Square is a large credit card processor in the United States which has come under fire in recent months and years for increasing prices, one-size-fits-all products, and customer service concerns. Many small business owners go with Square due to their far-reaching marketing campaigns and name recognition. Yet when it comes to credit card processing, the first available option might not be the best.
So what exactly is happening with Square’s prices? We will cover this in detail below, as well as how these changes will impact businesses who are already using Square or looking to use Square in the future.
How Does Square Credit Card Processing Pricing Work?
Square, like many other credit card processors, deducts their fees directly from electronic transactions before the money even hits your account. Square features no fees for many common incidental charges, which appeals to many small businesses. This is great for transparency, however, their flat rates make up for this by charging all businesses the same no matter their unique situation.
In many ways, Square’s credit card processing pricing is built to be as simple as possible to appeal to a wider customer base. Everyone is charged the same. This is great for simplicity but bad for businesses who want to find unique options.
Square Raises Fees for Small Businesses
So what is the Square pricing increase exactly? Here are the facts:
Square’s price increase has already taken effect, having gone live on November 1st, 2019.
This increase marks the first Square credit card processing pricing change since 2011.
Square’s previous rate per transaction was 2.75 percent.
The new rate includes a 2.6 percent rate PLUS a flat 10 cent charge for each credit card transaction.
These rates only apply to tapped, dipped, or swiped credit card transactions. Other transaction types such as manually entered payments, keyed in payments, or card on file payments may carry a higher rate of 3.5 percent PLUS a flat 15 cent charge.
It is important to understand that this increase is not an increase for all businesses. As we will discuss in greater detail below, the industries which will be hit hardest by these changes are those who process many transactions for relatively low dollar amounts. Most typical transactions will cost business owners more with Square’s new rates.
The cut-off where the new rate actually becomes less expensive is near $100 purchases. With the old pricing rate, merchants would be responsible for paying $2.75 per $100 transaction. With the new pricing system, they would only pay $2.70. If your business’ typical transaction is lower than $100, you are almost certainly looking at higher credit card processing rates with Square.
Square Payment Processing FAQs
Why is Square changing their payment processing fees?
To quote the Square website: “The updated pricing structure takes into account the full cost of operating our business and all market forces.” There is no question that companies must occasionally raise their prices to adjust to the market. The biggest difference is not the actual price increase, but the flat fee on top of the percentage rate which had previously not existed.
Who is hit hardest by Square’s pricing increase?
There is no question that high volume, low cost per transaction businesses will be hit hardest. A common example of such a business is the local coffee shop. Coffee shops are already hit hard by credit card processing fees, which is why some go so far as to go cash only or require minimum purchases. Let’s take a look at a typical coffee shop transaction and how Square’s price increase will make an impact:
A cup of traditional coffee comes to about $3.00. The old pricing model would have a coffee shop paying a processing fee of $0.0825, or just over 8 cents. The new pricing model would have a coffee shop paying $0.178, or nearly 18 cents! The average coffee shop selling a cup of coffee will pay over double their previous processing costs with Square’s new fee structure.
How can I avoid paying this increased rate?
Unfortunately, current Square users are already paying higher rates. The only way to avoid paying higher payment processing fees is to look for another merchant services provider. Thankfully, there are reputable merchant service providers who work with small business owners to develop white-glove payment processing features. Square is a large company that deals with volume to make ends meet. Many smaller firms will be more flexible when it comes to the terms of your agreement.
True Merchant Offers Affordable Payment Processing Options
True Merchant is not a multinational corporation. We take pride in getting to know all of our clients personally before offering tailor-made merchant service solutions. Unlike larger firms like Square, we have the flexibility to offer a wide suite of products and services with transparent billing and rates which fit your business’ needs.
To learn more about how we can help your small business grow, please call or email a member of our qualified merchant services team today!