Square Review, Rates - Fees

Square Review, Rates &, Fees

Square Up's credit card processing service causes many businesses to mistake simplicity for competitiveness.

Square Up credit card processing isn't a good fit for every business. Square is best suited for individuals, or for businesses with low or sporadic sales volume or a low average sale amount. And even then, Square's poor customer service and tendency to hold funds and impose reserves makes it a gamble for any person or business.

Choosing the right credit card processing solution can make or break your business, and it's recommended that you read this entire Square review before using the service for your business.

Square has oversimplified credit card processing. This has allowed the company to grow rapidly, but at the expense and frustration of many of its users in form of deposit limits, frozen funds, and poor customer service.

See how Square compares to GoPayment, PayPal Here and others using our

Square is an Aggregator

Square Up is not a credit card processor, it's an aggregator. Paymentech is the company that processes transactions for Square, and JP Morgan Chase is the company's acquiring bank (also called a member bank).

Square's application collects credit card information and routes it to Paymentech where it is then routed through Visa or MasterCard's network to the customer's issuing bank .

Update - 12/16/2014. Square now offers an offline (store and forward) mode for merchants to accept payments even without an available internet connection.

Square uses processors and banks just like any other merchant service provider, and it's not exempt from the interchange fees that banks charge, or the assessments that Visa, MasterCard and Discover charge. Square Up pays interchange and assessment costs behind the scenes and passes these costs to its users via a bundled pricing model.

Rates, Fees &, Pricing Model

The pricing model a processor uses has a greater impact on cost than the rates and fees it charges.

Rate &, Fee Pricing

Square uses a bundled pricing model to bill its customers for credit card processing. This means it combines the three components of credit card processing costs into one single rate.

For example, banks charge businesses an interchange rate and transaction fee of 1.51% and $0.10 each time a business swipes a Visa consumer credit card. Visa makes money by charging an assessment of 0.11% and $0.0185 on the same transaction.

Adding these costs gives us the "wholesale" rate of 1.62% with a $0.1185 transaction fee. Square combines these first two components of cost with its own markup, and then bills its customers a single rate of 2.75%.

As I'll explain a little later in the review, Square's pricing is cost-effective for some businesses, and very expensive for others.

General Charges

Square Up does not charge any monthly, annual or start up fees. The only charges are the company's processing rates listed below, which vary depending on whether a credit card is physically swiped or the card number is key-entered.

Swiped Rate (Retail)

Square charges a flat, fixed rate of 2.75% of volume for all Visa, MasterCard, Discover, and American Express credit and debit card transactions. For example, a $100 transaction would incur a fee of $2.75.

Keyed Fees (Card Not Present)

Transactions that are keyed instead of swiped are charged a higher rate of 3.50% of volume plus a $0.15 per item fee. For example, a $100 transaction would incur a fee of $3.65.

Flat Rate Pricing -- Discontinued November 8, 2013

Prior to November 8, 2013 Square offered flat rate pricing of $275 per month with several very limiting restrictions.

Under this pricing model a business did not pay a percentage fee. Instead, it paid $275 per month to process up to $250,000 a year in swiped transactions. Any volume in excess of the $250,000 limit was billed at Square's typical 2.75%.

Square's flat rate credit card processing only applied to swiped transactions less than $400. Transactions of $400 or more were billed at Square's swiped rate of 2.75%, which was a charge in addition to the $275 flat rate.

It's also important to understand that Square's flat rate of $275 did not cover keyed transactions. Keyed transactions were billed at Square's typical rate of 3.50% plus $0.15, and these charges were in addition to the $275 flat fee.

The restrictions that Square has imposed on its flat rate pricing caused many businesses to pay more than $275 a month. For example, keying in even as little as 10% of transaction volume resulted in a business paying a hefty 3.50% plus $0.15 surcharge in addition to the $275 for all keyed volume.

Funding &, Deposits

Square doesn't get very high marks for the way it handles funding and deposits. The company deducts fees prior to deposits, which hinders cash flow, and it caps deposits for card-not-present businesses.

Funding Time

Below is the funding schedule from Square's Web site that outlines when deposits will show in a user's bank account.

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