The real costs of Square mobile payment service

Have you read the fine print of the Square mobile payment agreement? Read insight as to what the terms mean to your business and how it compares with a traditional merchant account. Are you better off with a traditional merchant account, mobile payment solution, or something else like a virtual terminal?

Everything in “quotes” below is language from the terms of service as of today.

“Square may permanently or temporarily terminate, suspend, or otherwise refuse to permit your access to the Service without notice and liability for any reason, including if in Square’s sole determination you violate any provision of this Agreement, or for no reason.”

“For any reason” is unusual language and does not exist in typical merchant agreements.

“The Service and your Square Account may only be used in the fifty States of the United States of America and the District of Columbia.” This shouldn’t be a concern, but since this is on a mobile device, I thought I’d point out you can’t travel to other countries with your cell phone and accept payments that way.

“You may hold monetary balances that you receive in your Square Account”.  Your transactions are deposited into your Square account. This is similar to how paypal has worked for years. The money is deposited into your Square account and you have to transfer it to your bank account.

This from the TOS page, which is what you agree to in writing: “For the first six (6) months new Square Accounts will be required to maintain a Reserve of no less than the combination of a trailing 14 days of sales activity and any pending transaction disputes (i.e., Chargeback, refund request or claims). The Reserve may be raised, reduced or removed at any time (including during the first six (6) months of a new Square Account)”.
I also found this related information on their FAQ page “: How much money will Square deposit?” As a new Square user, we will immediately deposit your first $1,001 of sales per week to your bank account, which means you have access to the money by tomorrow. Any remaining amount will be transferred to your bank account within 30 days of the transaction.”….”Square will automatically send you your money after a 24 hour period. It can take 2-4 business days, depending on your bank, for the electronic transfer to clear.”

So the information is somewhat conflicting and surely will be updated soon. Do they hold a reserve of 14 days, or 14 days after the first $1001? I’ve read users reporting their funds are taking up to a week to deposit. Based on the information above, I suspect the first $1001 is deposited, but then balances above that are on a rolling reserve basis.

Square is a little bit like Paypal with funds going first to the Square account, not a bank account. The time from request of transfer to appearing in your bank account is usually 3-5 business days with Paypal, and it must be done manually. With a traditional merchant account, it’s typically 1-2 business days, and it’s always done automatically.

If your application states that you process $10,000 a month, then almost $5000 will be held in reserve according to the terms. In a traditional merchant account, reserves are not typical. They are on an exception basis. It does say the reserve can be dropped. However, your application is completed online agreeing to the terms. Therefore, you’ll be trying to get a change after the account is opened.

“Square Accounts are limited to certain transaction limits, which are displayed on our Site.” I couldn’t find the limits, but you may see them when you download the app and sign up.

Privacy: Square does not let you store the email address for where you’re sending the receipt, in order to protect privacy. In other applications, your customer can opt-in to email and you can save that address.

Reconciliation: How much were your sales? You’ll need to calculate that because your deposits are net of the fees on the agreement. On a $100 sale, $97.10 would be deposited for a swipe transaction. (2.75% plus $.15). For standard merchant accounts, fees are deducted once per month, so you keep money in your bank longer and it’s a line item for your bookkeeping.

Square has the benefit of enabling a signature for capturing credit cards in the field. Volume users won’t save money by having a field signature at these rates. You should also balance risk. Do I know my customers? No? Signature may be important to protect you from chargebacks.

The home page advertises as a use for babysitters and other business types in the field. It looks like a nice application for those who only occasionally accept credit cards.

See also Square vs Verifone Payware Mobile

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