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Square introduces monthly pricing

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Re: Square introduces monthly pricing

#141

Post by nkurz »

notatoad wrote: post #55
tibbon wrote: post #24

So two things that I've never understood. 1) Why is it just now that someone's actually providing competitive service in this space? We've had people selling CC machines and service for years... 2) Where (in general, not just with Square) does the money actually go? It seems that prior to Square announcing this, getting under 2-3% or so was nearly impossible. On the scale of the US economy alone, that's HUGE money. W…

2-3% is over-estimating things. Online retailers pay that much, anybody charging credit cards at a physical location should be paying more like 1.75% in fees.

I take credit cards at a physical location for a physical product, and think I have good rates. We do $10-$20K per month, and averaged across all cards and including all fees we pay about 2.6%. I've checked with FeeFighters and others, and have never seen a legitimate quote as low as you suggest. I don't know if the savings are enough to cause us to switch (we use Square as a backup), but I think that for certain merchants this new offer is the best rate around. If you speak from experience and are currently paying less than 2% total fees in the US by some other means, please tell me how you are doing it!

Re: Square introduces monthly pricing

#142

Post by notatoad »

nkurz wrote: post #141
notatoad wrote: post #55

Earlier quoted context omitted.

2-3% is over-estimating things. Online retailers pay that much, anybody charging credit cards at a physical location should be paying more like 1.75% in fees.

I take credit cards at a physical location for a physical product, and think I have good rates. We do $10-$20K per month, and averaged across all cards and including all fees we pay about 2.6%. I've checked with FeeFighters and others, and have never seen a legitimate quote as low as you suggest. I don't know if the savings are enough to cause us to switch (we use Square as a backup), but I think that for certain mer…

I'm not currently paying less than 2.6%, because i deal exclusively with online transactions. All i know is that most of my clients who handle offline transactions through another provider are shocked at paying over 2% when they start collecting money online.

and my experience is in Canada, not the US, but in general our rates are slightly worse here. Your rates might be high because your volume is pretty low.

Re: Square introduces monthly pricing

#144

Post by nkurz »

gsibble wrote: post #121
zeroonetwothree wrote: post #111

Earlier quoted context omitted.

There are several cards that give 2% flat on all purchases. You can also do much better if you use specific categories across multiple cards, for example there are cards that give 5% for restaurants.

Most of those very high reward rate cards come along with significantly higher interchange fees (4-5% or even higher). Merchants abhor them.

I'm dubious. I just glanced at my interchange plus billed Merchant Account Statement, and the highest I saw was 2.95% + 20 cents for a couple international business rewards cards. I suppose you could count this as 5% for an under $10 purchase, but do you have a specific example of a card that exceeds 4% on larger transactions?

Re: Square introduces monthly pricing

#145

Post by nkurz »

notatoad wrote: post #142
nkurz wrote: post #141

Earlier quoted context omitted.

I take credit cards at a physical location for a physical product, and think I have good rates. We do $10-$20K per month, and averaged across all cards and including all fees we pay about 2.6%. I've checked with FeeFighters and others, and have never seen a legitimate quote as low as you suggest. I don't know if the savings are enough to cause us to switch (we use Square as a backup), but I think that for certain mer…

I'm not currently paying less than 2.6%, because i deal exclusively with online transactions. All i know is that most of my clients who handle offline transactions through another provider are shocked at paying over 2% when they start collecting money online. and my experience is in Canada, not the US, but in general our rates are slightly worse here. Your rates might be high because your volume is pretty low.

Perhaps Canada actually has better rates than the US, but my general experience has been that people who say they are paying less than 2% aren't actually looking closely at their bill. My guess is that your clients are wrong, and are quoting the best-case advertised rate they signed up for, rather then the actual all-included cost they pay. But maybe they could get that low if their average transaction is high enough and they are in an extremely safe industry?

Re: Square introduces monthly pricing

#146

Post by LyndsySimon »

gsibble wrote: post #120
LyndsySimon wrote: post #95

Earlier quoted context omitted.

I have no insight into Square's management or financials, but if I were Jack Dorsey, I would find it reasonable to operate at a moderate loss for a fair amount of time, before launching my own exchange system that bypasses cards completely. Indeed, that seems to be the way they're going, what with _Pay with Square_ allowing for contactless, mobile-based payments. First they disrupt card processing for small merchants…

I agree that may have been a good strategy (and may have been their original strategy) but with $100m in cash from VISA, it's very unlikely they will launch a competing network. Also, all of Square's payments including digital ones still get processed over VISA/MC/AMEX and still have interchange. Getting rid of the card itself does no good to lower fees. Prepaid accounts would definitely work though. Again, Square pr…

> but with $100m in cash from VISA,

I was unaware of this; that does make a significant difference.

Re: Square introduces monthly pricing

#147

Post by suldan34 »

wadetandy wrote: post #126
nnnnnnnn wrote: post #115

Earlier quoted context omitted.

Not "less than 21k." There is no upper bound on the value. You always save money, provided you process upwards of $10k/mo. A merchant processing 50k/month on square paying 2.75% would save money by switching to the new plan. At least, if I'm reading this correctly.

Except that merchant can't switch to the plan if they process that much, since it is limited to merchants under $250,000/year.

after 21k per month, you jump back to the regular rate of 2.75% per transaction. Over $10,000 per month, Google Checkout charges me 2.2%. But of course with Google Checkout you can't do all of the cool things that you can do with Stripe.

Re: Square introduces monthly pricing

#148

Post by Aleran »

armen52 wrote: post #52
vaksel wrote: post #36

Earlier quoted context omitted.

there are actually a ton of costs for them. They have to pay for infrastructure, they have to pay for customer support, they have to pay for fraudulent transactions and on and on. I think most credit card companies have something like 10%-15% ROI

Their fraud costs are not what you make them seem. The credit card companies do not take on the risk for fraud most of the time. They push that risk onto the merchants. This is why large e-commerce companies have giant fraud departments trying to prevent fraudulent orders and charges on their site; because when they occur, they generally just eat the loss.

Actually the merchant is only liable for the loss if they did not follow all of the rules and regulations for processing the credit card.

From wikipedia (http://en.wikipedia.org/wiki/Credit_card_fraud#Merchants): "The liability for the fraud is determined by the details of the transaction. If the merchant retrieved all the necessary pieces of information and followed all of the rules and regulations the financial institution would bear the liability for the fraud. If the merchant did not get all of the necessary information they would be required to return the funds to the financial institution. This is all determined through the credit card processory."

From what I have seen, it is very common for the merchant to be liable for losses on a card not present transaction (e.g. online retail) but the credit card company stomaches the losses for a card present transaction.

I suspect that online merchants could reduce their liability by implementing things like Verified by Visa but choose not to because it causes them to lose too many legitimate sales.

Re: Square introduces monthly pricing

#149

Post by Aleran »

lwhi wrote: post #86

So if your (small) business takes $60,000 in a year, you will pay square $3300; effectively a rate of 5.5%. If your business takes $160,000 in a year, you end up paying square a rate of around 2.06%. Is this really that revolutionary? (.. am I oversimplifying the situation?)

This is revolutionary because it is the first time that merchants have been ever been given the option to pay a flat fee per month in lieu of paying a percentage fee on each transaction. While that may not seem like a big deal you, merchants really love the simplicity of it.

A business that processes 60K a year is below the size that is targeted by this pricing structure. They are better off continuing to pay 2.75% per transaction.

Re: Square introduces monthly pricing

#150

Post by nnnnnnnn »

wadetandy wrote: post #126
nnnnnnnn wrote: post #115

Earlier quoted context omitted.

Not "less than 21k." There is no upper bound on the value. You always save money, provided you process upwards of $10k/mo. A merchant processing 50k/month on square paying 2.75% would save money by switching to the new plan. At least, if I'm reading this correctly.

Except that merchant can't switch to the plan if they process that much, since it is limited to merchants under $250,000/year.

No, it isn't limited that way. It's 0% under 250k, and reverts to the regular 2.75% if you process above those limits.
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