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How Square’s Pricing Changes Affect Your Small Business

December 5, 2019

 

The major merchant services company Square recently announced new pricing that is applicable to all customers as of November 1, 2019.

 

The most important update for companies that have small-ticket transactions on average is the change from a flat 2.75% fee for on-site tapped, dipped, or swiped card transactions to a 2.6% fee plus 10 cents per payment. 

 

Square has been a very popular merchant service company with many retail businesses because of its flat-rate processing charge. However, businesses with smaller average tickets will see a significant impact on their overall payment processing costs as a result of the pricing change. Restaurants, coffee shops, and convenience stores are among the most common users of Square and will be the types of vendors hardest hit. 

  

Consider two examples of how Square’s pricing affects small ticket retail vendors: a coffee shop with an average $5 ticket and a restaurant with an average $10 ticket.

 

Let’s assume that the coffee shop averages 3,500 weekly sales. Under Square’s old pricing the per ticket charge would be $0.13 per transaction. Under Square’s new pricing the charge on the average ticket would jump to $0.23. Weekly revenue net of processing charges under the old pricing system would be $17,045. Under the new pricing, the net revenue would be $16,695, a difference of an additional $350 per week (an additional $18,200 annually) in fees paid to Square.

 

Now let’s consider our restaurant with 2,000 weekly sales. Square’s previous pricing would be $0.28 per $10 ticket, and increases to $0.36 per ticket under its new pricing structure. The weekly net revenue after processing fees decreases from $19,440 weekly to $19,280, resulting in an additional $160 in processing fees ($8,320 in additional annual fees) paid to Square.

 

Square’s new pricing structure will have a negative impact on average payments below around $75, and will create greater fee increases as individual tickets get smaller. 

 

Smaller ticket retailers will be faced with difficult choices as a result of additional processing costs under Square’s new pricing system. Whether through increased retail pricing, pressing customers to pay in cash, or lost net revenue, Square’s pricing will cause inconvenience for small businesses and their customers. The good news is that as Square shifts its business model in ways that increase its income and benefits its large ticket vendors, there exist many viable and better alternative choices for smaller ticket vendors.

 

PayHub Payments offers innovative and seamless payment processing for your brick and mortar retail spaces and your eCommerce stores.  We are your partner in processing all types of card and electronic payments efficiently and at a fair, honest, and transparent rate. If you are concerned about the impact that Square’s new pricing policy will have on your business, contact us today for all of your business’s payment processing needs and we will explain our reliable fee structure and processing methods. We will be happy to provide you with a detailed analysis of how our fee structure compares with Square’s new pricing. Our unmatched customer service will make the savings we can provide even more attractive.  

 

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