around $3.20 in fees. The business would receive approximately $96.80 in its bank account.
This example helps clarify how Stripe’s pricing works in practice. The fee is taken automatically when the payment is processed, so businesses never have to calculate or collect it separately. What customers pay and what the business receives are clearly shown in the Stripe dashboard.
Actual fees can vary depending on the payment method, country, or additional services used, but this example reflects the most common Stripe pricing scenario for online card payments.
Who pays the 3% credit card fee?
In most cases, the business pays the credit card processing fee, not the customer. When a payment is processed through Stripe, the fee is deducted automatically from the transaction amount before the funds are deposited into the business’s bank account. Customers usually see only the final price they agreed to pay.
Some businesses choose to account for this fee in their pricing by slightly increasing product or service prices. Others may pass it on explicitly in certain industries, depending on local regulations and customer expectations. Stripe itself does not decide who absorbs the cost; it simply applies the processing fee to the transaction.
From a practical standpoint, Stripe is designed to make the fee predictable and transparent for businesses. This allows companies to plan their pricing and margins without needing to manage card fees separately.
Is Stripe completely free?
Stripe is free to sign up for, but it is not completely free to use. There are no setup fees, monthly fees, or subscription costs for a standard Stripe account. Businesses only pay fees when Stripe successfully processes a payment.
Each transaction comes with a processing fee, which is deducted automatically before the payout reaches the business’s bank account. This means that if no payments are processed, there are no charges. The costs are directly tied to activity rather than access to the platform.
This pricing model often causes confusion. Stripe is free to start with and easy to try, but it is not a free payment service. Its value comes from providing payment infrastructure without upfront or fixed costs.
Stripe vs PayPal (are they the same?)
Stripe and PayPal are often compared, but they are not the same. Both allow businesses to accept online payments, yet they are built around different models. PayPal is a consumer-facing platform with user accounts and balances, while Stripe focuses on providing payment infrastructure for businesses behind the scenes.
With PayPal, customers often pay using a PayPal account or balance, and funds may sit inside PayPal before being transferred to a bank. Stripe does not work this way. Customers usually pay with cards or other payment methods without interacting directly with Stripe, and funds are routed to the business’s bank account through scheduled payouts.
Because of this difference, Stripe is often preferred by businesses that want more control over the checkout experience and a cleaner payment flow. PayPal can feel more familiar to consumers, but Stripe is designed to be invisible, flexible, and easier to integrate into custom websites and apps.
Is Stripe the same as PayPal?
No, Stripe is not the same as PayPal, even though both are used to accept online payments. PayPal is designed around user accounts and balances, allowing customers to store money and pay from a PayPal wallet. Stripe does not offer consumer wallets and does not require customers to create accounts.
Stripe’s role is to process payments in the background and transfer funds to the business’s bank account. Customers typically pay with cards or other supported methods without realizing Stripe is involved. This makes Stripe feel more like payment infrastructure than a payment destination.
In practice, PayPal is often chosen for its consumer recognition, while Stripe is chosen for flexibility and control. They solve similar problems, but in fundamentally different ways.
Is Stripe cheaper than PayPal?
Stripe is not always cheaper than PayPal, but in many cases the costs are similar. Both platforms charge transaction-based fees, and for standard online card payments their pricing often falls within the same range. The difference usually becomes clear when looking at how the fees are applied and what the business is paying for.
Stripe’s pricing is generally more predictable and transparent, especially for card payments. PayPal may include additional costs depending on how customers pay, such as using a PayPal balance, currency conversion, or cross-border transactions. This can make PayPal feel more expensive in certain scenarios, even if the base rates appear similar.
For businesses that rely heavily on card payments and want a simple fee structure, Stripe often feels more cost-effective. PayPal can still make sense when customers strongly prefer it, but Stripe tends to offer clearer pricing and fewer surprises as a business grows.
Stripe vs PayPal: when does each make sense?
Stripe makes the most sense for businesses that want a seamless, custom payment experience and plan to scale online. It works especially well for SaaS companies, subscriptions, platforms, and businesses that rely primarily on card payments. Stripe’s strength is in staying invisible to customers while giving businesses control over how payments are processed and paid out.
PayPal makes sense when customer familiarity is a priority. Some customers prefer paying with a PayPal balance or using an existing PayPal account, and in those cases offering PayPal can reduce friction at checkout. It can be particularly useful for consumer-facing businesses with an audience that already trusts and expects PayPal as a payment option.
For many businesses, the choice is not strictly one or the other. Stripe often serves as the core payment processor, while PayPal is added as an optional method for customers who prefer it. When flexibility, clean payment flows, and long-term scalability matter most, Stripe is usually the better foundation.
Can you make money on Stripe?
Stripe itself is not a way to make money. It does not generate income or pay users for using the platform. Instead, Stripe is a tool that processes payments for businesses that are already selling products or services online.
People often ask this question because they see Stripe involved in transactions and payouts. What actually happens is that Stripe enables businesses to collect money from customers and then transfers those funds to their bank accounts. Any money a business “makes” comes from its sales, not from Stripe.
In other words, Stripe helps you get paid, but it does not create revenue on its own. Its role is to support existing business models by handling payments reliably, not to act as a source of income.
What people actually mean when they ask this
When people ask if they can make money on Stripe, they are usually not asking about Stripe itself. What they are really trying to understand is whether Stripe can be used as part of an online business to collect payments and receive payouts. The question often comes from beginners who are still connecting the idea of selling online with the tools that make payments possible.
In many cases, this question also reflects confusion between payment platforms and income platforms. Stripe is sometimes mistaken for a marketplace, investment app, or earning system, when in reality it is none of those. It does not attract customers or generate sales on its own.
What Stripe actually provides is the ability to monetize an existing product or service. If there is something to sell, Stripe can help process the money. If there is no business behind it, there is nothing to earn from Stripe itself.
Stripe as infrastructure, not income source
Stripe should be understood as infrastructure, not an income source. It provides the technical and financial foundation that allows businesses to accept payments, but it does not play any role in generating demand or sales. Stripe moves money; it does not create it.
This distinction is important because it sets realistic expectations. Stripe does not function like a marketplace, a platform that pays users, or a system where money accumulates on its own. It only becomes relevant once a business already has customers and transactions to process.
Seen this way, Stripe’s value is in reliability and scale. It supports revenue by making payments work smoothly in the background, allowing businesses to focus on what actually generates income: products, services, and customers.
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Stripe processes online payments for businesses. It securely moves money from a customer’s card or bank to the business’s bank account, handling authorization, security, and payouts in the background. Stripe does not act as a wallet for customers and is usually invisible during checkout.
No, Stripe and PayPal are not the same. PayPal is a consumer-facing wallet with user accounts and balances, while Stripe is a payment processor built for businesses. Stripe works behind the scenes and does not require customers to create accounts.
Stripe does not hold money in a wallet like PayPal. Payments go through a short processing period and are then automatically paid out to the business’s bank account. The delay exists for settlement and security, not to store funds long-term.
Stripe is considered safe and legitimate. It follows major payment industry security standards and is trusted by millions of businesses worldwide. Stripe is designed to reduce risk by securely handling payment data and minimizing exposure for businesses.
For standard online card payments in the U.S., Stripe typically charges a percentage of the transaction plus a small fixed fee. The exact amount depends on the payment method and location, but there are no monthly or setup fees for basic usage.
Stripe is free to sign up for, but it is not free to use. There are no upfront or monthly costs, but Stripe charges a fee for each successful transaction. If no payments are processed, there are no charges.
Stripe is not always cheaper than PayPal, but its pricing is often more predictable. Fees are generally straightforward for card payments, while PayPal costs can vary based on how customers pay and additional services used. For many businesses, Stripe feels more transparent as they scale.