Merchant Account vs. Square
It can be said that Square has revolutionized how payments are processed in the world today. Requiring a smartphone and a supplied card reader, processing payments has never been so easy.
When the company first began, standard merchant accounts were a chore to open and maintain. Contracts would last for years, come with early cancellation fees, and would not be nearly as transparent as necessary to instill trust in account holders. Today, however, the game has changed, yet again. Merchant account providers have now stepped up and are in strong competition with service providers like Square.
If you are considering accepting credit and debit card payments your dilemma may be to pick between a merchant account or Square. Upon first glance, Square is the more simple of the two but comes with its own risks and costs. Merchant accounts are slightly more complicated but come with strong customer support and security. Traditional merchant service accounts provide more flexibility and customization to fit the individual needs of a business.
Applying to Open an Account
One of the biggest perks of Square is that applying is completely free. Just like when signing up for any other internet account, you enter some basic information and verify your business and email address. After this, you have an account with them! There is no need for credit reports and bank statements to be submitted.
Merchant accounts are usually more complicated. You have to apply using a more detailed application that asks for personal information. You may also have to submit or authorize a credit report for yourself and your business. The application process is typically longer, and everything about you is triple checked. As a small business owner, the simplicity of Square may be more appealing to you. However, remember that if you have a suspicious transaction, you will probably get your account placed on hold almost instantly.
Costs and Profitability
Square has a fixed rate for its transactions. Every time you swipe a card, you are charged 2.75% of the purchase amount. With merchant accounts, you gain more flexibility. You can be charged a lower rate for an older business or an older account, you might get discounts for higher sales volumes, and you are charged less for debit card purchases than those with credit cards.
Remember that debit cards are typically cheaper to deal with than credit, and merchant accounts price each swipe according to the type of the card. However, Square doesn’t have monthly or hidden fees to add to their rates. However, established businesses will almost always find that a merchant account provider will offer better rates.
Termination, Contracts, and Upgrades
One of the most attractive aspects of Square is the way the processing is conducted. You pay for each transaction, and that is all. You don’t have to sign a contract, you don’t have to be legally bound, and you can get out any time you want. There is no commitment to keep using the Square reader if you don’t like it. You can also stop and start using it again at any time.
Most merchant accounts today have their own monthly pay as you go plans. However, they usually require you to sign a legally binding contract as well. This might extend for up to 3 years based on the plan you get. While this isn’t true for all providers, enough of them do it that you have to be very wary about the merchant account provider you pick. Read any contract carefully and look for additional fees.
Consider your options and the needs of your company before you make a choice. While merchant accounts can seem more complicated, they provide enormous support with security, software, and efficient transaction processing.
Square offers a basic payment plan and no hidden fees, evaluating the structure of your business can help aid this decision process. Good luck, and happy hunting!