Credit Card Processing

Square’s Transaction Fees and Equipment Leasing

by Ben Dwyer

Payment processing company Square has built a reputation on offering simple, flat-rate credit card processing for small business. The well-publicized 2.75% rate was a good deal for businesses with small average transactions or low monthly credit card sales, but the company no longer offers that rate.

In 2019, Square did away with its 2.75% rate in favor of 2.6% + 10 cents per transaction.

Additionally, the company is now offering equipment leases, a practice that we generally advise against here at CardFellow. Read on to see what these Square fees mean, and what the leasing is all about.

Square’s Per-Transaction Fee

“Per-transaction fee” refers to the non-percentage part of a processing rate, usually quoted in cents.

In the past, Square has not charged a per-transaction fee on swiped credit cards. Instead, the company offered a flat 2.75% on all swiped transactions. Only manually entered cards were subject to a percentage with a per-transaction fee. (3.5% + 15 cents.)

In early 2019, we noticed that new businesses with average tickets under $10 reported that when they signed up with Square through a quote request, Square quoted 2.75% plus a per-transaction fee. One business states that Square quoted 15 cents. To verify, I requested a quote for taking credit cards with an average sale under $10, but sometimes higher. Square quoted me 2.75% + 10 cents.

In early autumn of 2019, Square began notifying existing customers that they would be migrated from 2.75% pricing to 2.6% + 10 cents. Additionally, the 2.75% pricing has been removed from Square’s website and is no longer an option.

November 2019 Fee Update Notice

In September of 2019, businesses started mentioning that they had been notified their pricing would change on November 1st, 2019. These businesses stated that they would now receive a per-transaction fee, with some businesses saying they were told 5 cents and others 10 cents.

Square confirmed this pricing change. Going forward, 2.75% flat rate is not an option.

Variable Business Pricing

The fact that different businesses were quoted different rates is not something that Square publicizes. The company has always pushed its flat rate and not mentioned any possibility of a per-transaction fee for using a different sign up method.

Additionally, it appears that Square will review pricing and can make adjustments. I was told that my pricing could be re-evaluated in 90 days. While it’s possible that pricing could be adjusted down, it also implies that Square fees could go up as well. Allowing re-evaluation effectively kills the flat rate.

Square’s Website and Contract

In 2019 and 2020, Square appeared to be trying to maintain its reputation as a simple, flat-rate processor. There was initially no mention of the per-transaction fee on its website. At present, the company does publish the 2.6% + 10 cent rate it now typically charges for in-person transactions. It also lists the 2.9% + 30 cents charged for online transactions at 3.5% + 15 cents for manually entered (keyed) transactions.

Why Does Square Charge This Fee?

The reason given for the per-transaction fee is that it covers the costs of premium support and account management. No further details are available as to what the “premium support” entails.

On a speculative level, Square is plugging a hole in its pricing model.

Square is hugely popular for businesses with small average transactions, such as coffee shops. It has typically appealed to businesses with an average sale under $10. In many cases, for sales under $10, Square actually loses money if it only charges 2.75%. This is exactly what happened when Square processed transactions for Starbucks. Because of the wholesale cost (Square’s cost) to process transactions, the 2.75% didn’t cover expenses and Square lost millions. The fee structure change appears to be Square’s remedy to the problem of losing money on small transactions.

That particular money leak may also have been a problem given that Square went public, and now has shareholders to answer to.

Will the Per-Transaction Fee Apply to Current Customers?

Yes. Square began notifying customers in autumn of 2019 that they will soon be switched to new pricing with a per-transaction fee.

Square Leases Equipment

Another development is that Square has partnered with POS Portal to lease equipment like cash registers, the Square POS stand, and receipt printers. Leases depend on credit-worthiness, with contracts starting at 24 months. While the monthly pricing for a 24-month contract is similar to the costs to buy outright, a contract any longer would make the equipment much more expensive than purchasing. It’s for that reason that we usually advise against leasing. Note that it is not required that you lease equipment through POS Portal. You still have the option to purchase Square equipment and accessories outright.

Related Article: Why You Shouldn’t Lease Processing Equipment.

Rental Equipment

Currently, Square’s website boasted an option to rent credit card processing equipment. While this may not be a great option for businesses that need to process transactions on a consistent basis, it may be a good choice for seasonal businesses with multiple cashiers or special event businesses.

Businesses must rent a minimum of 4 units and can take cards and cash.

Alternatives to Square

The Square fee significantly limits the benefits for businesses with small average sales. That said, in some cases it may still be the lowest cost.

If you’d like to move away from Square, you can use a different mobile processing solution. PayPal Here as a smartphone processing option with no per-transaction fee. (PayPal Here currently charges 2.7% per swiped transaction with no additional per-transaction fee. I verbally confirmed this pricing with PayPal for transactions under $10.)

However, almost every processor these days has a smartphone card reader. Here are some options to consider:

Clover Go – The Clover Go is available from processors that use the Fiserv (formerly First Data) platform. If you go direct, pricing is listed at 2.69% + 5 cents per transaction. Pricing may vary if you choose a different processor, and could be more or less depending on your business.

TSYS MobilePASS – Available from processors that use the TSYS platform, the MobilePASS option is a basic smartphone reader that connects through your device’s headphone jack. Pricing will be set by the processor you choose.

AnywhereCommerce – The AnywhereCommerce card readers are universal options that work with many different processors. EMV and NFC (contactless) options are available.

PayPal Here – PayPal Here is PayPal’s mobile processing solution. It costs 2.7% per swiped transaction, with no per-transaction fee.

There are many other readers that work with a variety of processors, including ePN, RoamPay, SwipeSimple, and USAePay. Proprietary solutions like FreshBooks Mobile are also available.

If you’re looking for processing with a mobile device and want to make sure you’re getting a good deal, use our quote comparison tool to easily see pricing. View options.

4 thoughts on “Square’s Transaction Fees and Equipment Leasing”

    1. Hi Mike,
      This was through firsthand experience as well as discussions with businesses. However, we’ve received clarification from Square that the per-transaction fee only applies to certain methods of signing up, and have updated the article accordingly.

  1. Seems it is affecting current customers—I’ve just been notified my rate is going to 2.6% plus .10/swipe starting November 1.

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