Is Square The Best Mobile Credit Card Reader?

Thinking about taking that free Square reader with your new Square account? Before you seal the deal, you might want to consider a few important things about what the Square magstripe reader can — and can’t — do when you process a payment. We’re going to take a look at the credit card magstripe reader and what comes with your Square account, and we’ll also compare a few different options so that you can make the best decision for your small business.

How Did The Square Credit Card Reader Conquer The World?

If we think about a “business disruptor,” Square would be the quintessential example for the payment processing industry. Why, you ask? Because Square created an entirely new way of thinking about payment processing. They democratized payments for fledgling entrepreneurs who may not have had the volume to sustain a traditional merchant account. And with just one little card reader, they made it possible for more business owners to expand how they do business, whether that was at a brick-and-mortar store or not.

Square paved the way for the entirely new niche of mobile payment processing, and it all started more than ten years ago with the magstripe strip reader that could attach to an iPhone. Sure, Square has improved the tech along the way to boost security and prevent tampering of the device, but it’s essentially still using the same swiping technology it did when it first hit the market.

So where are we now? Is the basic Square reader still the best option for your small business? Let’s take a look at how options in readers have evolved over the past decade, so you can decide for yourself.

Get To Know Square’s Credit Card Readers

As soon as you set your account up with Square, you’ll have your choice of readers shipped to your house or place of business. Before we dig into the various readers available, it’s important to note that Square’s real value here is the free Square POS, and no matter what reader you choose, that doesn’t change. Square POS features include:

• Reports
• Invoices
• Record of Transactions
• Balance Transfers
• Item Catalog
• Customer Directory
• Team Management
• Virtual Terminal
• Loyalty
• Marketing (optional add-ons)
• Appointments
• Other Optional App Integrations (e.g., bookkeeping, ticket sales, order management, etc)

Now that I’ve clarified the fact that your account features stay the same no matter which reader you choose, let’s take a peek at the free Square reader.

Meet Today’s Free Square Reader

To make sure you’re up to speed so far, keep in mind that when you set up your account, you’ll have a choice of a free Square Magstripe Reader: either the lightning connector or the headset jack. Your choice, of course, depends on your type of phone. Compatibility shouldn’t be an issue for most of you as the Square Reader for Magstripe is compatible with most Android devices and Apple products (hence the Lightning connector), but you can look for your specific device on Square’s drop-down device compatibility menu. 

Using The Square Magstripe Swiper

When you plug your reader in and open the app on your device, you’ll be all ready to make a sale. When it comes to swiping, it’s all about using a smooth, swift motion with the card as you pull it straight through. If you hesitate or pause mid-swipe, you’ll just have to try again, because it probably won’t “take.”

Swiping with the Square Reader

Overall, it’s a very easy process, and after each sale, your customer can enter in their email address to receive a digital receipt. At your dashboard, you can also enable tipping for that additional screen prompt as well.  The other nice thing about the magstripe reader is that you don’t have to worry about charging it, and it’s small enough to carry, even in a tight pocket. If for some reason you lose an internet signal (or you’re too far away from civilization for a trustworthy connection to begin with), you can still take payment in Offline Mode. Just make sure you can regain connection and process the sale within 72 hours, or the saved sale expires.

The magstripe reader certainly gets the job done, but a lot has changed with the payment industry, and you may want to opt for the other reader instead. We’ll discuss that in detail soon. But first, let me introduce you to the other option you have if you sign up with Square: the Contactless & Chip Reader.

Meet Square’s Other Mobile Card Reader: The Contactless & Chip Reader

Square Contactless & Chip Reader: Taking A Payment

The Square Reader for contactless and chip is also an option as you are signing up for your free Square account. Yes, you will need to shell out $49 for the Square Contactless & Chip reader, but you’ll also get the free magstripe reader along in the box, too! Leaping from free to $49 may seem like a big jump, but here are a few things worth considering:

• Digital Payments: With the contactless and chip reader, you can start taking digital wallet payments like Apple Pay, Google Pay, and Samsung Pay.
• EMV Chip Reader: The key difference between the magstripe reader and the contactless and chip reader, of course, is that you’ll read the EMV chip on the credit card by dipping instead of swiping. Why does this matter? See my next point.
• Fraud & Chargeback Protection: The digital wallet and EMV reader cover you more effectively from the risk of chargebacks and fraud than just the magstripe reader will. We’ll touch back on the shift away from magstripe in a little bit, but keep in mind that the contactless reader will not only offer more protection for your business from fraud, but you’ll also “future proof” your business for the growing trend of digital wallets as well.

If you decide you are happy with the free reader, for now, you can always purchase the Square Contactless & Chip reader later, and it’s included with the Square Stand. You can also purchase additional accessories from Square, like a case, to keep your reader attached to your phone.

Say Hello To The Square Terminal & Square Reader

Another option if you are thinking about a more all-in-one device is the Square Terminal. Take a payment, navigate on the larger screen, and print your customer a receipt from this device for only $299.00.

While that is another big price jump, I like to include this option here in the event that it is a more appropriate choice than the contactless reader if you also prefer printing receipts (not to mention more payment flexibility). You can swipe, dip, or tap at the Square Terminal. For a more in-depth post that goes into more hardware possibilities with your Square account, check out The Beginner’s Guide To Choosing Square POS Credit Card Readers & Cash Register Bundles.

Can A Small Business Really Get By With Just The Free Square Reader?

To make the best decision for your business, it’s important to consider a few things when it comes to fraud protection. Earlier, I touched on the fact that the chip reader improves fraud and chargeback protection for your business. That’s because of the big liability shift that’s happened in the payment industry. Businesses that don’t upgrade and use the chip reader to process credit cards are no longer covered by the payment brands should fraud occur. Merchants are responsible to eat the loss. So what does that mean for your business? The impact of the liability shift can impact a business differently, depending on its size.

For instance, if you own a coffee shop and process smaller ticket items, this liability shift may not affect you as much as the local furnishings or high-end clothing boutique. That’s because if a customer completes a fraudulent transaction, you’re responsible for the cost of it. Losing the price of a coffee vs. the price of a complete furniture set is quite a difference. So while it’s certainly not illegal to swipe rather than dip a chip card, you simply won’t have the same protections.

Of course, with mobile payment processing also came a new subset of security issues. The people at Square actually participate in and guide the decision-making behind policy changes set by the Payment Card Industry Standards Counsel —the official decision-makers and policy drafters of global payment security standards. So you can rest easy knowing your reader is a secure way to take payment as far as data transfer goes, making PCI compliance much easier (and cheaper) for your business to maintain.

The takeaway here is that yes, if you have a seasonal business or you process small tickets, you have a lower risk of chargeback and fraud. Using that free magstripe reader will likely be completely fine for you. However, considering the price of the upgraded reader is close to the price of one chargeback, it also just makes sense to invest in that for most businesses.

What About Square’s Processing Fees?

Whether you swipe with the free reader, opt for an EMV reader, or go with the Square Terminal you’ll pay the same in processing costs, which are: 2.6% + $.10 per swiped, dipped, or tapped transaction. One thing I do like about Square is that their fee structure is very easy to understand. Unlike some other pricing models that charge a different rate depending on the type of card, you know exactly what you’ll be charged.

This flat-rate fee with predictability and no monthly minimums, monthly fees, contracts, or termination fees can be fantastic for the small business, but it’s not for everyone. While there are certainly higher volume businesses (above $5,000/mo) that do well with Square, these may do better with a traditional merchant account that offers a lower cost per transaction.

Additionally, I don’t like to talk about Square without mentioning the potential account stability issues. Square is a third-party processor like Stripe, Shopify, and PayPal, and that inherently comes with less account stability. The third-party processor business model is notorious for being less forgiving when it comes to high-risk businesses and has some common red flags. All of this information is laid out in the merchant agreement, which we always encourage people to read in full. The vast majority of people will never face a problem, but it can be a nightmare if you do. To avoid some common red flags and find out if your business may be better suited with a high-risk processor, check out How To Keep Your Payment Processor From Holding Funds Or Terminating Your Account.

How Does The Square Reader Compare To Competitors?

When it comes to comparing hardware, you really have to keep in mind the features that come with the POS. And in Square’s case, it’s a favorite because you really do get a big bang for your buck. Here’s what I like best:

• Freebies: Free reporting tools, invoicing, virtual terminal, customer directory, and some good inventory tools, and it’s a great value overall.
• No Account Restrictions: Additionally, Square does not put restrictions on accounts if you do choose to use the magstripe like some processors (e.g. Paypal) do.
• Payment Flexibility: I like that even for the relatively low-cost option of the Square Contactless & Chip Reader, they let you break it up into smaller monthly payments, and you won’t be locked into a traditional lease to do so.
• Room To Grow: Square offers a larger suite of tools on the backend than similar payment processors. From a free Square website to options in upgrading employee management and marketing; it’s a lot to expand into!

However, Square is not a one-size-fits-all solution by any means, so if you’d like to check out all of your options in free readers, check out our post, The Best Free Credit Card Readers For Small Businesses.

Where To Buy Your Square Reader

You can get additional Square readers (both the free magstripe reader and the contactless reader) directly from Square, or at major retail outlets including Target, Best Buy, and Amazon. Return policies will differ depending on what store you purchase the reader from, and the last time we checked into the matter, we found that Square does not warranty their readers unless you purchase them directly from Square. We like that Square offers financing without signing a lease, so keep that in mind with your decision-making.

Also, keep in mind that the Square Reader itself isn’t tied to any particular Square account, so you can use pre-owned readers or swap readers between your own Square accounts and not worry that you’ll cross accounts.

Do You Need A Promo Code To Get A Free Square Reader?

You do not need a promo code to receive the free Square reader. Square offers the free reader with every account, and even if you opt for the Square Contactless & Chip Reader at the time of signing up, they’ll include a free magstripe reader in the box for you.

What’s The Final Verdict On The Free Square Reader?

The free Square reader can be a great get-you-in-the-door offer, but ultimately you shouldn’t let the “freeness” sway you without digging into the overall processing costs, features, and ultimately what you’ll need over the long term to grow your business. Businesses that have higher-ticket sales should probably avoid taking Square up on that free reader. We strongly suggest that businesses with higher risks of chargebacks and higher ticket prices go for an EMV compliant reader so that you can get better protection from fraud and chargebacks.

Smaller-ticket businesses and businesses with a lower chargeback risk are likely not going to have any issues with the reader, but we still suggest putting that EMV chip reader on your radar to get at some point. Overall, the free reader and the robust feature-set that Square offers makes them an excellent value for lower volume small businesses. Want to know more about Square? Find out what comes with a Square account and what types of business Square is best suited for in our full Square Review.

If you’ve read this far but you are still in the information-gathering stage on processing credit cards in general, you can download our free resource: Beginner’s Guide To Payment Processing.