Square Payment Fees: What You Need to Know in 2023

In modern business, customer satisfaction is the ultimate goal of organizations having big-time aspirations. It is especially true of small- and medium-size ventures, which can compete with blue-chip companies only if they cater to all preferences and even whims of their clientele. One of such aspects is the comfortable payment for the goods and services they buy. What are the trends that dominate in this field?

Contemporary customers use credit and debit cards extensively and like to consummate a transaction here and now. It means leveraging points-of-sales (POS) on a large scale that process payments both via physical cards and those “living” inside mobile devices. POS-based deals with credit cards are growing in popularity, with their number topping 40,000 in the Eurozone alone two years ago.

Naturally, enterprises that are in the market for onboarding POS technology should take thought for processing payments made through such terminals and choose a convenient and cost-effective platform to deal with this routine. And this is where Square comes in handy. To do that you need to know what is square and understand all the subtleties of working with it.

Square as Large as Life

Launched in 2009 as a software vendor that developed two payment-processing apps, the company has evolved into a powerful player in the IT market whose annual net revenue exceeds $4.7 billion with a 2022 market cap of over $81 billion. Today, its range of products includes both hardware (card readers, terminals, etc.) and software of different types (an e-commerce website builder, an appointment scheduling solution, customer loyalty programs, and more). Yet, the core of this ecosystem is the payment processing software Square is famous for.

Being housed in a card reader that can be plugged into any mobile gadget, it creates an all-in-one POS that restaurants and retail outlets especially favor. Why? Because it is easy to set up and foolproof to use. Besides, it involves no contracts, minimum requirements, and insignificant upfront costs. Of course, such perks come at a price (not for consumers, though, for whom using Square is one of the free features), which is Square payment processing fees.

Zooming in on Square Payment System Fees

“How much are Square processing fees?” is the wrong question to ask, since Square payment fees differ depending on the brand’s product or service. Basically, they fall into four categories.

Transaction fees

Square transaction fees are charged per transaction and are automatically deducted from the total when a person uses their bank card for payment. Thus, the company that accepts the payment will obtain the transaction sum minus the fee on its bank account. Square percentage fees vary according to the type of transaction.

• Card-present transactions. No matter what card a customer utilizes (swipe, contactless, mobile wallet), Square charges 2.6% plus 10 cents for each transaction.
• Card-not-present transactions. In this case, card details are entered manually. Since such episodes incur more fraud risks, Square credit card fees are higher (3.5% plus 15 cents).
• Online transactions. Whether they are made via Square’s Online Store or utilizing APIs, the fee is the same – 2.9% plus 30 cents.
• Invoices. When you send an invoice to the client, it will cost you 3.3% plus 30 cents if it is a card payment or 1% (but not less than $1) if it is a bank transfer.

Hardware fees

These are rather one-time costs than regular fees which a company must allocate to buy one of Square devices. Square readers for magstripe ($10) and contactless cards and chips ($59) are the most affordable. A Square terminal and Square register are big-ticket items for which you must fork out $299 and $799 correspondingly.

Software fees

They are associated with software the brand offers and exist in the monthly subscription form. 

• Square POS solution is a suite meant for small businesses that helps them manage inventory, sales, and customer data. It has a free version which typically covers all needs of such ventures.
• Square for Retail/Restaurants. Being niche solutions, they are honed to deal with the workflow of such organizations. Each of them has a free version, but if you want more advanced features, you will have to pay $60 for a monthly subscription per location. There is a pricier Premium plan for large restaurants that process $250,000 a year.
• Square Appointments. This solution is just what the doctor ordered for fitness studios, salons, and other businesses that rely on appointments with bookings, reminders, and calendar management capabilities. It comes in three versions: Free, Plus ($29), and Premium ($69) in monthly payments for one location.

Additional fees

There are some extra fees charged under certain circumstances. Here belong refund fees (original transaction fees aren’t returned in case of a refund), non-compliance fees (if you fail to comply with PCI DSS requirements), and instant transfer fees (you will have to pay 1.75% per transfer if you want the money to appear on your bank account immediately and not within the term stipulated in your contract with the bank).

Sounds like a lot of money to lose? Well, you can never tell until you have a look at what other payment processing brands charge.

Square vs Competitors: Comparing Fees

Besides Square, there are two other behemoths in the niche. 

PayPal Zettle

Being honed for cash-strapped startups, this vendor charges zero software subscription payments, but it also has a high-level Store Kit Mini suit which will cost you $249. As for the brand’s hardware, you will have to fork out $29 for the first and $79 for any extra reader.

Payment processing fees by PayPal Zettle differ depending on the transaction circumstances. For card-present transactions (QR code included), the fee is 2.29% plus 9 cents. In case of a manual card data entering, the percentage grows to 3.49% (plus the same 9 cents). Invoice payment fees are 3.49% plus 49 per transaction.  

As you see, the latter fee is higher than the one charged by Square, the second is on par with it, whereas the in-person credit card transaction fee is definitely lower. 

SumUp

This system is exclusively mobile-friendly, thus is good for usage in locations where such gadgets are expected to be leveraged extensively. Software of this brand is also free to utilize, but its basic equipment is a notch pricier than PayPal’s or Square’s. A card reader costs $39 and a cradle bundle is $10 more. A SumUp Solo touchscreen is the most expensive piece of machinery ($129).

SumUp’s pricing policy is not a chump change issue either. The lowest fee here is for in person transactions (2.75%). Online and invoice payments will cost the company 2.9% plus 15 cents each while payment-linked or manually keyed payments have the highest fee among the three (3.25% plus 15 cents).

Evidently, calculating entrepreneurs will choose Square over the other two, given its price/service range ratio. What’s more, you can take additional steps to cut down on Square fees. 

How to Reduce Square Fees: Life Hacks to Remember

There are three possible methods calculating entrepreneurs can apply to minimize their expenditures related to using the Square payment processing system.

• Emphasize cash or debit card payments. Since Square credit card payment fees are higher than those charged for cash or debit card transactions, you should encourage your customers to use the latter. Such incentives could be verbal requests or small discounts for down payments.
• Choose POS for in-person transactions. Whenever possible, opt for card-present transactions over online or card-absent payments. 
• Enhance transaction value. You can save on the percentage rate if you have fewer transactions of a greater value. The value increase can be done by bundling products/services, upselling, or determining a minimum transaction sum. 
• Watch currency exchange rates closely (for non-US residents). Calculated in US dollars, Square fees may have different values in various national currencies. With Rates, you can monitor exchange rates and their dynamics to make beneficial currency conversions and thus optimize your expenditures.

Conclusion

Square offers a range of products and services that help businesses (mostly small- and medium-sized) streamline accepting payments. Being free for customers, they come at a price for entrepreneurs, who must pay various fees for utilizing Square. The most flexible are transaction fees that can be curtailed by prioritizing cash or debit card payments, employing POS for in-person transactions, and increasing each transaction’s value.

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