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Square Vs Merchant Account: Which is Better for your Business

Square Vs Merchant Account

Square Vs Merchant Account: Square is a well-known payment processing service that has changed the game in a way that makes it simple for small companies accepting credit card payments. There is no need for contract lengths, ad-hoc pricing strategies, hidden costs, or expensive equipment. Square is a simple technology-based service ideal for startups or smaller companies requiring a one-stop solution. But, as your business expands, you might realize that Square’s flat rate pricing model becomes prohibitive. For this reason, consider using a merchant account as an alternative. Merchant accounts come with a wide range of pricing and features that are customizable according to the specific requirements of your business. Merchant accounts also provide greater flexibility and control over Square. The most appropriate choice of payment processing company to use for your company depends on your specific preferences and requirements. If you’re not sure which option is best for your needs, then this post can assist you in evaluating the advantages and drawbacks of each choice and also show you how to figure out if Square or an all-inclusive merchant account would be the best option to suit your needs.

SQUARE’S MERCHANT SERVICES AREN’T THE SAME AS A MERCHANT ACCOUNT

Square Vs Merchant Account: With Square, the application process is free of cost, and everyone can sign up for an account. Square will require the most basic details about your business and confirm your identity. However, there’s no need to go through the lengthy underwriting process. You’ll instead be in and running within a couple of days. However, the process of acquiring a merchant account can take more work. nApplications are usually straightforward. However, you should expect the procedure to take some time. This is because the department responsible for underwriting examines every part of your enterprise to decide the likelihood of experiencing chargebacks (learn how to prevent charges) and accusations of fraud, as well as other things processors aren’t willing to handle. There could be a lot of back and forth with a rep before the account is approved. This is why Square can be more beneficial to small and new companies.

HOW DOES SQUARE WORK?

When Square was first introduced, it offered nothing other than basic credit card processing, reports, and analytics. Nowadays, there is a better situation. Square has expanded its products and services offerings dramatically over the last few years and offers just everything you can expect to get when you use a traditional merchant account service.

HOW DOES A MERCHANT ACCOUNT WORK?

With all the services offered, it’s simple to see your Square account is a business account. But that’s not the situation. Square is a payment service provider (PSP) that can handle your debit and credit card transactions. However, it isn’t able to give you a full-service merchant account. Your account instead is linked together with others into one large merchant account. The benefits of this model include an efficient, quick procedure for approval of your budget and the possibility that Square takes care of every aspect of PCI conformance needs for you without charge. One of the main disadvantages is that because your company isn’t subject to the standard thorough vetting procedure required for accounts with merchants, The risk of having an unexpected account freeze, hold, or closure is much greater.

COMPARISON: KEY DIFFERENCES BETWEEN SQUARE & A MERCHANT ACCOUNT

Square Vs Merchant Account: While both Square and traditional merchant accounts enable the acceptance of credit and debit card transactions, There are distinct distinctions between the two. This table outlines the significant differences that you must know about when choosing what option will work best for your company:

Square Merchant Accounts
Aggregated account, no unique Merchant ID number Full-service account, unique Merchant ID number
Pay-as-you-go billing Fees are billed every month, even if you don’t process any transactions
No long-term contract or early termination fee May include long-term contract (typically 3 years) and early termination fee (up to $500 on average)
No recurring monthly fees for a standard account Multiple recurring monthly & annual fees
Predictable flat-rate pricing Highly variable tiered, interchange-plus, or membership pricing

 

Additionally to the above considerations, One of the main differences between Square and traditional merchant accounts is that all customers are offered identical terms and pricing with Square. However, this is different for merchant accounts, as the contract’s terms, fee plans, and processing fees can vary between businesses one day and the next. They can also be adjusted to suit your needs through aggressive bargaining. Most traditional merchant account companies do not publish any details about pricing or contractual terms on their sites, opting instead to use a quote-based system precisely specific to the needs and size of the company. It is a good thing that there has been a highly positive shift in the processing industry in recent years to make it more transparent, especially in terms of fees and rates for merchants considering a purchase. Many of our top-rated companies now offer extensive explanations of their processing rates, fees, fee schedules, and the terms of contracts on their web pages. Companies trying to select the best provider for their business can evaluate their estimates against the amount Square costs. For many small-sized businesses, Square is the most affordable option. In the case of greater processing volume in the event of higher processing volumes, the much lower interchange-plus rates offered by a full-service merchant account service provider are likely the most cost-effective option regardless of the extra annual and monthly fees incorporated.

IS SQUARE CHEAPER THAN OTHER MERCHANT SERVICES?

Square Merchant Account
Pricing Model Flat-rate Tiered, interchange-plus, or membership
Monthly Fees None Variable, usually at least $10/month
Early Termination Fee/Cancellation Fee None Variable, $0-$500 or higher
Hardware Options Proprietary (can only be used with Square) Usually universal (can be reprogrammed to work with a different provider)
Ideal For Small or newly established business (less than $5K/month processing volume Medium-large business (over $5K/month processing volume)

Hardware Options Proprietary (can be only used in conjunction in conjunction with Square) Most of the time, it is universal (can be modified to work with another provider). Ideal For New or small-sized businesses (less than $5K/month ) processing volume, Medium-large businesses (over $5K/month processing volume). The above table summarizes the significant distinctions between Square and the traditional merchant account. The Square stands out from most merchant accounts in an important aspect: Transparency.The cost of merchant accounts and the terms of contracts can be highly flexible; Square offers you all the details you need to make an informed choice before making a decision. The best option that is less costly for your business will be contingent on the size and nature of your company and the kind of rate and conditions you can get from a merchant account service.

Generally, Square costs less if your company processes less than $5,500 monthly for debit and business credit card transactions. An experienced merchant services service provider may need to be more cost-effective than this figure. It’s essential to note that the $5k number is only an approximate average. There have been figures of as low as $1,500 to as high as $10,000 per month. This is the recommended “tipping point” where a merchant account would make more sense.

Finding a reasonable and exact “tipping point” for your business is something only you can determine depending on your requirements and other variables like your month-long processing capacity and the typical ticket size. If you require assistance when it comes to “doing the math,” check out our book, Don’t Overpay to Pay for Credit Card Processing: Tips to Choose a Great Merchant Services Provider and Lower Your Costs, for a thorough guide (complete with worksheets) of how to calculate the cost for your entire transaction with Square or any other merchant account service.

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Also Read: Payment processing: Accept payments anywhere with authorize.net

WHICH IS BEST FOR MY BUSINESS NEEDS: A MERCHANT ACCOUNT OR SQUARE?

Selecting a payment processor suitable for your company is more than just an issue of choosing the most affordable alternative. Also, it would help if you considered other factors, including the accessibility of other services, software and hardware choices, and (most importantly) the level of customer service.

CHOOSE SQUARE IF…

Square has proven to be an affordable choice for many people. The ever-expanding range of services and services is an excellent alternative to conventional merchant accounts. Also, it’s a good alternative for small-sized businesses that otherwise might need help paying for an all-inclusive merchant account. The majority of companies will discover Square as the best alternative in these scenarios:

  • Businesses that are seasonal or part-time
  • Companies that are only required occasionally to accept credit card
  • Small non-profits
  • Full-time companies that usually perform less than $5,500 per month

CHOOSE A MERCHANT ACCOUNT IF…

While it’s an excellent Square, there are better choices than this one. A merchant account will better serve larger, established companies due to low processing costs, access to more advanced technology and hardware, better security of the report, and superior customer support. The best option is to select the merchant account (from the top company) if the following criteria apply to your company:

  • Businesses that are full-time and operate year-round.
  • Businesses that will accept credit cards regularly
  • Nonprofits with large size
  • The majority of companies process $5,000 monthly

Also Read: MTOT Disc: What Does it Mean Exactly?

SQUARE VS MERCHANT ACCOUNT: THE FINAL VERDICT

Are we recommending Square to merchants? Yes, it is the right choice for most firms. Are we recommending conventional merchant accounts? Absolutely. But which is the better option? It isn’t easy to decide. In the case of processing payments, there are a variety of approaches. Your business’s age, size, sector, and manner in which your company operates day-to-day all play a role in deciding on a processor. Specific facts are undisputed: opening a Square account is much easier and takes longer. However, it could mean you lose the security of your account. Service to customers will always be more efficient with a highly-rated payment processor. With Square, it is not possible to have an option to choose which equipment or software you’re using. Merchant accounts generally offer the user a range of choices. However if you want to consider the best option for merchant accounts. 5 Star Processing is the best.

Like always, the choice is based on what will help your company to profit the most. Consider both the advantages and disadvantages.

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