Square is one of the world’s most popular payment processors, offering simple payment solutions and equally simple hardware to businesses looking to take electronic payments both online and in-store. One of Square’s most notable features has long been its pricing structure; a straight 2.75% with no additional flat fee tacked on to each transaction. But a recent announcement from Square has revealed that the company’s popular pricing model is about to change, with major consequences for a large portion of their merchants.
How Prices are Changing
The new pricing structure will see Square’s old 2.75% flat rate thrown out the window in favor of a rate of 2.6% plus ten cents on all transactions. At first glance, the lowered percentage fee might seem attractive, and for some companies, it will be. But quickly crunching the numbers shows that a significant number of transactions will actually result in higher fees. At $67, fees on items will go down by a quarter of a penny, with savings increasing as dollar amounts increase from there. But for all transactions below $67, fees will go up. A $20 transaction, for instance, will see fees rise from $0.55 to $0.67.
What the New Pricing Model Means
The clear implication of the new pricing model is that businesses that sell a high volume of items with prices below $67 per sale are set to see a significant increase in their overall monthly processing fees. That’s a huge problem, as high-volume-low-cost sellers make up a large proportion of Square’s user base. The old pricing model, lacking the flat ten-cent fee, was a major selling point differentiating Square from the significant and tight competition in the electronic payment processing industry. Now, with that competitive advantage gone, it remains to be seen whether growth in high-dollar sales users will offset the inevitable shrinkage Square’s userbase is set to see in the wake of this change.
How to Avoid Losing Money on Rate Increases
Merchants looking to stay with Square don’t have a say in the pricing change, which goes into effect on November 1st, 2019. The only way for Square users facing fee increases to turn the tables is to increase their transaction values to maximize the number of sales over the $67 threshold. That isn’t an impossible task, but it will require some major store-design and marketing savvy. The other, more obvious method is for Square users worried about their fees to switch to another established payment processor that offers a more agreeable price structure.
BAMS is one such payment processor, currently serving thousands of merchants across a wide range of industries. BAMS uses interchange plus pricing, the most transparent – and generally most affordable – pricing model available to merchants. Interchange-plus doesn’t use set percentage amounts like Square, PayPal, or any of the major third-party processors. Instead, the percentage fee charged is determined by the actual interchange rate of the card used for payment. The result is that merchants are never overcharged on transactions made with low-interchange fee cards – a daily occurrence with the majority of payment processors.
For more information on how BAMS’ interchange-plus pricing model can save your company money on your merchant services bill every month, sign up for our thorough five-point price comparison.