Tuesday, January 24, 2023

How Do Square Credit Card Readers Work

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Should I Use Square For My Business

Square Payments | Credit card reader Review | How Dose Square Pay Work

Square is a very impressive company. Its business model is different to that of iZettle or SumUp as its focusing far more on its app and far less on its card reader. And so far, it looks like this gamble is paying off. Reviews are positive across the board and largely match our experience with the device and app.

Here is a quick snapshot of Squares reviews.

However, as Ive said in other articles, Squares long-term battle isnt against other card readers, its against the established terminal rental model.

As you can see above, the leading card readers are fairly similar in terms of capital costs, running costs and functionality.

When comparing card readers with terminals, however, the differences are much clearer. Traditional terminals have long contracts and minimum monthly fees. That makes them unattractive for low volume and irregular merchants. However, traditional terminals come with significantly lower payment processing fees.

Once your turnover hits approximately £2,000 per month, its almost always cheaper to ditch the card reader and invest in a traditional card terminal.

So, whether Square is right for your business is really a question of turnover. If youre under the £2,000 threshold, Square will provide an excellent, flexible and affordable means of processing payments. Over the £2,000 threshold and youre probably better investing in a more traditional set-up.

Square Pos Hardware Costs & Transaction Fees

As always, Square pricing is very straightforward. Below, weve listed prices for the hardware and what it will cost you to process payments.

  • Square StandFor Contactless & Chip: The cost for this one is $199. If you want to add an iPad, you can do so for $329. Note that the stand is only compatible with an iPad , iPad Pro 9.7, or iPad Air . Youll pay 2.6% + $0.10 per swipe, dip, or tap transaction with the Square Stand so long as you are running the free Square POS or Square For Restaurants. Merchants using Square for Retail process transactions at a different rate 2.5% + $0.10.
  • Square Terminal: To get your business a Square Terminal, youll pay $299, shipping included. Your payment processing fee is 2.6% + $0.10 per swiped magstripe card, swiped or inserted chip cards, and contactless payments.
  • Square Register: Square Register costs $799 to purchase it outright. Shipping is free, and it arrives in seven business days or less. Its ready to start processing payments right out of the box, so theres no fuss when it comes time to launch. Square charges a processing fee of 2.5% + $0.10 for contactless payments, swiped or inserted chip cards, and swiped magstripe cards.

If you add on specialized software, such as Square for Restaurants or Square for Retail, you will have an additional monthly charge . Both of these premium POS systems are geared towards specialized businesses and include features such as advanced reporting and table mapping .

Can You Use A Square Reader With Multiple Devices

You may be wondering about the possibility of sharing a reader between different devices or maybe even switching readers. Good news! You can do either of those things! If you have more than one device, decide to upgrade a device , need to swap a device or hand your Square reader to a different team member for them to plug into their phone, you can do so without an issue.

Thats because your account is anchored to your Square POS app, not to a specific reader. When you or your team member signs into the Square POS app, transactions go into the system automatically. You can use the same reader across different accounts, too. So if you have two businesses, or you have more than one Square POS app , the reader works interchangeably with those as well.

Keep in mind that when you choose your reader, you may limit your usage. For example, you can only use the lightning reader with iOS, but the standard 3.5mm headphone jack reader is compatible with multiple devices. Of course, you can always purchase more readers to suit your needs and keep up with a growing team. As long as they are signed in to your Square account, all sales will sync to your account.

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How Do Contactless Card Readers Work

Contactless cards use short-range wireless technology which sends information to the contactless payment machine. This is the same technology used by Apple Pay, Android Pay and Samsung Pay devices. The transaction limit increases security for customers, while the speed of payment helps shorten queues so customers arent kept waiting. Many businesses like shops, cafés and small restaurants that sell low-cost items receive more sales due to the quick turnaround of their contactless card machine.

Squares Fraud Triggers Can Be Scary

5 Best Mobile Credit Card Swiper Readers That Works with ...

The primary tactic Square currently uses to limit fraud is much less transparent than its previous rolling reserve policy and is the reason for the companys low score in this section. Square appears to rely on undisclosed algorithmic risk factors to place automatic holds on transactions that it deems suspicious. The system appears to flag a high number of legitimate transactions and can cause serious problems for some merchants. Numerous complaints have surfaced stating that Square has randomly and without explanation, or notification, placed lengthy holds on their fundseven those that were swiped in person. When a transaction is flagged, Square will either contact the merchant to obtain additional information about the merchant or the transaction, or it will simply deactivate the merchants account.

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How Apple Pay And Android Pay Readers Work

NFC stands for near field communication. NFC payments keep your bank info safe with several layers of security. Like chip cards, NFC data is both encrypted and dynamic, which means it changes for every transaction. Apple Pay, Android Pay, and Samsung Pay are all examples of popular NFC payment apps. Contactless payments like Apple Pay have an added level of security because they require a customers fingerprint to unlock the app to initiate the payment. And in the unfortunate case that your phone is stolen, a fraudster wouldnt be able to get past this fingerprint verification step.

To process NFC payments, customers hold their smartphone over the contactless reader, with their finger on the home button. This triggers the transaction, which, as we mentioned, takes just seconds.

Apple Pay uses a technology known as tokenization, which keeps bank info safe. To set up Apple Pay, you take a photo of your credit card within the app. Apple then transmits the card info to your credit card provider. The card provider then swaps out your card info with a token, or random series of numbers. The token is sent to Apple, which sends it to your phone. Because the token and not your actual credit card info is transmitted during each payment, your info is safe and fraudsters cant do anything with the scrambled info thats transmitted. A different token is also generated for each transaction. All this makes it extremely difficult for a fraudster to hack.

Square Terminal Costs And Fees

Merchants can buy Square Terminal outright for $399 or pay 12 monthly installments of $37. Square also offers a $300 statement credit for new Square users, which is intended to bring the effective cost of the terminal down to $99. Transactions processed through Square Terminal are cheaper than normal Square transactions but more expensive than Square Register transactions, coming in at 2.6% plus $0.10. Manually entered credit card payments will be charged Squares keyed-in rate of 3.5% plus $0.15.

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How Does A Credit Card Reader Work

The business or merchant enters the amount of the transaction into the terminal and asks the customer to swipe, tap, or insert their card. The reader extracts the bank information from the customer’s credit card and communicates with the financial institution wirelessly or through a telephone line. If the bank or institution authorizes the transaction, it will issue an approval code and receipt in just a few seconds.

How Chip Card Readers Work

Getting Started with the Square Contactless and Chip Reader

EMV®, developed and managed by American Express, Discover, JCB, Mastercard, UnionPay and Visa, is the global standard for chip cards. While Australia made the migration to EMV in 2013, there are still some markets around the world which are still undergoing the migration from magstripe to chip.

Chip cards are considered some of the most secure cards, because the data on them is dynamically encrypted, making it very difficult for fraudsters to isolate the cardholder data and extract it into anything that could be used illegally. EMV technology has been proven to help fight and reduce fraud in countries around the world, and the countries that have already made the switch report a dramatic reduction in fraud since phasing out magstripe cards.

EMV cards have an embedded computer chip that stores the cardholders bank details. The payment information also keeps changing, making it difficult for fraudsters to extract anything useful. When a chip card is inserted into the reader, the two entities communicate with each other in an encrypted language, with a unique code created each time the card is inserted. This data is then sent to the acquiring bank.

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Focusing On Square Credit Card Processing For Small Business Owners

Unlike most Square reviews that talk about Squares various services and features, this review primarily covers topics that matter specifically to small business owners regarding credit card processing, point-of-sale, and processing fees when accepting payments. Square has a plethora of technology, which we will briefly mention below, but this review will focus on Squares payment technology, card reader, desktop POS, store builder and e-commerce platform.

Is Square Holding Your Funds Right Now?

Before we get started, thousands of merchants have reported their payments frozenby Square. If youre one of them, then you might find the following resources helpful:

How Does Square Work

Square starts with simple, flat-rate payment processing that includes credit cards, contactless payments, and ACH transfers. Then, it offers various products within its ecosystem that all work together to form a complete small business management solution. However, some of the solutions, like Payroll, can be used as a standalone.

Square continues to add to its offerings for small businesses, from improvements to the software to new systems to, most recently, banking services.

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Who Is It Best For

Square aims to suit every business type. Having tested the POS app, we can verify its especially useful in the retail and hospitality sectors food-and-drink in particular due to its comprehensive product library, checkout functions, tipping, analytics and staff management features.

Those selling at multiple locations can distinguish between sales at different locations. And lets not forget the very small size of the card reader, which makes it the handiest for mobile payments at, for example, market stalls, home visits and conferences.

As with other payment companies, Square has a list of prohibited businesses. Some of these industries include pharmaceuticals, adult products and services, certain marketing services, certain financial services, and illegal or otherwise questionable products and services.

Square has been particularly popular with cafés and eateries.

Customer Support Reviews And Complaints

How does square work and how does Square make money ...

Square is available to phone or email between 9am and 5pm Monday to Friday. There is no weekend or evening support, which is fine if the system works, but not so good if you need support at night in a bar, for example.

The majority of Square reviews are positive, but there is also a thread of negative user reviews in the UK. The main complaints are about unresponsive customer service, account verification issues and in some rare cases, withheld payments.

It appears that if you do get an issue to resolve, it can be difficult to get through to customer support on the phone and even online. Email replies are slow, and urgent issues are not always dealt with promptly.

Some users report having their account rejected out of the blue , but it appears many of them are types of businesses that Square deems as high risk. We strongly recommend reading the fine print of what trades Square does not allow to avoid having payments suddenly rejected.

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Track And Record Transactions

Your point of sale software will track all the cards processed through your credit card reader.

This will save you time if you need to research a transaction for your bookkeeping for example, if a customer issues a chargeback. You can also allow tips to be processed automatically through Shopifys POS software to make rewarding your employees simple.

Square & Payment Security

Right out of the gate, we need to take a quick minute to cover payment security. Its that important. Regardless of how you accept a payment keying in a card, swiping with a magstripe reader, a dip or tap, etc. Square provides secure and PCI-compliant payment transactions. Square is fully compliant with the latest Payment Card Industry Data Security Standard . And that also means you wont have to pay additional PCI fees or hire a team to manage ongoing compliance, either.

This out-of-the-box payment security is just one reason why Square is such a powerhouse for the millions of small business owners who trust it.

Lets take a look at the Square reader options next.

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Square Compared To Other Readers

Square is really competing against two different types of product: first, other mobile card readers and second, traditional rented card terminals.

Lets start by comparing Square to its direct competitors in the card reader niche.

Square 1.75%

As you can see, the mobile card reader niche is a contested market and theres not a lot between the best and worst deal. The Square Reader costs £19 so its cheaper than the iZettle, PayPal Here and SumUp.

However, you should remember that the Square device is simpler than competing devices as it doesnt have a screen or keypad. Also, remember that most readers can be purchased via an affiliate link with up to 50% off the list price.

Next, lets discuss Squares payment processing fees. At a flat rate of 1.75%, Square and iZettle are at the higher end of the scale. SumUp is the cheapest, charging just 1.69%. However, to put that in context, Square and iZettle charge £350 to process £20,000 and SumUp charges £338. Yes, you save money with SumUp but its not a huge amount.

PayPal Here is the odd one out as it uses a sliding fee scale. Basically, the higher your monthly card transaction turnover, the lower Squares processing fee. If you process up to £1,500 per month, PayPal charges you 2.75%. If you process up to £6,000, PayPal charges 1.75%. And so on up to monthly sales volumes of £25,000 or more which attract a 1% fee.

How Contactless Card Readers Work

How to use the Square Reader Payment Solution

Contactless payments are typically faster than chip card payments, and for this reason theyre perfect for busy checkout windows and other situations where speed is of the essence. Contactless payments are just as secure as chip cards, but the transactions are processed near instantaneously.

NFC is short for near field communication, but the technology is more frequently referred to as contactless or tap-and-go payments. Like chip cards, NFC data is encrypted and dynamic, meaning that unique data is created for every transaction. Contactless cards and mobile wallets like Apple Pay, Android Pay and Samsung Pay are well-known examples of NFC payments.

To process an NFC payment, your customer taps their card or holds their mobile wallet-enabled device over the contactless reader. This action triggers the super quick transaction.

If youre using a tap-and-go card, the behind-the-scenes transaction process is almost identical to that of the EMV transaction outlined above. If youre using a mobile wallet like Apple Pay, there are some added layers of security.

Square charges just 1.9% per tap, dip or swipe, whether its physically processed or manually entered. Thats it there are no hidden fees, monthly charges or long-term contracts. So no matter how your customers choose to pay, weve got you covered.

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Squares Policies On Holding Your Money

Until November 2013, Square placed holds on funds of card-not-present sales for 30 days if more than $2,002 was charged within any rolling seven-day period. This meant that if a merchant keyed in $2,100 in sales within a seven-day period , the extra $98 would be held by Square for 30 days. This policy generated a lot of confusion among users because Square did not provide any warning before the $2,002 limit was reached. Square now claims that merchants can process transactions of any type and any size without having to worry about a processing limit, but this claim is not entirely accurate.

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Selling And Getting Paid

Making money is as simple as choosing an amount and swiping a card. If you have items you sell regularly, you can also set up a virtual shelf with all the items for sale, and select them from the shelf to automatically register a total. You can swipe a credit card through the reader, or key in the card number manually. You can also accept cash and use Square for tracking and receipts, but the real value is with a credit card.

Once the buyer swipes his or her card, Square prepares a receipt, which can include itemized charges, location, or your company’s logo. The customer signs the receipt using a finger on the touch screen , adds a tip if desired, and chooses to either have the receipt emailed or sent as a text message. Every receipt also has a unique URL.

The new Square reader also supports EMV cards. In the future, a growing number of credit cards and debit cards will feature embedded security chips to make transactions less risky for consumers. The new dongle features two separate slots. You can swipe magstripe cards through one slot as usual. However, if you have a chip card, you can insert your card chip-first vertically into the second slot to make payments. In fact, if you try swiping a chip card, Square forces you to use the more secure method. Figuring out these new gestures can be tricky at first, but it soon becomes second nature.

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