Posts Tagged ‘credit card acceptance’

VMS-Washington – All About Square

Square Overview

Unlike most Square ( reviews, this Square up review focuses primarily on the things that matter to merchants and business owners, instead of just focusing on the Square’s technology. Square is often called “Square up” or “Squareup” because of the domain that Square uses for its website; however, the official name is for the company is “Square.” The names will be used interchangeably in this review.

Founded in February of 2009 by Jack Dorsey who is also the founder of, Square has seen tremendous growth in a very short amount of time. Much of the company’s success can be attributed to the fact that Square has ingeniously broken the mold of traditional credit card processing by removing the traditional barriers to entry and bringing credit card acceptance to the individual. iPhone, iPad and Android users simply fill out a quick form, download the Square app, and then await the arrival of the Square up reader in the mail. The Square credit card reader simply plugs into the headphone jack of the phone making it a mobile credit card terminal.  In fact, Square’s model has been so successful that it has attracted big name competitors such as Intuit (GoPayment) and North American Bancard (Pay Anywhere) to offer similar mobile processing services.

Square Sales and Marketing Tactics

Another area where Square differs greatly is in how it markets and sells its service.  Where most merchant account providers utilize poorly trained outside independent agents who are focused on setting high fees for big commissions, Square relies mostly on online marketing and partnerships with retailers and cell phone service providers.  Nearly all of Squares customers sign up directly through the homepage of the company’s website or by purchasing a reader a store with a 100% mail-in rebate.  Square has also benefited from an enormous amount online buzz and word of mouth promotion.  Square’s pricing is straight forward and easy to understand (covered later in this review), however, the company fails to mention anything about its fund holding and risk mitigation policies in it marketing material and advertising.  These policies have been reported to cause significant problems for many merchants and some have even complained of large financial losses. Due to the importance of these policies, and that Square fails to make merchants aware of them prior to account setup and prior to running transactions, many have complained of misleading marketing by the company.

Square Up Cost, Fees and Contract Terms

The Good

One of the most appealing aspects of Square is that, unlike nearly every other processor, Square credit card processing has only one fee: the processing fee of a transaction.  There are no other fees that are typical of credit card processing, such as activation fees, monthly fees, gateway fees, downgrade fees and early termination fees. Square has no additional monthly fees whatsoever and no monthly minimum processing fees.

No matter the card type, merchants pay a single flat rate of 2.75% for swiped transactions, or 3.5% + $0.15 per typed transaction (as of this review).  Although the transaction rate is higher than the “Qualified” rate of most traditional merchant accounts, it is comparable to the “Mid-Qualified” and “Non-Qualified” downgrade surcharges that about 80% of most transactions experience in a traditional merchant account setup.  The rate is, however, much more expensive than the Interchange Pass-through rate pricing model.  Given that most merchants do not have Interchange Pass-through pricing, and the fact that Square has no monthly fees and no time commitment, makes it one of the most affordable credit processing options in the market.  Nevertheless, Square does have some drawbacks.

The Not-So-Good

Square does not verify the credit history of its customers (a benefit for some) so it sets a few limitations to avoid potential losses to fraud. When it comes to processing limits, Square states that there is no limit to the amount of money that can be accepted per transaction or per month – which is mostly true.  Instead of denying transactions once a processing “limit” has been reached, the company relies on two methods to limit possible fraud while allowing merchants to accept an “unlimited” amount of credit card sales.

The first method is the most transparent and can be found with a little research in Square’s help section; however, you will find no mention of it just about anywhere else. Square place sholds on funds of card-not-present sales for 30 days if more than $2,002 is charged within any rolling seven day period.  This means that if a merchant keys-in $2,100 in sales within a seven day period (either in a single transaction or multiple), instead of swiping the card through the card reader, the extra $88 will be held by Square for 30 days.  This policy applies to any amount over $2,002 in any seven day time period.  Merchants who regularly process more than $2,002 a week in card-not-present sales have two options to circumvent the deposit hold. With the first option, Square periodically reviews accounts and will automatically raise the limit for merchants that regularly process over the limit, have few refunds and very few to no chargebacks. The second options allows merchants to request a raise their card-not-present deposit limit by emailing Square’s customer support.

The second method Square uses to limit fraud is much less transparent and the reason for the company’s low score in this section. Merchants are reporting in great numbers that Square has randomly and without explanation, or notification, placed lengthy holds (exceeding 30 days) on their funds – even with swiped transactions.  Square appears to rely on undisclosed algorithmic “risk factors” to place automatic holds on transactions that it deems suspicious.  It many cases the system appears to flag a high number of legitimate transactions without notifying the merchant of the hold, or the reason for placing it.  Square’s policies regarding these types of holds are murky at best and make the service highly undesirable for higher volume merchants. It appears that the company needs to do a much better job of educating merchants about the types of transactions that have a risk of being held, notifying merchants when transactions have been held, and communicating with the merchant through the hold process.  Since fund holding can greatly impact a merchant’s operations, the grade for this section will remain low until Square improves the system.

VMS-Washington – All About Square

Square Customer Service, Complaints & Dispute Resolution

Another area that Square comes up short in this review is in its customer service.  For a company that has only been around for about two years, Square is racking up a lot of complaints. The majority of the complaints fall into three areas: Practically non-existent merchant phone support, misunderstanding and non-disclosure of the $1,000+ card-not-present deposit hold policy, and complaints of random fund holding with no explanation or communication.

The company appears to rely too heavily on customer service provided by email, a Twitter support page, and a support blog. This can pose a big drawback for many merchants, especially for those who are not willing to wait for an email response.  The company does, in fact, have a phone number ((415) 375-3176) but it appears to go to a voicemail system for the majority of callers.  Additionally, many merchants are reporting wait times of several days before getting a response from Square, regardless of how they contacted the company. For many merchants it seems inexcusable for a financial services company to not have a readily available 800-number helpline.

Square could greatly improve its rating in this section by adding a dedicated customer support number and better communicating its hold policies.

Square Better Business Bureau Report

As of this update, Better Business Bureau (BBB) is reporting an “A-“ rating.  A total of 202 complaints have been filed in the last 36 months which is up from 118 as of our July 24th, 2012 update.  Of the complaints, 115 are regarding problems with service, 65 with billing and collection, 18 with delivery issues, and four in advertising and sales. It should also be noted that Square has been in business for less than the 36 month reporting period. Additionally, the report goes on to say that there are three types of common complaints: Delays in deposit times, long fund holds ranging from 30-90 days, and difficulty reaching any sort of customer support or getting issues escalated to a higher ranking representative. Square has responded by quoting its Terms of Use policies and referring to the help section of its website.

Bottom Line

Square is definitely on the right track with providing an easy credit card processing solution with no long-term commitments and no monthly fees.  The service is proving to have some major drawbacks for higher volume merchants because of murky fund holding policies and poor customer support.  It appears that Square is best suited for individuals who have an occasional need to accept a credit card and merchants with small ticket items and low volume credit card sales. If you’re looking for alternatives  to Square contact us or check out our comparison blog: VMS-Washington – Square vs. ROAMpay

Thank you,


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