Square Credit Card Processing – Is It Right For Your Business?

Square Credit Card Processing – Is It Right For Your Business?

Square Credit Card Processing – Is It Right For Your Business?

Over the past few years Square has taken a large portion of the small business world from big name credit card processors. The commercials show sleek POS systems, mobile swipers and really enthusiastic yoga instructors accepting payments from their customers in the middle of a park on their iPhones. It looks really easy for both the merchant and for the customer, but my mother always taught me – if it looks too good to be true, it probably is.

Square credit card processing comes at a premium. At 2.75% per swipe for Visa, MC, Discover and Amex, small business owners and sole proprietors are getting beaten over the head with fees and probably don’t even know it. It looks appealing because there are no transaction fees associated with the account and swiping Amex at under 3% is a dream, but let’s be realistic on a few points:

  • Most mobile swipe percentages are under 2%
  • Most transaction fees are only around 7-10 cents on the swipe
  • Amex is not as popular as Visa and MasterCard

So let’s use Square’s example that they have on their website with the 2.75% swipe rate: Swipe $100 and get $97.25 in your business bank account in two business days. Okay, not bad.

Let’s use Choice Merchant Solutions swipe fee of 2.59% with no transaction fee model: Swipe $100 and get $97.41 in your business bank account with next day settlements.

Or, let’s use a different Choice Merchant Solutions model of 2.49% with a 10 cent transaction fee: Swipe $100 and get $97.41 in your business bank account with next day settlements.

Even though the savings on one transaction is only 16 cents, those dollars can add up quickly.

The second Square credit card processing conundrum that we see a lot of is holds on merchant’s funds. Funds can be held upward of 90 days and Square may require copious documentation on the merchant’s end to obtain their funds. So swipe $100 and get nothing is unfortunately what happens to many of their customers. The merchant has to be very aware of Square’s seller agreement and the following portions specifically: Reserve Policies, Card Not Present Processing Limits, Risk and Fraud, Business Types, Volume and High Ticket Amounts, and Chargeback Policies. While all of these items are important when considering the use of any merchant account, Square seems to be hyper sensitive.

In this case, Square’s reserves and holds are triggered by their risk algorithms and don’t seem to be as flexible as a standard merchant account. Although it may be a great solution for smaller businesses and sole proprietors who don’t want to deal with transaction fees and other line items, the holds and reserves may scare some away.