The introduction of mobile payment options, like Square, has changed the landscape of credit card processing. The question is, as a Furniture Medic Franchisee, is a Square-type of account right for you? In this article, we discuss the pros and cons of Square, as well as other options that you, as a small business owner, may want to take a look at.
The first question you want to ask yourself when considering if Square is right for you, is, “How much do I process in credit cards every month?” or “How much do I think I will process in credit cards every month?” The number one advantage of a Square account is that there are no monthly fees. You may ask yourself, “How they are able to waive monthly fees when everyone else has them?” It is simple. They charge a much higher percentage on every transaction. Square charges 2.75% for swiped transactions and 3.5% + $0.15 cents for keyed-in transactions. So, let’s say you do a job for $400.00 and key in the transaction. It would cost you $14.15 (if it were swiped it would cost you $11.00). If you are only doing one to three jobs a month on credit cards, then Square (or a Square-type account) is probably something that would work for you. If, however, you are doing three or more jobs of this size a month on credit cards, then that higher percentage starts to add up.
A traditional merchant account is generally going to charge around $10.00 a month in set fees; however, the percentage per transaction is much lower. There are two types of traditional accounts, a swiped account and a card-not-present account or MOTO (mail-order-telephone-order) account. These accounts usually have three tiers of fees: qualified (swiped or card-not-present but with ZIP and security code), partially qualified (reward cards) and non-qualified (government, international or corporate cards). On average you pay around 1.3% to 2.4% for a traditional account when you take the different tiers into consideration. So, with either the swiped account or the card-not-present account, you save 1.0% or more on all your transactions versus Square. That is a savings of almost $10.00 on every $1,000 that you process. In other words, if you are doing three or more jobs a month of around $400 each on credit cards, it is cheaper for you to have a traditional account instead of a Square account.
Below is a comparison of advantages and disadvantages of traditional versus Square accounts that should be factored into your decision about which type of account to use.
Advantages of traditional accounts:
- Customer support: If you use Square and have ever tried to get a human being to help who understands your problem, you know what I am talking about. No one likes to deal with customer support, but generally you have better luck with customer support when you have a traditional account versus Square.
- Fees: Although traditional accounts always have monthly fees (these vary based on the type of account but range from $5.00 to $15.00 a month), the percentage you are charged per transaction can be significantly lower. Again, if you are doing more than three jobs per month of around $400 each on credit cards, this type of account is cheaper for you.
- Monthly billing: Traditional accounts make your monthly reconciliation much easier. If you do a $400 job, then $400 shows up in your account the next business day. The fees all come out at one time the first business day of the next month, so deposit amounts match your invoices.
Advantages of Square-type accounts:
- No monthly fees: If you do a low volume of credit card transactions each month, the fact that there are no monthly fees means this type of account saves you money.
- Simple fee structure: Square has two rate categories, 2.75% for swiped transactions and 3.5% + $.15 cents for card-not-present. You always know up front exactly how much it will cost you to take a card.
Disadvantages of traditional accounts:
- Monthly fees: These generally range from $5.00 per month to $15.00 per month, depending on the type of account and which credit card company you use. Remember, even though there are monthly fees, the percentage charged per transaction is much lower. So, as long as you are doing three or more inspections a month, this account is still cheaper than a Square-type of account.
- Fee structure is not as simple: There are usually three tiers of fees, and all of your transactions fall into one of these tiers. It is not as simple as Square’s one-rate-fits-all, but once you get used to the structure, statements for traditional accounts are easy to understand.
Disadvantages of Square-type accounts:
- Customer Support: When you finally do get hold of someone, they know nothing about you, your business or your industry. It can be very difficult for them to help when they don’t know anything about you.
- Higher percentage rates: On average, you pay about 1% more on every transaction when using Square instead of a traditional account.
- Daily Billing: Transaction fees are taken out before the funds are deposited in your account. So, if you do a $400.00 card-not-present inspection, $385.85 shows up in your account. This makes it more difficult to reconcile your accounts, since the dollar amounts on your invoices do not match the deposits in your account.
To summarize, both Square and traditional credit card processing accounts have positive and negative features. If you have any questions about which type of account is right for you, please don’t hesitate to give us a call, and we will do our best to guide you.
To apply for a “Square” type of account with no monthly fees, click here.
If you are looking for a traditional account, please give us a call at 1-800-608-7363.