by Ben Dwyer Ever since its launch in 2009, Square has been a popular choice for small businesses looking for a low-cost option to accept credit cards.
With its minimal underwriting and fast setup, it lowered the barriers to entry for small businesses seeking credit card processing. Suddenly, business owners could download an app, sign up for an account, and accept credit cards within days or even hours. There was no lengthy application before you could start accepting cards, and Square’s simple flat rate pricing structure was much easier to understand than complex tiered or interchange plus models.
But what worked when you were just starting out might not be your best fit as you grow and mature your business. That’s especially true given some changes that Square itself has made as it grew in popularity.
How do you know when you’ve outgrown Square? Let’s take a look at some signs.
#1. Your Processing Volume Has Gone Up
Many businesses start with Square because their processing volume (how much money you take in credit cards) is low at the beginning. Square offers quick sign up with no required monthly volume.
But as your business grows and you increase sales, you’re eligible for more competitive pricing than a flat rate solution typically offers. While Square’s flat rate structure is predictable and looks less complex, it’s often not the most cost-effective. Interchange plus models can often save you money – sometimes significant amounts – over flat rate processing. If you’re noticing that your processing costs are taking a larger portion of your revenue, it’s time to explore other options.
How to check what you could be paying: Sign up for a free account here at cardfellow.com to see pricing from interchange plus processors to compare to what you’re paying with Square.
#2. You Want Better Reporting Capabilities
As a startup, you’re focused on a million things, and detailed reporting isn’t as critical. You can easily get by with the basic reporting available with Square. But as your business grows, you may find yourself looking for more detailed analysis into your customers’ purchasing habits, best-selling items, and other financial information. Square’s current offerings may not offer the level of detail your business needs and which other processors can provide.
#3. You Now Sell Across Different “Channels”
If you started off with a single brick and mortar location but have since added an ecommerce website or sell services / goods through subscriptions, you may find it difficult to manage everything easily through your Square account. While the company technically offers multi-channel support for those situations, some users complain of difficulties managing inventory and orders across the channels. Other processors can more easily integrate your different sales avenues to make inventory management and payments more efficient.
#4 You’ve Started Selling Internationally
While Square does allow US businesses to accept international transactions, it has limitations that other processors may not, such as allowing customers to see pricing in their home currency and pay with that currency. Other processors can more effectively handle international payments and multiple currencies.
#5. You Need Dedicated Customer Service
Square has never been known for great customer support. It’s one of the drawbacks to its early model of just getting as many businesses as possible while keeping support labor costs down. As a startup, you may not have needed customer support very often, or ever, and that may be the case now that your business is larger. But if you do, you want to know you have a dedicated rep or a way to get support quickly. In the past, Square did not even list a customer support phone number on its website.
While Square has attempted to work on the customer support aspect of its services and does list a customer support phone number now, many businesses still complain that support is not at the level they would expect. There are options to get higher levels of support on premium plans, but that comes with its own costs. If customer support is important to you, Square may not be the right fit anymore.
Bonus #6. Square Wasn’t Right for Your Business in the First Place
Just because Square offers quick sign up and easy-to-understand pricing doesn’t mean that it was ever actually the best option for your business.
I’ve heard from business owners that signed up with Square because of name recognition or because of worries that they wouldn’t be eligible for a traditional merchant account. In other cases, the business owner just needed to get started with credit card processing, and Square offered an easy route to do that. In all of those situations,, the business owners didn’t explore other options, assuming that Square would be fine for their needs.
But in many cases, it wasn’t the right fit. This is particularly true for:
Businesses that are Prohibited by Square’s Terms
Believe it or not, this comes up regularly. Businesses don’t look into the types of industries that Square prohibits, and simply sign up and begin processing. In many cases, Square catches on eventually and shuts down the account – often without warning. If you’re using a Square account but your business is in a prohibited industry, you’ll want to look for a replacement before they close your account.
Businesses with Larger Average Tickets
Square was once the best option for businesses that process smaller individual transactions (under $10). For businesses with larger tickets than that, Square typically isn’t competitive cost-wise.
It’s also no longer as competitive for businesses with smaller individual transactions, but I’ll get to that in the next section on how Square has changed.
How has Square changed?
It’s not just your business that has changed. Square itself has undergone many changes over the years, from good things like adding POS systems and processing equipment to less good things, such as implementing monthly fees and the per-transaction fees that they disliked against early on.
That means that Square could have been a good option for your business at one point, but isn’t now.
Here are some of the changes with the biggest impacts.
Introduction of the Per-Transaction Fee
When Square launched in 2009, it took the processing world by storm. The company promised “flat rate” pricing that didn’t vary by card type or the multitude of other reasons that traditional processors showed multiple rates for one business.
The original flat rate was a simple 1.75% for all card payments through its smartphone credit card reader.
This rate didn’t last long, as Square quickly moved to 2.75% flat fee for in-person (swiped) transactions and 3.15% + 15 cents per transaction for card-not-present (ecommerce or keyed) transactions.)
But even 2.75% wasn’t able to cover Square’s costs in some situations. In fact, the company lost millions processing small size transactions for Starbucks.
That led to the introduction of the per-transaction cents fee. Square initially began adding this quietly, charging only some businesses with small transaction sizes, and not widely publicizing it. However, over time, the company made it more prominent.
Introduction of Monthly Fees
In the late 2010s, Square introduced Square for Restaurants and Square for Retail. They were touted as packages tailored to those industries, but they also involved a new cost: monthly fees.
Now, Square has monthly fees and per-transaction fees, just like many other traditional processing companies.
Online Monthly Fees
In 2020, when Square launched its ecommerce options Square Online, it did offer a free plan, but for access to features that many businesses wanted, you had to sign up for one of the three plans with monthly fees.
Over the years, as Square moved toward a more traditional pricing model that includes per-transaction fees and monthly fees, it lost some of its cost benefit for small businesses. In fact, it’s actually more expensive for many businesses than a competitive interchange plus processor. Additionally, these various rates and monthly plan options have eliminated some of the simplicity that drove interest in Square in the first place. The company offers a calculator on its website now to help you determine how much you’ll likely pay, and there are pricing pages with multiple plans laid out. It’s a far cry from the early days of 2.75% flat rate.
So how do you know if it’s time to move on from Square?
The bottom line is that if you need to lower your processing costs and your average transaction is over $10, if you need to get more advanced reporting, or want additional access to dedicated customer service, you have your answer: you’ve outgrown Square.
