Square Review

Square’s Fees are Simple

One of the most appealing aspects of Square is that, unlike traditional credit card processors, Square credit card processing has only one fee: a per-transaction processing fee. The company does not charge any 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.

Fees for Square Reader and Square Stand

Square used to offer a very competitively priced magnetic stripe card reader, but following the switch to chip cards in the U.S., users are encouraged to purchase the new chip card reader at a still-low cost of only $49. The company offers a single processing fee option for all merchants using Square Reader or Square Stand, it’s two flagship pieces of hardware: a flat rate of 2.60% plus $0.10 for swiped transactions and 3.5% + $0.15 for keyed-in transactions. Alternatively, the company provides other rates for merchants from businesses in different industries. Square for Restaurant’s rate is also 2.60% plus $0.10 while Square for Retail charges 2.5% plus $0.10. Invoice payments are processed at a rate of 2.75%. The company allows merchants to deposit into their bank accounts on the next day for free or instantly for 1% of the amount being transferred.

Square 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 was discontinued as of February 2014.

Square Register Costs and Fees

The revamped Square Register that Square launched in October 2017 comes with a lower per-transaction rate of 2.5% plus $0.10. In order to receive this lower rate, merchants need to purchase the Square Register itself for either $799 upfront or 24 payments of $39. It will take a long time before the savings most merchants experience on a per-transaction basis will offset the cost of the equipment, so merchants should be sure that they have a need for the Square Register hardware before buying it.

Square Terminal Costs and Fees

Merchants can buy Square Terminal outright for $399 or pay 12 monthly installments of $37. Square also offers a $300 statement credit for new Square users, which is intended to bring the effective cost of the terminal down to $99. Transactions processed through Square Terminal are cheaper than normal Square transactions but more expensive than Square Register transactions, coming in at 2.6% plus $0.10. Manually entered credit card payments will be charged Square’s keyed-in rate of 3.5% plus $0.15.

Virtual Terminal and Payment Gateway Pricing

In addition to its storefront payment processing services, the company also dedicates a portion of its website that advertises its virtual terminal and payment gateway services, the Square Online Store. Merchants making transactions through this e-commerce portal are charged a flat fee of 2.90% plus $0.30.

How Square’s Fees Compare

Although the company’s standard transaction rate is higher than the “Qualified” and debit rates 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 2.75% rate is, however, much more expensive than a competitive Interchange Pass-through rate pricing plan.

Some Things You Need to Watch Out For

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.

Square’s Policies on Holding Your Money

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 a merchant 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 of 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.

Related: How to Stop Square From Holding Your Money

Square’s Fraud Triggers Can Be Scary

The primary tactic Square currently uses to limit fraud is much less transparent than its previous 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 stating that Square has randomly and without explanation, or notification, placed lengthy holds (exceeding 30 days) on their funds—even those that were swiped in-person. When a transaction is flagged, Square will either contact the merchant to obtain additional information about the merchant or the transaction, or it will simply deactivate the merchant’s account.

More Transparency Needed For Risky Transactions

This protocol allows Square to publicly claim that it does not hold its merchants’ funds because the withheld funds technically belong to “deactivated” Square merchants rather than “active” Square merchants. 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 could result in account deactivation. Potential steps that the company could take include issuing a warning prior to processing transactions that will be held, notifying merchants immediately once transactions have been held, and communicating with merchants through the hold process.

Some Minor Improvements Could Raise Square’s Rating

In most respects, Square has very favorable pricing and contract terms for merchants. It has a simple signup process, affordable equipment costs, no monthly fees or long-term contracts, and easy-to-understand pricing. However, sudden account deactivation can greatly impact a merchant’s operations, so the grade for this section will not enter “A” territory until Square improves its risk mitigation procedure.