20 Jul Why Square Is Not the Best Choice for Accepting Credit Cards
Launched by Twitter’s Jack Dorsey, Square has become a very popular method of easily accepting payment in-person. It is particularly common to see it being used by new startups, self-employed individuals, and traveling salesmen. The company also makes Square very easy to adopt, offering free readers and zero monthly fees. Like anything else in business with no barriers to entry, it also has some very significant disadvantages for businesses both large and small.
1. High Percentage Fees
While Square’s fees are not astronomically high, they are still higher than many professional credit card processing companies on the market. The company charges a 3.5% fee plus $.15 per transaction. In contrast, most merchant accounts start at 2.7% and go down from there. While Square’s rates are 2.75% for certain activities, this rate is fixed regardless of the transaction size. For example, a web design company accepting $25,000 for a project would still have to pay the full 3.5% fee if keying-in the transaction.
2. Poor Customer Perception
Since Square is so easy to use, it also has a somewhat sophomoric perception among professionals today. Customers may also be wary of remitting payment through the Square reader since it is notoriously insecure. Finally, the Square Reader has a poor image because it is often used by unscrupulous salesmen. While it is likely that a company will still agree to use the Square Reader as a payment method, customers may have reservations against using it for many transactions.
3. No Phone Support
One of the biggest downsides to credit card processing through Square is that it has no phone support. When disputing a critical transaction that the survival of a business depends on, Square won’t be available over the phone to help. Instead, business owners will need to wait several days for a reply to an email inquiry to get assistance. This can lead to very significant issues down the road when transactions are disputed by customers. When comparing merchant accounts, always keep an eye out for ones that offer exceptional support.
4. Fund Withholding
In order to mitigate fraud, Square frequently withholds funds from customers in order to protect themselves. Unfortunately, the company does not mention that it will also withhold all funds in excess of $2002 during a 7-day rolling basis for 30 days. The results of this can be potentially devastating for small businesses that are depending on a large payment being available immediately to carry out a project.