Square – Transparent and Easy Can Be Expensive!

Ginger HollowellCredit Card Processing/ Merchant ServicesLeave a Comment

Is Square Transparent?

Square now has 3 rates for processing. Easy and transparent is not quite as easy and transparent as it used to be, because you need to understand when the different rates will be applied to your transactions. But nevertheless, the rate is still posted on the Internet in plain sight. But just because you can see the rate, is it “Transparent?” Most businesses take credit cards in multiple ways — swiped, keyed-in, and over the Internet. Your fees at the end of the month will be a combination of all 3 types.  Transparency becomes fuzzy. Here is a breakdown of Square’s new rates:

Swiped cards 2.6% and $.10
Ecommerce cards 2.9% and $.15
Keyed into a POS device 3.5% and $.15

And at the end of the month, you do not get a breakdown of how many cards in each category you transacted. Your effective rate, the fees divided by your volume, is a rate that varies every month depending on how many cards you took in each category of swiped, Ecommerce, and keyed.  Transparency is now definitely fuzzy.

Is Square Easy?

Square does have an easy and quick way to sign up.

Is Square Expensive? Answer is YES and here is why:

Maybe you take a majority of cards swiped and so you think 2.6% and $.10 is OK, and it is easy to sign up. Square has built a brand, and everyone knows what Square is. But is it a good rate?

If you sell ice cream and your average ticket is $10, then 2.6% is $.26, and then add $.10 to make your average cost $.36. Most small tickets are debit cards and the interchange cost rates vary from $.15 to $.25, so Square is making somewhere between $.21 to $.11 per transaction. If you run 1000 transactions per month, then square is charging you $110 and $210 per month for their service.

If you sell transmission service and the usual ticket is $1000 swiped, then 2.6% is $26 plus $.10 or $26.10. Most of your cards are rewards cards which have a cost of 1.8% and $.10. The difference between 2.6% and 1.8% is .8%, and multiply that by $1000 and the profit on that transaction for square is $8. If you run 40 transactions per month, you are paying Square $320.

In both cases, Square is cleaning up, all because you chose easy and transparent versus understanding the interchange cost of your transactions. Lack of education is expensive!

Square has equally priced their Ecommerce and Keyed-in rates appropriately to make good money for themselves, counting on the consumer to pick “Transparent” over taking the time to understand the nature of their own types of transactions and the cost of the various wholesale interchange rates for their types of transactions.

So take a little bit of time and energy to get educated. It will be well worth it.

We suggest that you visit with a merchant services company, like Electronic Money Company, that will give an honest, upfront, comparison that will be TRANSPARENT FOR REAL. Take the time to understand the comparison and ask questions. Make sure you truly understand the types of transactions you typically take.

We suggest that you choose a Cost-Plus pricing structure. Cost-Plus means that you pay the actual cost of the transaction plus a % and transaction fee for the processors. Then you will know exactly what you are paying your processor because you can multiple that surcharge “Plus” times your volume and the transaction fee by the number of transactions you take on average. Contact Us and give us a try. You will like our quote and you will like our customer support even more.