Unlike most Square reviews (squareup.com & square.com), this Square Up review primarily covers the topics that matter to most merchants and small business owners rather than Square’s technology. Square is often called “Square up” or “Squareup” because of the domain that Square uses for its website; however, the official name for this company is “Square.” For the purposes of this review, the names will be used interchangeably.
Founded in February of 2009 by Jack Dorsey, who is also the founder of Twitter.com, Square has seen tremendous growth in a very short amount of time. Much of the company’s success can be attributed to the fact that Square has ingeniously broken the mold of credit card processing by removing the traditional barriers-to-entry that restricted processing services to actual businesses and instead brings credit card acceptance to the individual, or essentially anyone and everyone.
Signing up for the company’s payment processing service is simple: iPhone, iPad, and Android users simply fill out a quick form, download the Square app, and then await the arrival of the Square up reader in the mail. The Square credit card reader plugs into the headphone jack of the phone or tablet, thereby making it a mobile credit card terminal. In fact, Square’s model has been so successful that it has attracted big name competitors such as Intuit (GoPayment) and North American Bancard (Pay Anywhere), as well as numerous others both domestically and internationally.
Other Square Services
Since the launch of its card reader and mobile app, Square has rolled out several other payment services for both business and personal use.
Square Register is a point-of-sale (POS) system that provides extra features not included in the company’s mobile app, including analytics, sales reporting, staff management, and a customizable item library. The service, which is free to download and optimized for the iPad, also allows merchants to set up loyalty programs and send digital receipts.
Square Market is an online store directory for Square merchants. Merchants with an existing Square account can create an online profile for their store within the Square marketplace for free. They may then sell their products through the Square market for the usual rate of 2.75% per transaction.
Square Cash is a direct peer-to-peer cash transfer service that is linked to a user’s debit card. Square Cash sends payments via email and allows for free transfers of funds between users. The service is not targeted at business owners, but they may use it to make payments outside of a business setting.
|Key Points – Sales & Marketing|
|Uses independent resellers?||No|
|Promotes deceptive rate quotes?||No|
|Discloses all important terms?||No|
Square differs greatly in how it markets and sells its service in comparison to traditional credit card processors. Where most merchant account providers utilize poorly trained outside independent agents who are focused on setting high fees in exchange for big commissions, Square relies mostly on online marketing and partnerships with retailers and cell phone service providers, most notably partnering with Starbucks in 2012. Nearly all of Square’s customers sign up directly through the homepage of the company’s website or by purchasing a reader at a store with a mail-in rebate covering 100% of the cost. Square has also benefited from an enormous amount of online buzz and word-of-mouth promotion.
Square markets its pricing with a straightforward and easy-to-understand message (covered later in this review); however, the company fails to mention anything about its fund holding and risk mitigation policies in its marketing materials and advertising placements. These policies have been reported to cause significant problems for many merchants, and some have even complained of large financial losses. Due to the importance of these policies, and the fact that Square allows merchants to run transactions that may trigger holds without any prior warning, many have complained of misleading marketing by the company. Hence, we have lowered Square’s grade in this section to a “C-” rating.
Square Marketing Example
|Key Points – Costs & Contract Terms|
|Key-in rate:||3.5% + $0.15|
One of the most appealing aspects of Square is that, unlike traditional credit card processors, Square credit card processing has only one fee: the processing fee of the transaction. There are no other fees that are typical of credit card processing, such as activation fees, monthly fees, gateway fees, PCI Compliance fees, downgrade fees, and early termination fees. Square has no additional monthly fees whatsoever as well as no monthly minimum processing fees or requirements.
Square now offers a single pricing option for all merchants: pay a flat rate of 2.75% for swiped transactions and 3.5% + $0.15 per keyed-in transaction. The company formerly offered a plan that included a flat monthly fee of $275 and 0% on swiped transactions up to $250,000 in processing per year, but this plan will no longer be available as of February 2014.
Although the company’s transaction rate is higher than the “Qualified” rate of most traditional merchant accounts, it is comparable to the “Mid-Qualified” and “Non-Qualified” downgrade surcharges that about 80% of most transactions experience with a traditional merchant account anyway. The rate is, however, much more expensive than the Interchange Pass-through rate pricing model.
Square does not verify the credit history of its customers prior to approving an account, so it sets a few limitations to avoid potential losses to fraud.
Square states that there is no limit to the amount of money that can be accepted per transaction or per month through its service – which is only partially true. Instead of setting processing limitations and denying transactions once a user reaches a limit (a tactic used by most other providers), the company relies on other methods to mitigate potential losses due to fraud. These methods allow merchants to accept an “unlimited” single transaction amount as well as “unlimited” monthly sales volumes, but with a catch.
Until November 2013, Square placed holds on funds of card-not-present sales for 30 days if more than $2,002 was charged within any rolling seven-day period. This meant that if merchants keyed in $2,100 in sales within a seven-day period (either in a single transaction or in multiple transactions), the extra $98 ($2,100 – $2,002 = $98) would be held by Square for 30 days. This policy generated a lot confusion among users because Square did not provide any warning before the $2,002 limit was reached. Square now claims that merchants can process transactions of any type and any size without having to worry about a processing limit, but this claim is not entirely accurate.
The primary tactic Square currently uses to limit fraud is much less transparent than its rolling reserve policy and is the reason for the company’s low score in this section. Square appears to rely on undisclosed algorithmic “risk factors” to place automatic holds on transactions that it deems suspicious. The system appears to flag a high number of legitimate transactions and can cause serious problems for some merchants. Numerous complaints have surfaced that Square has randomly and without explanation, or notification, placed lengthy holds (exceeding 30 days) on their funds – even with swiped transactions. Additionally, merchants report that Square never notified them of the funding hold or the reason for placing it, and that they only discovered because they stopped receiving deposits from their sales.
Square’s policies regarding fund holding and risk mitigation are very murky and make the service quite risky for higher volume merchants. It appears that the company needs to do a much better job of educating merchants about the types of transactions that have a risk of being held. This includes issuing a warning prior to letting them run transactions that will be held, notifying when transactions have been held, and communicating with the merchant through the hold process. Since fund holding can greatly impact a merchant’s operations, the grade for this section will remain low until Square improves the system.
|Key Points – Complaints & Service|
|Total complaints:||Over 1,200|
|Live customer support?||No|
|Most common complaint:||Fund holds|
Another area that Square comes up short in this review is in its customer service. For a company that has only been around for a few years, Square is racking up a lot of complaints (over 1,200 in just our comment section below). The majority of the complaints fall into three areas: virtually nonexistent phone support, misunderstanding and nondisclosure of its former $2,002 card-not-present deposit hold policy, and reports of random fund holding exceeding 30 days with no explanation or communication from Square.
The company appears to rely too heavily on customer service provided by email and social media. This problem can pose a big drawback for many business owners, especially for those who are not willing to wait for a response through email, Twitter, or other social media channels. The company does have a phone number (888-642-0662) but the majority of calls are directed to a voicemail system that instructs users to visit the company’s online support articles and then promptly disconnects.
Regardless of how they contacted the company, merchants are reporting wait times of several days before getting a response from Square. Numerous users have also reported that Square has failed to respond to their support requests entirely. For many reviewers, it seems inexcusable for a financial services company this large to not have readily available phone support.
Square could greatly improve its rating in this section by adding a customer support phone line and better communicating its hold policies.
|Key Points – BBB Report|
As of this update, the Better Business Bureau (BBB) is reporting an “A” rating for Square despite 1,022 complaints filed in the last 36 months. This complaint total is up from 812 complaints as of our January 2014 update and 603 complaints as of our July 2013 update, and has skyrocketed from just a few dozen complaints since we first published this review in April of 2011. Surprisingly, the BBB has also raised Square’s grade from a “B+” in July of 2013 to an “A” despite the rising complaint volume.
Due to the high complaint count for the short time in business, we have adjusted the rating to a “D” for the purposes of this review. To learn more about about why we adjust BBB ratings for our scoring purposes, please see our Rating Criteria.
Square is definitely on the right track with providing an easy credit card processing solution with no long-term commitments and no monthly fees. The service is proving to have some major drawbacks for higher volume merchants, though, because of murky fund holding policies and poor customer support. It appears that Square is best suited for individuals who have an occasional need to accept a credit card payment, such as babysitters and flea market vendors. The service does not appear to suit very well merchants that either have a high volume of credit card sales or that sell high-ticket items.
This review was originally published on 4/28/11 and last updated on 7/7/2014.
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