Square Processing: What Happens When Increased Fees Meet Small Merchants

square changes credit card rates

The long-time credit card processing company go-to, Square, has recently gone through a rate change. Their cost on card transactions was an attractive flat rate of 2.75%, with no additional fee. Square’s new fees of 2.6% per transaction + $0.10 is going to change how you read a payment processing statement quite a bit.

The rate restructure appears to decrease your monthly bill, which is exciting to many of Square’s small merchants. Unfortunately, it is just those small merchants that will be paying for this change the most. Small business owners usually have smaller ticket sizes, and need more frequent transactions to keep the lights on. A coffee shop, for instance, will be paying an extra $10.00 a day on their 100 daily card purchases with Square. With the U.S. totaling $12 billion in coffee sales annually, that could mean an additional $1.2 billion spent in card processing fees alone, if all of those cafes used Square. In fact, the only merchants who benefit from this rate change are those whose average ticket size is larger than $67. Do you know of many Square merchants that can get their customers’ tickets that high?

The late September update is not the first change Square has made to their customers’ monthly costs. And it’s certainly not the first one that was meant to seem like a sweeter deal than it really is. Prior to August of 2012, they had a simple pricing of 2.75% per transaction. Square’s new fees were released on a promotion in which merchants could choose to pay $275 a month instead of 2.75%. The point of cost savings was earning $10,000 a month in card sales or more. Again, it was a great incentive to brand-new business owners who don’t know the true cost of card processing. Those new business owners are just the ones that might not reach 10k a month while starting out. 

With most of Square’s products being optimized for the small and mobile merchant (app, magstripe, chip reader and iPad stand), it’s curious that their pricing wouldn’t be. Now that it is no longer as competitive for the small business owner, you’re advised to consider other alternatives. Perhaps it makes sense to do a little more research on your merchant card services provider just in case you find a smarter option.

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