I darkened the doorstep of the Personal Finance and Money Stack Exchange for the first time in a while. (If for no other reason than to be a thorn in Little Advisor‘s side. 🙂 )
My wife uses Square and loves it. She's used it to sell copies of An Uncivilized Yankee and A Great Wide Nowhere to people through her business. “You take credit cards?!” they ask, mouths agape. The flat pricing model — 2.75% without monthly charges — is a game-changer. Forget $20+ per month, plus a set-up fee of $100 or more, before you make your first charge.
There was a question about using Square in a non-business setting. As in selling something to a buyer responding to a Craigslist ad, or at a yard sale.
Immediately I went into “Whoa, camel!” mode and questioned whether this was within their terms and conditions. It's a merchant account, after all. I'd never heard of anyone accepting credit cards outside of a registered business setting.
Frankly, I couldn't figure definitively from the terms and conditions whether accepting credit cards in a personal capacity was allowed or not. People responded that there was nothing in the terms and conditions prohibiting it, but I still felt uneasy because the prohibition could have been buried somewhere.
So after arguing a bit, I finally did what I should have done in the first place: ask Square about it.
Their response surprised me. No, I actually didn't need to have a business registered to use Square and accept payments for goods and services through credit cards!
That's a huge paradigm shift. I, Fred Consumer, can sell my old sweaters to someone at my yard sale — and accept his credit card. Crazy!
Accepting credit cards is easy. Staying out of trouble is a bit harder. There are restrictions on the kinds of cards that can be accepted. No gift cards and no prepaid cards. This takes some learning and practice to recognize legitimate cards, along with a lot of other little details on other matters.
Higher-volume credit card transactions are probably still a tad cheaper with a conventional merchant account due to lower transaction fees. There's also more up-front risk mitigation to justify the lower rate. (It's not practical for Square or any other merchant account provider to offer a low rate to just anyone who applies.) But for someone just starting out it's a low-cost way to accept credit cards.
A flat 2.75% is great, but I just see prices getting lower, and deals getting better, as time goes on. There could well be a time that nearly everyone's a merchant.
Do you use Square or a similar service? How do you like it?
I don’t have a merchant account yet, but may in the future. If I need one, it will probably be online. Does square offer their service online?
Square at first was only targeting individual use, moving on to small businesses later. So many users were asking the same question, but the other way around.
Square only takes transactions via their smartphone app. Use of their dongle to swipe cards is recommended, but you can manually enter the cards in, though a larger fee is charged for it.
Many banks issue credit cards to customers and act as issuing banks. These banks hand out cards of a certain brand, with Visa, MasterCard and Discover the most common. American Express is a little different — it acts as both the issuing and the acquiring bank and charges a single fee directly to the merchant but will administer the transaction through the acquiring bank so that a merchant can process American Express transactions through the same terminal as the other cards.