When Square Is Good For You

One of our goals at Corporate Tools® is to help our clients get better credit card processing contracts and better rates. That means we’re used to fielding questions about Square—one of the most well-known and most popular credit card processors out there.

What follows is an overview of Square’s pricing, products, and services. It isn’t a “review” in the traditional sense (we aren’t going to be Square’s cheerleader or its detractor), but simply a no-nonsense discussion of what individuals and businesses interested in Square’s services need to know.

What Is Square?

Square is a third-party payment processor and financial services company best known for its mobile card payment services and technology.

Most people have heard of Square if they’ve heard of any credit card processors. This is because Square’s payment technology opened up the world of accepting credit cards to ordinary people. That clown in the park selling balloon-animals and swiping cards for payment? You (and your happy kid) probably have Square to thank.

And it’s hard to deny that Square was a real game-changer when it arrived on the scene in 2009. The card payment industry was (and generally still is) so old-fashioned and risk-averse that it can be tough for hobbyists and very small businesses to access the merchant services and get the equipment they need to process credit card payments.

Square built its business around appealing directly to this neglected class of potential merchants.

Square’s Pricing, Products & Services

In our view, there’s a lot to like about Square—including a low barrier to entry, user-friendly technology, a free online store (if you need it), and predictable rates that just about anyone can understand.

Some of these advantages are also potentially disadvantages, depending on the nature of your business, so we’ll cover both sides of that equation below.

Square’s Accessibility

One of Square’s main claims to fame is its easy accessibility—and that claim is well earned. In fact, just about anyone (apart from some prohibited businesses) can accept credit card payments through Square. There are no credit checks, no start-up fees, and no monthly fees unless you sign up for one Square’s numerous add-on services, and some of Square’s basic offerings—including its magstripe reader and point-of-sale (POS) app—are free.

All you really need to get started with Square is a smart phone or tablet and the right Square hardware, and you can start accepting card payments almost immediately.

Account Instability & Funding Holds

But that ease and immediacy has a potential downside, as well. When you sign up with Square, you won’t go through the intense vetting process typical of more traditional credit card processors (such as Helcim) and acquiring banks. Instead, Square will typically just welcome you into the family and then scrutinize you later (like a lot of real families!), and that scrutiny can sometimes result in terminated accounts and/or frozen funds.

Square can hold or freeze your funds for all sorts of reasons, including sudden increases in sales volume and major fluctuations in your average ticket size. To get a sense for the scope of this problem, check out Square’s BBB reviews (though you should definitely take those reviews with a grain of salt). It’s likely one of the most common Square customer complaints you’ll find.

Square’s Credit Card Processing Fees

Square’s basic offerings—its default point-of-sale (POS) system and magstripe reader—are free, so how does Square actually make its money? Mainly by charging credit card processing fees and selling additional payment technology and add-on services—all items we’ll cover in detail below.

Square’s Flat-Rate Pricing Model

Square uses a flat-rate pricing model and charges one of three transaction rates for all transactions involving its default POS software:

2.6% of the transaction total + $0.10 per transaction for card-present transactions
3.5% of the transaction total + $0.15 per transaction for manually keyed-in transactions
2.9% of the transaction total + $0.30 per transaction for online transactions

Additionally, businesses that process payments using the Square for Retail software or the Square Appointments Software pay the lower rate of 2.5% + $0.10, but these software options come with additional monthly subscription fees.

Pros of Square’s Flat-Rate Pricing
The benefits of Square’s flat-rate pricing model come down to its simplicity and predictability. Square’s credit card processing fees are the same for all card brands and types—Visa, Mastercard, Discover, and American Express—including credit cards, debit cards, prepaid cards, and rewards cards.

So it’s fairly easy to predict what your costs based on your average sales and the types of payments you usually process. And you won’t see your costs rise and fall for reasons you can’t control—such as a customer paying with a high-end rewards card.
Cons of Square’s Flat-Rate Pricing
But this sort of simplicity and predictable isn’t necessarily a good thing for all businesses. If you process a lot of transactions and have a fairly high sales volume, for instance, even Square’s lowest rate for card-present transactions can have quite the impact on your bottom line.

For example, let’s imagine three businesses that each process $20,000 in card-present payments per month and yet have very different average tickets—$400, $40, and $4.

In this scenario, the 2.6% part of Square’s processing fee will stay the same—$520 for all three businesses—but that little $0.10 fixed transaction fee will make all the difference in the world to what each business pays out to Square:

The business with a $400 average ticket will process approximately 50 transactions per month and pay out a mere $5 in per transaction fees for a total of $525.
The business with a $40 average ticket will process approximately 500 transactions per month and pay out $50 in per transaction fees for a total of $570.
The business with a $4 average ticket will process approximately 5,000 transactions per month and pay out a whopping $500 in per transaction fees for a total of $1,020!

That last case might make “simplicity and predictability” look more like problems than solutions for some types of business.

Does Square provide custom rates?

Yes. Square offers custom rates for businesses that have both an average ticket size over $15 and process more than $250,000 in card payments. These aren’t really “negotiable” rates (Square’s team will decide what your rates will be), but they offer one way for larger businesses to take advantage of Square’s technology and services while lessening the impact of Square’s otherwise high credit card processing fees.

Does Square have chargeback fees?

No. Unlike much of its competition (including PayPal), Square doesn’t add on service fees for individual chargebacks, which are payment disputes typically initiated by a customer. When a chargeback occurs, Square will simply place a hold on your account for the amount of the disputed funds (if the funds are there) or debit the amount from your bank account (if the funds in your Square account are lacking).

Learn more about chargebacks, how to fight them, and how to avoid them at our comprehensive guide on Credit Card Chargebacks.

Are there alternatives to Square’s flat-rate pricing?

Yes—although not from Square. In general, most credit card processors offer either flat-rate pricing (like Square), tiered pricing, or interchange-plus pricing.

Of the three options, interchange-plus pricing is the most transparent because you can actually view and analyze your overall processing costs—distinguishing between non-negotiable fees set by the credit card networks and “markups” added on by your payment processor. Interchange-plus plans are also usually less expensive in the long run for higher-volume businesses that process a lot of credit card payments.

You can learn more about interchange-plus pricing and the other available payment models at our guide on Credit Card Processing Fees.

Square’s POS Software

Square’s basic POS software is free—there are no startup costs or minimum monthly fees—which means you’ll simply pay credit card processing fees for each transaction.

Square’s POS software is also surprisingly sophisticated for a free app. It includes inventory tracking features, employee management options, and even the ability to work offline. For individuals and very small businesses with fairly simple operations, Square’s basic POS system is probably all you’ll need.

Of course, Square offers additional paid options as well, and these aren’t necessarily cheap. Here’s a quick run-down of the additional software options Square has to offer and the prices for each:

Square for Restaurants
This software option, designed for (you guessed it) restaurants and includes restaurant-related perks like the ability to alter menus, manage server tips, process takeout orders and deliveries, and design floor plans.

It’s generally a pretty sophisticated and user-friendly restaurant POS app, but it doesn’t come cheap. For each location, you’ll pay a $60 subscription fee, but this only covers one device at each location. For additional devices that run the Square for Restaurants App, you’ll pay $40 each.
Square for Retail
Square for Retail is a POS app designed specifically for the needs of retail stores. It includes the ability to build customer profiles (sales tracking, sales habits, etc.), real-time inventory management, controls for employee access, and the creation of purchase orders (among other features).

Square for Retail costs $60 a month per location, but it also comes with a slightly lower rate for card-present transactions: 2.5% + $0.10.
Square Appointments
Square Appointments is Square’s scheduling software—a means for booking appointments, sending invoices, texts, and email reminders, and collecting payments. Square Appointments is free for individuals but includes monthly fees if you’re a business with employees ($50 a month for business with 2-5 employees, and $90 a month for businesses with 6-10 employees).

One positive feature of the paid plans, however, is that they come with a lower processing rate: 2.5% + $0.10 for card-present transactions. Individuals, however, pay the ordinary 2.6% + $0.10 rate.
Square’s Add-On Subscription Services
Square also offers a wide range of add-on services that involve subscription fees, including payroll services, capital services (such as PPP loans), loyalty programs, marketing services, and more.

We aren’t going to cover the details here (there are too many and too many variables affecting pricing), but you can find the relevant information and pricing at Square’s website.

Square’s POS Hardware

Square offers a full suite of credit card payment processing equipment—from its free magstripe reader to more sophisticated card readers, terminals, and registers. Whether these options are right for your business will depend, of course, on your processing needs and the price you’re willing to pay.

Here’s a quick overview of the free and paid credit card processing equipment that Square can deliver:

Square Reader for Magstripe
This is a card reader that plugs into your mobile device and that can be used to swipe cards for payments. It’s cost effective, of course, because it’s free, but it isn’t capable of processing EMV chip card payments. If you want additional card readers, however, you’ll pay around $10 for each of them.
Square Reader for Contactless and Chip
The Square Reader costs $49 and allows you to process EMV chip card payments, contact-less card payments, Apply Pay, and Google Pay. Importantly, the Square Reader doesn’t have card swiping capabilities, but you’ll still get Square’s free basic reader for magstripe as part of the package. You’ll simply need to carry around both devices in order to accept every kind of payment.
Square Stand for Contactless and Chip
The Square Stand works with an iPad and and will allow you to dip, tap, or swipe cards for payment, and it includes a swiveling dock that can make your Square Stand work as a register at your counter if need be. The Square Stand costs $199 or $18 a month for 12 months.
Square Terminal
The Square Terminal is Square’s answer to the traditional credit card reader. It will allow you to tap, dip, or swipe cards, along with accepting Apple Pay and Google Pay. The Square Terminal costs $299 or $27 a month for 12 months.
Square Register
The Square Register is Square’s complete point-of-sale (POS) system. It includes a touchscreen for you and a customer-facing screen where customers can swipe, tap, and dip their cards. The Square Register costs $799 or $39 a month for 24 months.
Square’s Online Store
Square’s online store is probably one of the coolest things about Square for individuals and small businesses that need to make sells online.

Does Square charge hidden fees?

One nice thing about Square is that it generally doesn’t charge hidden fees. What you see is typically what you get. Visit Square’s website, and you’ll find admirably clear explanations of their rates, the types of technology and services they offer, and the differences between their free and paid options.

Of course, that doesn’t mean your total costs when you deal with Square will always be obvious. Square’s pay-as-you-go and buy-only-what-you need philosophy is one reason why it provides so many types of equipment and variations on its services, but that wealth of options can also lead to confusion. We recommend carefully examining Square’s website before signing up and selecting the equipment and services you prefer. Ultimately, all the details are there, but it will take some digging on your part. The detailed discussion in this review can help.

How Fast Does Square Transfer Payments?

It typically takes between 1-2 days for Square to deposit the funds from payments in your bank account. If you need faster deposits, however, you can pay a 1.5% fee on each transaction for same-day or instant transfers.

When Is Square Good For You?

Despite providing products and services that could work for just about any business, Square’s offerings are still mainly suited to individuals and small- and medium-sized businesses. This includes start-ups, coffee shops, food trucks, occasional sellers (such as hobbyists, people selling at yard sales, farmers markets, crafts fairs, and so on), and other businesses just now making the move to accept credit card payments.

This is mainly because of Square’s relatively high credit card processing fees and its use of a flat-rate pricing model. But it’s also because Square is a payment aggregator and doesn’t provide dedicated merchant accounts for processing credit card payments. By “payment aggregator” we simply mean that Square, like many other third-party payment processors, provides merchants with access to an aggregated merchant account that processes payments for numerous businesses at the same time.

Businesses that process a lot of card transactions and have a fairly high sales volume, however, will typically benefit most from starting a dedicated merchant account with a traditional merchant account provider.

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