by Ben Dwyer Square credit card processing isn’t a good fit for every business. It’s best suited for individuals or businesses with low or sporadic sales volume or a low average sale amount.
Square has oversimplified credit card processing. This has allowed the company to grow rapidly, but at the expense and frustration of many of its users – frustration that comes in the form of deposit limits, frozen funds, and poor customer service.
That’s not to say you shouldn’t use Square. Just be aware of the pros and cons before signing up based on name recognition. In this Square review, we’ll explore those pros and cons to help you decide if Square is the right fit for your business.
How much does Square cost?
Just want the rates?
In 2019, Square eliminated its long-standing “flat rate” and moved to a flat rate + transaction fee pricing model. Those costs depend on whether you’re taking cards by swiping or keying. Additionally, there are different rates for other plans, as noted.
| Square Rate | Monthly Fee | |
| Swiped Transactions | 2.6% + 10 cents | $0 |
| Keyed Transactions | 3.5% + 15 cents | Varies by plan |
| Online Transactions |
2.9% + 30 cents | $0 for basic, varies for advanced feature plans |
| Square for Retail | 2.5% + 10 cents | $60/month per location + $20/month per additional register |
| Square for Restaurants | 2.6% + 10 cents | $60/month per location + $40/month per additional register |
Square began adding a per transaction fee of 5 – 10 cents in November 2019. Believe it or not, Square was actually losing money on many businesses with small average tickets, such as coffee shops. The addition of the per-transaction fee was Square’s attempt to plug that money leak.
Additionally, Square has separate rates for CBD businesses. As any CBD company can attest, not many processing companies currently serve those businesses. Square’s rates for CBD reflect higher pricing more in line with “high risk” processing in general. As of autumn 2019, the rates are as follows:
| Square Pricing for CBD Sellers | |||
| In-Person (Swiped) | Online | Keyed or Card on File | |
| Rate | 3.5% | 3.8% | 4.4% |
| Per-transaction fee | 10 cents | 30 cents | 15 cents |
Rates subject to change at Square’s discretion. Custom pricing available for high-volume businesses.
Update — 3/4/2023: Square eliminates processing fee returns for businesses that issue refunds starting in April of 2023.
Update — 9/25/2019: Square eliminated it’s flat 2.75% pricing, instead offering 2.6% + 10 cents per transaction for swiped card payments. This effectively significantly reduces the benefit of using Square for small transactions.
Update — 10/28/2015: During Square’s IPO, information came out that Square lost millions of dollars by processing transactions for Starbucks.
Update — 11/11/2013: Square discontinued $275 monthly flat rate pricing as of November 8, 2013.
Square is an Aggregator
Square is not actually a credit card processor; it’s an aggregator. Paymentech is the company that processes transactions for Square, and JP Morgan Chase is the company’s acquiring bank (also called a member bank). Square’s application collects credit card information and routes it to Paymentech where it is then routed through Visa or Mastercard’s network to the customer’s issuing bank.
Does it matter?
Yes and no. Aggregators can be a good option, especially for smaller businesses and individuals that don’t need or want a merchant account with a monthly fee.
However, aggregators don’t do upfront due diligence. While the quick signup process means you can often start accepting cards same-day, it also opens you up to greater chances of unexpected account closure. With a processor that does an upfront application and underwriting, applicants are considered before approval.
With an aggregator, review often comes later. In some cases, that results in the company determining that they can’t serve your business and closing your account.
Additionally, aggregators are somewhat more risk-averse. While any processor can freeze your funds, aggregators may have lower thresholds for any activity they deem “suspicious.” Large transactions, unusual swings in volume, and other changes in processing patterns can make processors nervous. If you have situations like that, it’s better to avoid aggregators.
Rates, Fees & Pricing Model
The pricing model a processor uses has a greater impact on cost than the rates and fees it charges.
Rate & Fee Pricing
Square uses a bundled pricing model to bill its customers for credit card processing. This means it combines the three components of credit card processing costs into one single rate. For example, banks charge businesses an interchange rate and transaction fee of 1.51% and $0.10 each time a business swipes a Visa consumer credit card. Visa makes money by charging an assessment of 0.11% and $0.0185 on the same transaction. Adding these costs gives us the “wholesale” rate of 1.62% with a $0.1185 transaction fee.
Square combines these first two components of cost with its own markup, and then bills its customers a rate as noted in the chart at the beginning of this article. As I’ll explain a little later in the review, Square’s pricing is cost-effective for some businesses, and very expensive for others.
General Charges
Square does not charge annual or start up fees. The only charges are the company’s processing rates, which vary depending on whether a credit card is physically swiped or the card number is key-entered.
If you’re on the Square for Retail or Square for Restaurants pricing, you’ll have a monthly fee as well.
Swiped Rates
On the basic plan, Square charges a rate of 2.6% + 10 cents per transaction for Visa, Mastercard, Discover, and American Express credit and debit card transactions. If you use Square for Restaurants, you’ll also pay 2.6% + 10 cents per transaction, but with monthly fees on top of it. Square charges a $60/month fee for each location, with the first register’s subscription fee included in that price. Additional registers will cost you $40/month per register.
Keyed Fees (Card Not Present)
Transactions that are keyed instead of swiped are charged a higher rate of 3.50% of volume plus a $0.15 per item fee. For example, a $100 transaction would incur a fee of $3.65.
Monthly Flat Rate Pricing – Discontinued
Discontinued November 8, 2013
Prior to November 8, 2013 Square offered flat rate pricing of $275 per month with several very limiting restrictions. Under this pricing model a business did not pay a percentage fee. Instead, it paid $275 per month to process up to $250,000 a year in swiped transactions. Any volume in excess of the $250,000 limit was billed at Square’s typical 2.75%. Square’s flat rate credit card processing only applied to swiped transactions less than $400. Transactions of $400 or more were billed at Square’s swiped rate of 2.75%, which was a charge in addition to the $275 flat rate. It’s also important to understand that Square’s flat rate of $275 did not cover keyed transactions. Keyed transactions were billed at Square’s typical rate of 3.50% plus $0.15, and these charges were in addition to the $275 flat fee. The restrictions that Square has imposed on its flat rate pricing caused many businesses to pay more than $275 a month. For example, keying in even as little as 10% of transaction volume resulted in a business paying a hefty 3.50% plus $0.15 surcharge in addition to the $275 for all keyed volume.
The monthly flat rate pricing is no longer offered.
Funding & Deposits
Square doesn’t get very high marks for the way it handles funding and deposits. The company deducts fees prior to deposits, which hinders cash flow, and it caps deposits for card-not-present businesses.
Funding Time
Fixing a previous inconvenience, Square now offers the ability to choose your own close of day time. Square will group and send payments based on the chosen time.
Users generally register deposits in their bank account in one or two business days if sales are greater than $10. If sales are less than $10, Square will not deposit funds until sales surpass the $10 minimum. Below is the funding schedule from Square’s Web site that outlines when deposits will show in a user’s bank account.
| PAYMENT TAKEN | IN BANK ACCOUNT |
|---|---|
| Sunday 5 p.m. PDT – Monday 5 p.m. PDT | Tuesday morning |
| Monday 5 p.m. PDT – Tuesday 5 p.m. PDT | Wednesday morning |
| Tuesday 5 p.m. PDT – Wednesday 5 p.m. PDT | Thursday morning |
| Wednesday 5 p.m. PDT – Thursday 5 p.m. PDT | Friday morning |
| Thursday 5 p.m. PDT – Friday 3 p.m. PDT | Monday morning |
| Friday 3 p.m. PDT – Sunday 5 p.m. PDT | Monday morning |
Daily Discounting
Square deposits funds into users’ banks accounts using the daily discount method. This means that Square deducts fees prior to deposit.
For example, if a user key-enters a $100 sale, she will receive a deposit of $96.35, which is the gross sale amount less Square’s 3.50% plus $0.15 fee for key-entered transactions. Unlike Square, many processors utilize the more business-friendly monthly discounting method. With monthly discounting, the processor makes gross deposits throughout the month and deducts fees in one lump-sum at the end of the month. Monthly discounting provides better cash flow than daily discounting, and also makes reporting and reconciliation easier. Unfortunately, Square does not offer monthly discounting as an option.
Check out CardFellow’s article about daily vs monthly discounting to learn more.
Auto-Batching
Square automatically sends transactions to the processor for settlement at the end of each day. This is known in the credit card processing industry as auto-batching.
Auto-batching is convenient, as it helps reduce the likelihood of delays from forgetting to batch out at the end of the day.
Deposit Limit
In 2014, Square eliminated deposit limits for all existing and prospective accounts. In addition to eliminating the deposit limit, Square has removed related holds. Previously, Square’s virtual lack of an underwriting process left the company exposed to higher levels of fraud and misuse. For that reason, Square had limited deposits of higher risk card-not-present volume to just $2,002 every thirty days. Any amount beyond $2,002 was held until the following 30-day period. Any amount beyond $2,002 will be held until the following 30-day period.
Square’s high rate and fee of 3.50% plus $0.15 combined with its deposit cap of $2,002 a month makes it a very processing solution for businesses that key-enter the majority of transactions. If your business does key-enter most sales, and you’re dead set on using Square, you should request an “accelerated payment schedule” via Square’s email support.
Holds & Reserves
Credit card processors combat fraud and misuse by utilizing a thorough underwriting process before allowing a business or individual to accept credit cards. Square has bypassed this underwriting process in order to grow its user base as quickly as possible. Unfortunately for its users, this approach leaves Square very vulnerable to fraud which requires the company to take a “shoot first apologize second” approach to suspicious activity. The result is many businesses having funds held without notice for prolonged periods of time or reserves placed on deposits.
Holds
Like any merchant service provider, Square has a team of people that monitor transactions looking for fraud and other misuse. If suspicious activity is found, Square will freeze the user’s account and hold any unreleased funds for the “entire time it takes” for a thorough risk investigation. Funds are often held without notice, and Square is notorious for providing little, if any, customer service to keep people informed about the progress of a fraud investigation. As I said earlier, Square’s lack of underwriting makes the company especially sensitive to any changes in a business’s processing history, volume, or average ticket size. If your company experiences swings in volume, ticket size, or you’re expecting rapid growth, Square is not the processing solution for you.
Reserves
A reserve (often called rolling reserve or hold back) is when a credit card processor routes all or a portion of funds from your sales to a non-interest bearing account until funds in the account meet a certain balance.
For example, if a processor requires a $10,000, 5% rolling reserve on a business’s account, the processor will withhold 5% from each deposit until the balance of the reserve account reaches $10,000. It’s then up to the processor to decide at which point to release the reserve account, if ever.
A traditional credit card processor will typically notify a business if a reserve is necessary when the business applies for a merchant account. However, since Square does not have an application process, a reserve may be imposed, increased, reduced or removed at any time at Square’s discretion.
If your business operates on thin margins, a sudden reserve or more will likely be devastating. There’s no one at Square you can contact to inquire whether your business is likely to incur a reserve, so consider this carefully as you determine whether Square is right for your business.
Swiper & Compatible Devices
One of the benefits of Square’s service is that it’s completely free to get started. Square’s application runs on a user’s existing iPhone, iPad or Android device, and there is no charge for the magnetic stripe card reader (swiper) that plugs into the headphone jack.
Square also offers EMV-capable swipers to allow you to securely accept EMV chip cards. Currently, the EMV reader costs $29. Square also has a combination contactless/EMV reader. The swiper is free to businesses that qualify, or will otherwise cost $49 but include reimbursement of $49 of processing fees.
Swipers and Readers
Square’s magnetic stripe swiper is about an inch tall by an inch wide, and plugs into the headphone jack of compatible devices to collect information from the magnetic strip of a customer’s card. Once a card is read, the information is encrypted and then passed to Square application for transmission. 
Square’s EMV swiper is also a small-profile reader that plugs into a headphone jack. The swiper can be used for both chip cards and magnetic-stripe cards, providing a wider range of card acceptance possibilities. Square’s EMV swiper is expected to be available prior to the October EMV liability shift.
The combination NFC/EMV reader is approximately 2.5″ x 2.5″ square, and can be charged and then connected wirelessly, or plugged in to the Square Stand using a USB hub. The NFC/EMV combo reader also comes with a traditional magnetic stripe reader to allow you to accept older magnetic stripe credit cards.
Compatible Devices
Square’s service is compatible with iPhone, iPad and Android devices. Apple iPhones must be running iOS version 4.1 or newer, which includes the 3G, 4 and 4S versions of the phone. Apple iPads must have iOS 5.0 or newer. Android devices must be running operating system version 2.1 or newer.
Requirements subject to change. Be sure to check with Square for the most up-to-date compatibility specs.
Customer Service
Square excels at some things, but customer service is not one of them. The company goes out of its way to avoid verbal contact with its customers, and contacting Square customer service is not an easy task.
Customer service is expensive, and Square is putting its investors’ dollars toward growing its user base, not toward servicing existing users. Please tell us about your experience with Square’s customer service using the comment form at the end of this article.
Square Phone Number
Square only offers customer service by phone to businesses with existing Square accounts. Before calling, you’ll need to go to square.com/code to receive a “customer code.” The customer code is required when calling in order to reach a live customer service member through the automated recording system. Prospective customers and customers who have had accounts cancelled or frozen may be directed to email support where responses to questions and issues can take as long as week. You can give Square customer service a call at the phone number below.
Square phone number: (855) 700-6000
Square Email
Square strongly prefers email support over phone support. The company claims to answer emails within 24 hours, but the basic consensus from existing users is that Square takes anywhere from three to seven days to respond, and some people never receive a response at all. The Square email for support is listed below.
Square email: help@squareup.com
Alternately, you can contact Square via a form on the company’s Web site.
Sign Up
Square’s goal is to acquire as many new users as quickly as possible, so signing up is quick and easy. Square does not require a credit check on individual user accounts, but does require a credit check for commercial entity accounts. For typical user accounts, Square’s underwriting process is limited to a quick electronic verification of identity. However, the company does reserve the right to investigate a user more closely, and also to share user information with Paymentech (its processor).
Restricted Business Types
You wouldn’t know it from Square’s aggressive marketing, but the service is not for everyone. Like any other credit card processing service, Square has certain types of businesses that it will not work with. Take a look at section six of Square’s Merchant User Agreement to ensure your type of business is not prohibited before you sign up. If your business is prohibited, you will likely find out after you sign up when Square freezes your account and holds your money. And remember, there’s limited telephone support to get the issue resolved.
Square and CBD Merchant Accounts
In the spring of 2019, various news outlets reported that Square began a program to permit CBD sales. As of 2023, the company publishes separate rates for CBD accounts directly on its website and provides information for CBD sellers. With CBD sales explicitly permitted, businesses in that industry can consider Square for their processing needs without concern of being shut down as an unsupported business.
Is Square Right for You?
Square is a great processing solution for individuals and businesses that fit a certain profile, but Square is by no means right for everyone. It’s very important to educate yourself about how credit card processing fees work before you decide to use Square or any other processing service.
Square may be a good fit if: Your average transaction is less than $10 OR you process less than $3,000/month in credit cards. I’ll go into this in more depth below.
Business that May Benefit From Square
Certain businesses may benefit from the flat rate pricing, mobility, and lack of monthly charges that Square offers.
Low or Sporadic Processing Volume
Square’s lack of monthly charges makes it a perfect solution for individuals and businesses that don’t process many credit cards or that only process cards every now and then. Traditional credit card processors have monthly charges and usually a monthly minimum fee that makes them less competitive than Square for this merchant segment.
Low Individual Sale Amount
Square’s flat rate and no transaction fee pricing actually caused the company to lose money when it processed very small transactions, which is why Square began imposing a transaction fee in 2019.
Businesses that have an average sale of $5 may still find Square to be cost-effective. It depends on the alternatives for per-transaction fees. For businesses with many small transactions, the per-transaction fee can take a big bite of your profits. The lower the per-transaction fee, the better.
Business with Low Volume that Require Mobility
Square is a great fit for businesses that require mobility and also have low or sporadic processing volume. Businesses with monthly processing volume of about $4,000 or more will find other mobile processing service to be more cost-effective.
Businesses that Should Avoid Square
Businesses that have medium to high sales volume, key in most transactions, have fluctuations in volume or ticket size, that enjoy any level of customer service, or that can’t afford to have funds frozen without notice should opt for a traditional processor in place of Square. Additionally, businesses that process a lot of returns (such as clothing stores) may want to consider other options.
Businesses with Higher Transactions and Volume
Square’s rate is nice and simple, but it’s not really that competitive when compared with a traditional processor offering interchange plus pricing. If your average transaction is over $10 and you process more than a few thousand/month in cards, skip flat rate. Instead, find a competitive interchange plus processor.
Sign up for free at CardFellow to receive instant quotes from multiple processors to see for yourself.
Keyed Transaction Businesses
Businesses that key-in transactions instead of swiping cards should stay far away from Square. 3.50% plus a $0.15 isn’t even close to competitive for card-not-present transactions.
Fluctuations in Volume or Sale Amount
Abnormal processing behavior triggers a risk flag that may lead to frozen deposits and account holds. Square has to manage risk like any other processor, but its streamlined sign up process leaves it more exposed than traditional providers, so it tends to have a hair trigger when it comes to holding deposits and freezing accounts. Businesses that have fluctuations in sales volume or average sale amounts should not use Square.
Customer Service is Required
Square is not known for good customer service. Even the company’s processing agreement directs user questions to an email address. If you place any value whatsoever on customer service, Square is not the processing solution for you.
Businesses That Take Returns
For businesses that take a lot of returns for customers (such as clothing stores) Square might not be the best option due to a change planned for April 2023. At that time, Square will stop issuing refunds of processing fees to businesses that have processed a return for a customer. In its official communication about the change, Square says it made the decision to reflect the fact that Square incurs processing fees on refunds themselves. While this is true, when a refund occurs, the processing company does receive a portion of the processing fees back.
Square could choose to refund the portion of the processing fee, even though its not the entire processing fee that was originally paid, but they are not doing so. For businesses with a lot of refunds / returns, that lack of credit for the original processing fees can add up.
If that matters to you, you’ll want to find a processor that returns your interchange fees. Processors that place quotes through CardFellow are required – by legal agreement – to pass those refunds to you when you perform a refund for a customer.
Simplicity & Competitiveness Are Two Different Things
Square hasn’t invented anything new; for better or worse, it has simply made credit card processing more accessible to the masses, largely through oversimplified pricing. Square pays interchange fees to issuing banks and assessments to card brands just like any other processor.
Interchange is credit card processing’s version of wholesale, and the vast majority of interchange rates are significantly less than the 2.6% and 3.50% rates that Square charges.
However, Square’s pricing looks simple. But simple is not the same as competitive. Don’t be fooled into thinking that a simple flat rate is automatically the lowest cost for your business. In many cases, it isn’t.
If you need help comparing your pricing with Square to other companies, try CardFellow’s free quote comparison tool, which includes pricing for Square so you can see exactly how it stacks up.
