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.