Business

Square Eliminates Flat Fee For Small Businesses

square eliminates flat fee

You may be using Square, the pocket-sized credit card reader, as a way of accepting payment on plastic while avoiding a lot of extra fees. If so, Square has some bad news for you.

The company announced recently it will be discontinuing a monthly $275 flat fee for businesses processing less than $250,000 annually.

These Square users will now pay the same 2.75 percent swipe fee per transaction larger customers do.

(On its website, Square says some larger customers can get additional breaks on swipe fees. But the company isn’t specific how much revenue must be generated to get those lower rates.)

In the announcement, the company said the decision was based on customer feedback. But a conciliatory tone also suggested the knowledge some would be unhappy:

Over the past year we heard from many of our customers that caps and limits in the program were inhibiting growth—at a certain point, rates went back up the more you sold. So, effective February 1, 2014, we’re replacing the Square monthly pricing program with one low per-swipe rate for your business.

Of course, Square also stressed it still doesn’t charge the annual activation, setup or cancellation fees credit cards do.

Some Businesses Will Pay More

In truth though, the change will cost some small businesses considerably more.

Launched back in August 2012, the flat or monthly fee program was meant to entice small businesses into giving Square a try, Venture Beat reported at the time.

These businesses now go from paying a flat fee for using the card to paying a fee on each transaction.

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To put this into perspective, Square explains its 2.75 percent swipe fee would leave bout $97.25 out of every $100.00 transaction.

And manually entered transactions would cost more: 3.5 percent plus a 15 cent manual transaction fee. So that leaves $96.35 out of every $100.00. (You get the idea.)

Sure, bigger customers with more revenue must already pay these fees. And Square may claim its “inhibiting growth” because sellers are suddenly paying more once their sales increase.

Still, it may be unwise to change a policy meant to make the service more attractive to smaller businesses in the first place.

Image: Square


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