To effectively manage and reduce the fees associated with using Square for your business, the primary strategy revolves around understanding and optimizing your transaction types.
Understanding Square's Fee Structure
While it's generally not possible to entirely "avoid" processing fees, as they are inherent to the cost of accepting credit and debit card payments, you can significantly minimize them. Square, like other payment processors, charges fees based on the method by which a payment is processed.
Prioritize In-Person Transactions for Lower Fees
The most impactful way to reduce your Square fees is to prioritize accepting payments when the customer's card is physically present.
Why In-Person is Cheaper
In-person transactions, often referred to as Point-of-Sale (POS) transactions, generally incur lower processing fees. This is because these transactions are inherently less susceptible to fraud. When a card is physically swiped, dipped (chip card), or tapped (contactless), there's a higher level of security verification possible, reducing the risk for the payment processor.
Examples of low-fee in-person transactions:
- Chip Card Transactions: When a customer inserts their EMV chip card into a Square Reader.
- Contactless (Tap) Payments: When a customer taps their card or mobile device (like Apple Pay or Google Pay) on a Square Reader.
- Swipe Transactions: When a customer swipes their magnetic stripe card through a Square Reader (still lower than keyed-in, but less secure than chip/tap).
Minimize Card-Not-Present (CNP) Transactions
Conversely, transactions where the customer's card is not physically present carry higher processing fees due to their increased susceptibility to fraud. These are known as Card-Not-Present (CNP) transactions.
Examples of higher-fee Card-Not-Present transactions:
- Online Sales: Payments made through an e-commerce store or Square Online.
- Keyed-In Transactions: Manually entering card details into the Square app or Dashboard.
- Invoices: Payments received via Square Invoices.
- Mail-Order/Telephone-Order (MOTO): Payments where card details are provided over the phone or by mail.
The increased risk of fraud associated with CNP transactions leads to higher rates to cover potential losses.
Practical Strategies to Reduce Square Fees
Here's a breakdown of how to put these principles into action:
| Transaction Type | Fee Rate Impact | Reason |
|---|---|---|
| In-person (Chip, Tap, Swipe) | Lower | Less susceptible to fraud, card is present and verified. |
| Online, Keyed-in, Invoices, Mail-order (Card-Not-Present) | Higher | More susceptible to fraud. |
1. Always Use Appropriate Hardware
Invest in a Square Reader that supports chip and tap payments. Encourage customers to use these methods.
- Avoid Manual Key-Ins: Only key in card numbers as a last resort. This method carries the highest processing fee because it lacks the security features of chip and tap transactions.
- Utilize Offline Payments (Carefully): While not fee-reducing, Square's offline mode allows you to accept payments without an internet connection and process them later. This can prevent missing a sale, but ensure you manage it carefully to avoid issues.
2. Streamline Invoicing and Online Sales
While online and invoice payments have higher fees, you can still optimize them:
- Accurate Invoicing: Ensure your Square Invoices are clear, accurate, and sent promptly to minimize disputes or follow-ups.
- Secure Online Store: If using Square Online, ensure your product descriptions are precise and customer expectations are managed to reduce returns or chargebacks.
3. Prevent and Manage Chargebacks
Chargebacks occur when a customer disputes a transaction with their bank, and they can result in significant fees from Square in addition to the lost sale.
- Clear Policies: Have clear return, refund, and service policies visible to customers.
- Excellent Customer Service: Address customer concerns promptly to resolve issues before they escalate to a chargeback.
- Maintain Records: Keep detailed records of transactions, shipping, and customer communication. This documentation is crucial if you need to dispute a chargeback.
4. Optimize for Sales Volume
For businesses with exceptionally high sales volumes, it may be possible to negotiate custom processing rates directly with Square. This usually applies to businesses processing hundreds of thousands or millions of dollars annually. If your volume is consistently very high, reaching out to Square's sales team could be beneficial.
By focusing on maximizing secure, in-person transactions and understanding the fee implications of different payment methods, you can effectively manage and reduce your overall Square processing costs.
