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Analysis: Is Square The Cheapest Credit Card Processor For Your Business?

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Melissa Johnson

Melissa Johnson

Melissa Johnson has been writing about payment processing and mobile payments since 2014, and has been quoted in articles for Credit Karma and The Next Web, among others. She graduated from The University of Kansas in 2010 with bachelor's degrees in English and journalism.
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    I’m on an interchange plus plan of 0% + 3.5 cents per swipe. My average swipe size is around $10. I’m doing about 30K in total credit card sales per month, and my effective rate is coming out to about 3.23%. I can’t help but think that something is wrong, since this is significantly more expensive than Square’s 2.7%. Am I being tricked somewhere?

      Melissa Johnson

      Hi, Gary!

      Without actually seeing your statement, I can’t give you an exact answer. But generally speaking, merchant accounts with a markup that low tend to come with a monthly fee, which likely plays a big part. It’s also possible that you’re processing a lot of cards with a higher interchange — rewards cards, business/corporate cards, and American Express cards all tend to have higher interchanges. I’d advise you to check your statement for fees other than processing rates, which could explain why the effective rate is higher than Square’s. (Please also keep in mind that Square is playing a numbers game — it charges less for American Express and other high-interchange transactions because it’s balancing out those costs by making money on lower-interchange transactions.) If you aren’t super confident in your current processor, I also suggest you check out our top-rated merchant providers for some alternative options!

        Joey Adair

        I have reviewed many merchant statements where the business owner thinks they have this extremely low pricing, but their merchant services company has monthly fees, other per item fees, are “padding” interchange with a mark-up that they are not divulging to you, or 100 other ways they are charging you.

        The merchant services game is very difficult to play for business owners because the pricing models are so complex. There are so many players involved in transferring money from the cardholder’s bank account to your business’s account, and they all need to get paid. They get paid through a fee on your merchant statement, and each one of these fees is an opportunity for your merchant account provider to earn money by marking it up. If you aren’t intricately familiar with the industry, it’s unlikely you’ll be able to understand what you are actually paying over the wholesale cost of processing usually. I’ve seen thousands of statements from different providers and sometimes even I am stumped for a minute.

        Your merchant account provider is performing a valuable service to you, and they deserve to be compensated fairly for it. However, because the industry is essentially a “race to the bottom”, merchant services companies are finding creative ways to hide their fees, and earn income in different ways. Note: they aren’t necessarily hiding their fees from you, they are hiding their fees from other merchant services companies that want to beat your pricing by 15% to steal you away. If they can misrepresent a marked up fee as being a “pass-through” cost, they will fool other merchant service providers into thinking there is no room to make any money on your account and to just give up.

        It is difficult to find reputable merchant services companies that aren’t charging a premium because of this complexity in pricing schedules. Your best option if you are looking to lower your fees, is unfortunately to shop your quotes. Never sign a lease, pay cash for your equipment, stay away from signing a contract with a term or cancellation fees, and look out for those annual fees. Any annual fee other than PCI Compliance is usually just profit taking.

        If you are a retail business accepting card present transactions from average income consumers with an average ticket between $25 – $75, you should be shooting for a total monthly charge of around 2% of your volume. If you are close to this, I’d just stick with what you have. If you are higher than 2.3%, you need to go somewhere else. Time to shop that merchant statement!


          Hi Melissa! Great article. Question… I have an app that charges the customer just $0.10 per transaction. Is there a payment processing company that charges just a percentage instead of a dollar amount? It doesn’t make sense for me to pay a dollar amount if I’m only getting $0.10 per transaction. Does that make sense?

            Melissa Johnson

            Hi, Abner! There’s a LOT that goes into payment processing, rate negotiations, etc. It’s hard to give the perfect answer with so little information, but in your case, I would look at platform payments such as WePay and make sure that your pricing structure is set up so that you can cover the associated processing costs plus turn a profit or otherwise pass them onto the consumer.

              Stephen Connally

              I’m looking at an average ticket of $700 or $1400 per transaction. At this point I have no idea how many of those transactions i’ll run a month. It’s a new business. I’m having trouble understanding who I should go with. I was looking at Square or CDG. I just don’t want to get locked in. BOA is who I do my banking with and they offer merchant services as well as Quickbooks. Not sure where to go from here. I’ve read everything you’ve generously provided several times and just don’t feel any more confident.

                Melissa Johnson

                Hi, Stephen!

                There’s a lot we don’t know about your business, so it’s difficult to say definitively (so many factors come into play!). However, based on the data you’ve given us, I would recommend going with a merchant account of some sort. Bank of America’s merchant services are likely a poor fit for you because they tend to stress expensive hardware leases and multi-year contracts. First and foremost, I would suggest either CDG or Helcim. I think QuickBooks Payments, if you’re planning on using QB for accounting, could also be a potential fit, but look at CDG and Helcim first.

                I hope this helps!

                  paul schultz

                  Melissa, do you know of any CC processing brokers (like energy and health insurance brokers) that a small company or nonprofit can hire to help it find the best CC processor for the company’s needs? This is a very complicated field and requires great expertise to compare competing CC processors. The broker should be someone who has experience in the field and does not get a commission or finder’s fee from a CC processor or bank to bring in new business. The broker would be paid a flat fee for his/her services. If so, please let me know

                    This comment refers to an earlier version of this post and may be outdated.

                    Amad Ebrahimi


                    I think Phil Hinke might be able to help you. Check out his website:

                    Take care!

                      This comment refers to an earlier version of this post and may be outdated.

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