September 17, 2014

Square Eliminates Flat Fee For Small Businesses

square eliminates flat fee

You may be using Square, the pocket-sized credit card reader, as a way of accepting payment on plastic while avoiding a lot of extra fees. If so, Square has some bad news for you.

The company announced recently it will be discontinuing a monthly $275 flat fee for businesses processing less than $250,000 annually.

These Square users will now pay the same 2.75 percent swipe fee per transaction larger customers do.

(On its website, Square says some larger customers can get additional breaks on swipe fees. But the company isn’t specific how much revenue must be generated to get those lower rates.)

In the announcement, the company said the decision was based on customer feedback. But a conciliatory tone also suggested the knowledge some would be unhappy:

Over the past year we heard from many of our customers that caps and limits in the program were inhibiting growth—at a certain point, rates went back up the more you sold. So, effective February 1, 2014, we’re replacing the Square monthly pricing program with one low per-swipe rate for your business.

Of course, Square also stressed it still doesn’t charge the annual activation, setup or cancellation fees credit cards do.

Some Businesses Will Pay More

In truth though, the change will cost some small businesses considerably more.

Launched back in August 2012, the flat or monthly fee program was meant to entice small businesses into giving Square a try, Venture Beat reported at the time.

These businesses now go from paying a flat fee for using the card to paying a fee on each transaction.

To put this into perspective, Square explains its 2.75 percent swipe fee would leave bout $97.25 out of every $100.00 transaction.

And manually entered transactions would cost more: 3.5 percent plus a 15 cent manual transaction fee. So that leaves $96.35 out of every $100.00. (You get the idea.)

Sure, bigger customers with more revenue must already pay these fees. And Square may claim its “inhibiting growth” because sellers are suddenly paying more once their sales increase.

Still, it may be unwise to change a policy meant to make the service more attractive to smaller businesses in the first place.

Image: Square

12 Comments ▼

Joshua Sophy - Staff Writer


Joshua Sophy Joshua Sophy is a staff writer for Small Business Trends, covering technology and business news. He is a journalist and editor with 15 years experience in media. A former newspaper reporter and editor, Joshua also serves as President of the Board of Directors of a curling club and is editor of a regional newsletter focused on the sport of curling in the Eastern U.S.

12 Reactions

  1. For the micro merchant the model of no monthly fees and no expensive POS investment is a no brainer with the mobility being just an added benefit. Square paved the way in bringing this offer to the market … but there are several other options to Square that will save you money. EMS+ (plusbyems.com) has a no monthly fee option with a swipe rate of 2.25%.

  2. I think that it is just okay. After all, the rule will only apply on businesses processing up to $250,000 annually. This means that anyone who processes less than that is safe. It’s true that percentage-based payment is higher but you don’t really need to worry about it if you actually make more money.

  3. I own a small cupcake store and half of my transactions are credit cards. With this small change it will triple my credit card fees, going from $275 to over $700 a month. The flat monthly rate was the best thing for our small business.

    • hi Chad, I’m sure you have tried alternative methods, but is there a way you could motivate customers to use cash instead? I know that I try to use cash when a merchant I like asks (with some logical explanation). It is an awkward thing to do, but I’ve seen it work.

    • Hi Chad,
      I’m sorry to hear that but I’m not surprised. I think this move on Square’s part will ultimately create opportunities for competitors offering different, and perhaps, better solutions as you’ve heard rumblings about here in the comment section. More on this later…

  4. Square is a business. This was a business decision to increase revenues, plain & simple.

  5. The best way to figure out savings is if you average under $1600/month in total processing, a flat (higher rate) is beneficial. Anyone who consistently averages over $1600/month, we have a solution for you. It’s called RoamPay and we have a swiped rate of 1.39% (debit/check cards) and 1.69% for standard Visa/MC/Discover.

    [Edited by Editor]

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