What's All The Buzz About Square?

by Shonali Burke on August 19, 2010

From my (business) pad to iPad

If you haven’t heard all the buzz about Square in the last year or so, a new tool for accepting payments will soon be available for business owners to use.

Image: Darren Hester, Creative Commons

Square lets business owners use their iPhones and iPads as credit card terminals, giving them a little plastic attachment allowing for cards to be swiped.

With a slew of cool features such as emailed receipts, photo recognition, and signing on screen (image: Florian Seroussi, Creative Commons), Square is definitely the slick new kid on the payments block.

However, Square has been experiencing setbacks due to fraud concerns and underwriting issues after its explosive debut.

The problem has to do with the complexity of the credit card processing industry, something which Square had hoped to make easier for business owners by not requiring them to set up a merchant account.

This begs the question, if you’re an e-commerce merchant, should you wait for Square?

The best answer is: it depends.

To see whether Square is a good option for your business, check out this nifty calculator which shows whether Square is more cost effective than a traditional merchant account.

The biggest difference between the two is the way pricing is handled: with Square there is a flat fee of 2.75-3.5% (depending on whether the card is swiped of keyed in) plus a $0.15 per transaction fee.

There are no signup or monthly fees associated with using Square, making it very attractive for low volume merchants.

With a traditional merchant account, pricing is variable and gets more competitive as credit card processing volume increases. For the best pricing (called interchange plus) merchants pay interchange (the fee set by Visa and MasterCard) and a constant processor markup which is usually a predetermined number of basis points on volume and a per transaction fee.

Merchants should make sure to demand interchange plus pricing from credit card processors if they go with the merchant account route otherwise there is a good change they will get ripped off.

The bottom line

If Square can accomplish all the things it promised from the beginning, it is sure to be an extremely useful option for business owners.

However, make sure to check whether its pricing makes sense for your business.

More on e-commerce from Women Grow Business:

Stella Fayman blogs about credit card processing at the TransFS Blog. TransFS.com is the comparison shopping site for credit card processors; just like getting multiple quotes for airfare using Expedia, TransFS lets business owners compare top quality processors on an apples-to-apples basis and makes sure they get the best deal by not having any cancellation or hidden fees, and only interchange plus pricing. Contact Stella with specific questions at stella@transfs.com or connect with her on Twitter.

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