Square reported earnings this week and one thing from the report really caught my eye. They reported that a higher percentage of revenue is coming from large merchants. Square offers a simple pricing structure of 2.75% per transaction (or 3.5% and $0.30 if Keyed In). This is a great deal for some merchants but a bad deal for others. At Payment Depot we actually refer people to Square if they process small transactions. When your average transaction is $5-$8 it makes sense to pay a flat 2.75% and we are happy to point you in that direction.
The part of their report that surprised me was that they reported growth with large merchants. They consider large merchants anyone who processes between $125,000 and $500,000+ annually. Square is a great option for small merchants, but they are usually not the best option for large ones. 2.75% flat with no other fees works great for small transactions, but not if you process large ones. If you are a large merchant, paying 2.75% is one of the most expensive ways to process credit cards.
Large Businesses are Not a Good Fit
Interchange rates are set and published by the card brands and they are the same for everyone. If you look at the long list of rates published by Visa and Mastercard, they range from .05% and $0.22 for a debit card, up to about 2.95% and $0.10 for some commercial cards. So with Square you are guaranteeing that you will pay close to the highest possible rates available.
All of the credit cards in your wallet have an interchange rate attached to them. Square is paying that rate, but they are charging you 2.75% whether the actual interchange rate is higher or lower. When I look in my own wallet I see 2 cards. My Bank of America debit card has a rate of .05% and $0.22 and my Amazon Rewards card is 1.65% and $0.10. If I purchase something with my Amazon card and the merchant is using Square, the merchant pays 2.75% and Square keeps the difference (just over 1%). Reading through Square’s earnings report, they said that their average profit per transaction was 1.01%, so the example above sounds about average.
Square is great for certain businesses and we refer people to them on a daily basis, but if you are an established business or a large merchant, Payment Depot and our tailored interchange+ plans will save you money. Give us a call and speak to one of our experts. We can analyze your business needs and if we are not the right fit, we would be happy to suggest an alternative.
Quick FAQs about Square’s Pricing Structure
Q: What is Square’s pricing structure?
Square offers a simple pricing structure of 2.75% per transaction (or 3.5% and $0.30 if Keyed In). However, this rate may not be the best deal for large businesses processing larger transactions.
Q: Is Square a good fit for large businesses?
While Square has reported growth with large merchants, and it offers solutions for large businesses, it may not be the most cost-effective option for large businesses due to its flat-rate pricing structure.
Q: How does the interchange rate affect large businesses using Square?
Interchange rates are set by card brands and are the same for everyone. With Square, you are guaranteeing that you will pay close to the highest possible rates available, which might not be ideal for larger businesses processing large transactions.
Q: Can large businesses save money by switching from Square to other payment processors?
Yes, there are cases where large businesses have saved significant amounts by switching from Square to other payment processors like Payment Depot, which offers tailored interchange+ pricing.
Q: Does Square plan to cater more to large businesses?
While Square has traditionally been popular with small businesses, there are indications that the company is setting its sights on attracting larger clients for growth.
Q: What are the alternatives for large businesses considering Square?
Payment Depot is one alternative mentioned in the original content. However, businesses should consider speaking with an expert to analyze their specific needs and suggest the best possible payment processing solution.
