Square for Credit Card Processing
IdealCost is often asked if Square is the right company for credit card processing. Most people don’t know much about it, so we decided to dedicate some time to discussing the history and merits of Square.
History of Square, Inc for Payments
Square was founded in 2009 by Jack Dorsey and Jim McKelvey. The story of Square’s inception was due to frustration by Jim McKelvey that he could not close a $2000 sale for his glass faucets and fittings because he didn’t accept credit cards. His friend Jack Dorsey, CEO and Co-Founder of Twitter, aimed to create a simple fix for accepting payments easily and conveniently and Square was born.
Credit Card Processing Industry Disruption
At the time of its release in 2009, there were a few versions of mobile payments acceptance. First, original mobile credit card terminals, which almost were the size of a brick, were used as all-in-one hardware and software. These mobile terminals required a version of a cell phone account and were quite inconvenient. Second, around 2008, some competing units were released that were about the size of a human fist. At the time these units were revolutionary because they could be carried in one’s pocket, which was much more convenient for home service calls by repair companies.
When Square released, everything changed. They were among the first major industry players to release a cell-phone compatible card swiper integrated into the software of the phone. The units were available in cell phone and office supply chain stores. One could go into a store and start accepting credit and debit card payments almost immediately. Virtually all credit card processors required several business days or weeks to submit paper applications and approve new accounts, but Square didn’t have any of those headaches. Clients could go to Square’s website and get started.
Square has continued to disrupt the credit card processing industry including with its relatively inexpensive Point of Sale (POS) systems for retailers and restaurants.
Aggregators vs. Credit Card Processors
So is Square, or PayPal or Stripe a credit card processor? Square is a payment aggregator .
Traditional credit card processing accounts allow clients to set up and own their merchant accounts through the banking system. An aggregator, like Square, owns the merchant account and essentially subleases to sub-merchants.
Advantages of Using Square
Square is easy and quick to set up. Very little information is required, and one can start accepting payments right away. The equipment start-up cost is minimal if anything. There is no long-term commitment with an early termination fee. If you want to test a new small business or add on to an existing business, it is a low-risk proposition for a low sales volume. What most clients tell us they like about Square is the fixed fee pricing with no surprise surcharges or monthly fees.
Disadvantages of Using Square
Remember our discussion about the quick and easy application process? While it is convenient, it does provide some downsides. For example, there is minimal, if any, actual risk and underwriting for companies. Because Square isn’t a traditional merchant account, individual rights are limited or entirely forfeited by the client. Since the due diligence by a credit card processor is done up-front, the likelihood of future problems is minimal. With aggregators, it is the opposite. Funds may be delayed for months or indefinitely, defending yourself from a customer chargeback is much more complicated, and limits may be placed on the account.
Is Square Right for You?
We have no idea. Every business is different and has unique needs. As a general rule, we’d recommend that if you have a business with an average sale under $200 processing less than $1500 per month, Square might be worth a try. However, if you anticipate a larger average sale size or more overall sales volume, you may want to consider a traditional merchant account.
Don’t Take on the Credit Card Processors by Yourself
Since 2009, IdealCost.com has helped hundreds of companies nationwide reduce their merchant account fees through identifying and fixing hidden profit, overcharges, fake fees, and billing errors. Clients have saved $300-$20,000 per month on their credit card processing fees without going through the hassle of changing their processing vendor, bank, or equipment. Switching credit card processors should be a last resort, only reserved for funding delays, poor customer service, or technical difficulties. Before you consider switching credit card processors, see if you qualify for IdealCost.com’s monthly savings program be uploading your most recent merchant statement for a free analysis. You’ll receive an estimate within 24 business hours.
If you are opening a new credit card processing account or must switch credit card processors due to funding delays, technical issues, or customer service problems feel free to contact us for a free consultation. IdealCost.com can help secure the best terms and fees based on your specific needs.