Think Outside the Square: Analyzing the Cost Effectiveness of Square’s Mobile Processing Solution

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Credit card processing is traditionally thought of as an at-the-counter transaction, where a merchant takes hold of a person’s credit card and swipes it at the register. The problem with this setup is that mobile merchants (those who rarely hang out near a register) don’t have an easy way to accept anything but cash.

Enter Square.

With Square, merchants can simply plug a device into their iPhones, iPads, or Android based smartphone’s to use for swiping. This appropriately-named, four-cornered accessory converts the credit card’s information into usable data on the phone or tablet, giving users instant access to the money they need.

The question now is whether or not using Square is cost effective in comparison to other options. Can you save money by using Square, or are you better off with another merchant account entirely? We’ve run the numbers to figure that out.

Square Fees and Rates

Square is perhaps the most simplistic payment processor on the market to understand, in terms of rates and fees. Merchants pay 2.75% per transaction, with no monthly or annual fees. There are no setup expenses whatsoever – not even the cost of the “dongle” itself. Square gives all that away with the hopes of enticing people to use their device.

In order to save money, some users may choose a flat monthly fee option, which is $275. This is beneficial for those with large-volume transactions, but it does not help people with less than $10,000 a month in credit card swipes. Once a merchant reaches $250,000 in annual transactions, he or she must go back to paying 2.75% per transaction. Nevertheless, this option could result in lower costs as a whole.

There is no contract associated with Square, so there are no cancellation fees to worry about. If a merchant decides that he or she no longer needs Square for mobile processing, he or she may opt to stop using the device. This simple, hassle-free setup is what leads people to use this processor in the first place, even if they don’t fully analyze the costs.

Note that there is a 3.5% + $.15 transaction fee for card-not-present (CNP) transactions. If your business typically operates without the physical swipe of a customer’s card, your rates could be significantly higher.

Comparing Square to a Merchant Account

Initially, the fees for Square will seem much lower than those of a merchant account. At the very least, they are easier to calculate and understand. With this in mind, the cost benefits of Square do not last long. Once a user reaches a certain volume of transactions, Square no longer becomes the cheap solution because it is purely based on percentages. Flat fees per transaction make matters more affordable.

We’ve illustrated the fee comparison for Square and merchant accounts below. In this chart, we used a special Square calculator to compare the costs of a Square account versus a merchant account. To simplify matters, we assumed an average transaction value of $50.

Square vs Merchant Account

As you can see, Square is the frontrunner for businesses with less than $5,000 in credit card transactions a month. Once a user hits $10,000 though, merchant accounts become more affordable. Of course, a change in the average transaction size will reveal slightly different numbers, but eventually, every business hits a breaking point. You have to determine what yours is.

Let’s break down the monthly costs at the $1 million mark, just to put matters into perspective:

Square Cost Assessment

As you can see, the flat transaction fees in the merchant account diagram help to significantly reduce the money paid out per month. Even with an Interchange fee, an assessment fee, a processor markup, a transaction fee, and other monthly charges, merchant accounts still offer more for the money than Square, at least at a dollar to dollar comparison. There’s a little more to the picture though…

The Value of Convenience

As much as we would love to purely look at the numbers, we have to think about convenience as well. If you do most of your business on the go, you may not have the opportunity to use traditional credit card processors. Food trucks, taxi cabs, traveling salesmen, and the like all need a way to accept Visa and MasterCard without having to lug a terminal around. That’s where Square has the advantage, despite the potentially higher costs.


Before signing up for Square, thoroughly assess whether Square is cost effective for your business. Consider your average transaction value, monthly sales volume, mobility needs, and more, and you should be able to determine how cost effective Square’s service really is. Know that there are other options out there, and don’t be afraid to take one of them on. As long as your customers are cared for, the name of the processor shouldn’t matter.

Think outside the Square.

Amad Ebrahimi
Amad has worked in the eCommerce and online marketing world since 2002. He started as an eBay seller, then slowly graduated to building & marketing his own websites and consulting others to do the same. He founded Merchant Maverick out of frustration with all the misinformation and shady tactics that he encountered when trying to find a merchant account for his and his client's businesses. He's the man behind most of the merchant account reviews, and articles posted on Have any questions related to credit card processing? Talk to him.
Amad Ebrahimi
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    Really good article. I have a start-up travel business and while my transaction amounts are typically between $1000-3500 (my highest volume month to date was $6700), there are months that I’m not doing any transactions. We don’t do any swiping, only keying in as all transactions are via phone. Typical merchant setups charge ridiculous access fees customer service fees, security fees, location fees, network fees, the list goes on. Is Square a good option to typical merchant accounts or are there better merchant processors that charge very little in recurring monthly fees? I’m looking for the best way to go until my sales are consistent.

      Jessica Dinsmore

      Hi Patrick,

      You could contact Square and see if they will accommodate your business, but I suspect, as a travel business, you will be classified as “High Risk“. If that is the case, you’ll be limited in your choices and also subject to higher fees, unfortunately. That said, there are still good options available.

        Dean Wolslagel

        Nice site and very informative !

          Nick Sandberg

          Quick question – is Square only available in US and Canada so far? Do you know if there is any plans of offering their services in Europe where there is a larger percentage of smaller businesses in most countries.

            Chloe Bahal

            Hi Nick,

            Unfortunately Square doesn’t offer services in Europe at this time, but it is something that is being looked into. Here is a list of countries that works with Square.

              Crystal Puente

              I am starting a company where all transactions will be $90.00 and card not present. Averaging $90,000.00 per month. Still can’t figure out which way will be cheaper for me. Any help would be appreciated.

              Thanks in advance,

              C. Puente

                Chloe Bahal

                Hi Crystal,

                I am going to send you an email right now so please keep an eye out for it.

                  Lynn Bell

                  This article does sum up the “basic” truth behind square vs merchant accounts. But it only covered TIERED pricing. There is a method to blow square completely out of the water if your have an agent representing a morally sound company. Yeah, I know this sounds like a far fetch but trust me, it can happen.

                    Dennis Melancon Jr

                    This hits it on the head. For small and upstart businesses like mine, Square is the right choice.

                      kelly Devine

                      I am opening up a small garden center and I’m very confused about the square.I recently found out that it does not process debit cards only tracts them .I would then also need a separate for debit customers to pay .Is there an easier way for payments? Should I just go with the standard counter machine or is the square still going to be convenient enough to warrent 2 forms of payment.Do you know if they intend to start taking debit on the square.I live in Canada so the system may be different here .If you have any suggestions I am open to it.

                        Tom DeSimone

                        Hi Kelly,

                        Accepting debit cards via mobile app is tricky for Canadian businesses. (I will update the review to make this limitation clear.) I’d suggest you talk to Helcim and just use a countertop machine. The lower rates you’ll get at Helcim versus Square will make it so the machine pays for itself very quickly.

                        Good luck,

                          Dana Hudson

                          Great article and confirms the conclusion I’ve recently come to about the most appropriate payment platform for my new business. My friend and I started our own candle making company earlier this year. I researched and number of Merchant Services options, including square, before deciding on Flagship Merchant services. At first, they seemed to offer the best deal – ranging from 0.98%-1.98% + $0.09 per transaction depending on the type (check card, card present or card not present. But then there’s also $7.95/month for the Flagship account, $7.95/month for the mobile card reader, & $25 for the monthly minimum fee. That monthly minimum fee wasn’t discussed or explained to us at all when we signed up for the account, though it was in the fine print of the contract. Check out – – for a good explanation. Long story short, is that Square is the most cost-effective option for our small monthly volume of credit card sales (<$1500). The seemingly very high 2.75% per transaction fee is offset by the fact that there are absolutely no other charges at all.

                            Chris Baer

                            Great breakdown. It was nice to get a sense of what volume works best/is most cost effective for the Square solution. As a healthcare provider we are often bombarded with merchant service quotes and who can save money for us and they numbers they give us are always biased. Even Square appears to have more hidden until you look at the break-even analysis. Nice article

                              Billy Martin

                              The main point of consideration in most businesses is not really the volume, but rather the average transaction amount. That is the factor that changes your numbers the most. For instance, my average transaction is $8.00. At that, the best card processing to be found will cost $200 more dollars than Square, at the $10000 of volume. If I had the $50 average transaction, then Square does lose out, though. Everyone has to run the numbers their respective business produces, as you pointed out.
                              Good article…

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