Square eliminates its credit card transaction fee

February 22, 2011 12:41 PM
Anthony Ha

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July 9-10, 2013
San Francisco, CA

Square took another step toward simplifying the credit card payment process today by getting rid of its 15-cent transaction fee. That means businesses who accept credit card payments using the Square reader just pay the company a 2.75 percent fee across all their payments.

The San Francisco startup’s chief operating officer Keith Rabois told me last month that Square is signing up between 30,000 to 50,000 merchants every month, many of them businesses who were previously cash-only. The advantage of Square is its simplicity and the fact that there’s no upfront financial commitment, so there’s very little risk for merchants who want to try it out.

Today’s announcement adds another reason why merchants can get over their credit card qualms (or switch over from an existing system). Previously, Square charged both a per-transaction fee and a percentage fee. This doesn’t just reduce the overall cost — it also means that smaller purchases, where the 15-cent fee might feel more significant, are more feasible. After all, those transaction fees are one reason why many stores won’t credit cards if your purchase is less than (say) $5 or $10.

Square has created a fun video highlighting some of the confusion over credit card fees, which I’ve embedded below. This also gives it an advantage over Intuit’s GoPayment, which has a more complicated pricing structure and includes a transaction fee of at least 15 cents.

This will presumably put an initial dent in Square’s revenue, but right now it’s more important for the company to get as many merchants using its devices as possible. That’s why Square is giving out the card readers (which merchants can connect to iPhones, iPads, and Android devices) for free.

Square has raised $37.5 million from Khosla Ventures and Sequoia Capital.

http://twitter.com/bluemonster bluemonster

Anthony, what financial impact will this have on credit card processors?
http://twitter.com/CPWhitley Walter Whitley

It is important to remember that you are offering a discount rate of 1.74% for swiped transactions and 2.29% for key entered transaction. Square is offering 2.75% and 3.5%.With Square you are not getting an actual merchant account. They are a payment aggregator, much like PayPal. So if a Square customer has over $1000.00 in sales in a week, Square will hold any money over $1000.00 and not deposit it into their customers bank account for 30 days. So someone could have $3000.00 in sales but they won't be able to get the $2000.00 for 30 days. Since the Square customer does not have an actual merchant account, Square does not have to follow banking rules and can hold money however they wish, usually 30 days, but sometimes longer. We don't do this we deposit all money from our customers sales within 2 business days. Also we have superior customer service. Check out the Square website they don't list a phone number, they don't have anyone live you can talk too. We assign each account their own personal support rep. who guides them through the process of merchant account set-up and activation of their device.
http://www.venturebeat.com Anthony Ha

Thanks for weighing in Walter.
http://www.venturebeat.com Anthony Ha

I'm not sure, most of the intricacies of how credit card processing and fees work go way over my ahead. (It took me a pretty pathetic amount of time just to bone up enough to write the post.) I'll bring it up with the company the next time I get a chance.
Kasha1040

I had 4 fraudulent charges on my credit card from square..that were very pricey…I will not let anyone swipe my card on this app.!!!!!!!!!!!!!!!!!!!