November 12, 2019

What is Square

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Square offers mobile payment processing and a full POS for businesses. But is it good? Find out if the credit card processor is right for you.

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Square was one of the first companies to let any business, including micro-businesses, accept credit cards on their smartphone. The platform offers a powerful POS system along with card processing hardware. But is it right for your business?

How Does Square Work?

The exact payment process will vary depending on the equipment you're using. Here are the steps using a mobile card reader, their most popular option.

  1. Buyer Makes a Purchase
    A customer swipes, dips, or taps a payment on your Square reader. In the case of over-the-phone payments, information is entered in Square's virtual terminal online.

  2. Square Card Reader Scans Buyer's Information
    The built-in Square POS system transmits the information to Square, which operates as the payment services provider.

  3. Square Passes Along the Information
    Square contacts the issuing bank and card networks, receiving approval for the transaction within a matter of seconds.

  4. You Receive the Funds
    Square pays merchants according to the chosen deposit schedule. The standard is 1–2 business days. The platform also offers faster or even instant deposit options (more on these below).

How to Use Square

Applying for an account with Square takes just a few minutes. You'll be asked to provide some personal and business information and verify your identity.

Once your account is approved, you'll decide what payment equipment you want. The magstripe reader is free; all other hardware has a one-time fee.

The hardware takes 7–10 days to arrive. But you can start collecting credit card payments instantly by downloading the Square POS app.

If you want to take your processing further, Square's hardware options let you accept more payments:

  • Order the free magstripe reader and accept swiped credit card payments.

  • Upgrade the magstripe reader to a Square Reader for contactless and chip payments.

  • Purchase a Square Terminal for in-person swipe, chip, and tap payments.

  • Buy a Square Register for complete payment processing and POS.

How Much Does Square Cost?

Square doesn't charge a monthly fee—you'll pay as you go. In other words, if you don't process any credit cards for a month, you don't pay any fees to Square that month.

When you do process credit cards, you'll pay the following fees:

  • Square Reader
    2.6% + $.10 for swipe, chip, tap, or contactless payments

  • Square Terminal
    2.6% plus $0.10 for swipe, chip, or tap payments

  • Square Register
    2.6% plus $0.10 for swipe, chip or tap payments

  • Invoice payments
    2.9% plus $0.30

  • Virtual Terminal
    3.5% plus $0.15 for keyed-in transactions

Can you Use Square Without Wi-Fi?
Square allows offline payments only for swiped payments. Merchants are responsible for declined payments or expired credit cards, though, so use this option with care.

Consider the following factors to decide if Square will work for what your business needs.

  • Prohibited Goods and Services
    Make sure Square accommodates what your business sells. Because the platform offers instant approval, they often won't notice the "riskiness" of your business until you start processing transactions. This could result in frozen funds and canceled accounts.

  • Flat-rate Pricing
    This model is an effective choice for every business. Other payment processing companies utilize interchange-plus pricing. The best pricing model for your business will partly depend on the size of your transactions. Typically, the larger your average transaction, the less cost-effective Square is.

Price out a few average-sized transactions for your business to see how Square's pricing compares to its competitors. You may find that the POS features are valuable enough to justify paying 2.6% + $0.10 for most transactions.

Does Square Automatically Deposit Your Funds?

Square deposits funds to your bank account within 36 hours of a transaction. This is their "standard" deposit schedule. If your business operations keep more irregular hours, you can request a custom "closing time" in order for your funds to count for each business day.

Square also offers two speedier options:

  • Square Card
    This business debit card links directly to your Square account. You can spend the funds as soon as you earn them. Best of all, there are no extra fees for this service.

  • Instant Deposit
    Instant Deposit sends the funds to a linked bank account via debit card. There is a per-deposit fee and you must have at least $25 in your Square account (after fees) to use this service.

Do You Need a Tax ID for Square?
You don't need a tax ID for your business to start a Square account—you can use your personal Social Security number instead. But you will need one or the other.

Other Square Features

Square's most popular features are its robust POS system and mobile credit card processor. Here's what else the platform offers:

Square Appointments
Square's user-friendly interface enables your clients to schedule their own appointments. Square will automatically send out reminders and integrate with the payment processing system, allowing customers to pre-pay for their services.

Square Restaurant
Connect your front-of-house and back-of-house with one powerful POS system to:

  • Integrate your restaurant's floor plan
  • Create menus
  • Customize your POS
  • Collect payments

Square Retail
Integrate your brick-and-mortar store, online store, and back-office all in one system with Square. This allows you to:

  • Manage inventory
  • Run reports
  • Process payments

Each of Square's specialized POS systems has a monthly fee per POS system. They offer a free 30-day trial to allow you to see if the system works well for your business.

Bottom Line

For pay-as-you-go credit card processing, Square offers many useful features. It offers a variety of POS features that make running any type of business more efficient for an affordable price.

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More from CreditDonkey:


Square Review


How Much Does Square Charge


Square Alternatives



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Square Rates

Square offers more than just a mobile credit card reader. But with new features comes complicated pricing. What rates can you expect to pay?

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