Starting Nov. 1, Square will change its United States rate for tapped, dipped and swiped transactions for existing customers from 2.75% to 2.6% plus 10 cents. For new customers, the change went into effect on Sept. 24.
“We are making this change to better align our rates with industry-wide transaction costs,” the company said in a prepared statement. “Our card not present pricing has always reflected this structure, and now our card present pricing will as well. We are committed to continuing to deliver accessible, easy to use tools that help sellers of all sizes start, run and grow their business.”
“Card not present” pricing applies to instances in which businesses manually type in their customers’ credit card information. According to a post on the company’s website, Square charges 3.5% plus 15 cents for those transactions because of the higher risk.
“If you go to the farmer’s market, anybody that takes a credit card is using Square,” said Dick Nelson, who owns both Dos Gatos Coffee Bar and Nelson Fine Art in downtown Johnson City “Almost anybody. If you go to an art or craft show, it’s Square.”
At Dos Gatos, Nelson said employees handle roughly 3,000 transactions a month, which average about $5 per ticket. About 80% of those transactions are paid for using a credit card.
Taking tapped, dipped and swiped sales from Sept. 1, 2018, to Aug. 31, 2019, Square said in an email to Nelson that the rate change would result in an estimated fee increase of $174.62 per month. But if recent sales trends continue, Nelson said that average increase would be closer to $250 per month. Nelson said the coffee shop is doing about 50% more business now than in the same month last year.
“Most small-ticket businesses operate on a pretty tight margin,” Nelson said. Those extra credit card expenses would cut into his company’s profits, he said.
“We’ve got to either raise our prices or not, and we can’t not,” Nelson said. “We don’t operate with a margin that allows us to just absorb $200-$300 a month.”
Nelson said choosing the right credit card processor is a huge and complicated decision. He anticipates that Dos Gatos will stick with Square and add a 10 cent surcharge to any credit card transaction. That would absorb any cost increase resulting from the rate change.
“Some people it will affect little, some people it will affect a lot,” Nelson said. “The smaller the ticket, the bigger the issue.”
Lisa LaPella, co-owner of LaPella Pottery, said her business also uses Square. She said LaPella Pottery attends about half a dozen retail events per year, but the bulk of their business is wholesale.
Because their tickets average $75 and up, LaPella doesn’t anticipate the rate change will have a significant impact on her business.
“In a business of our nature and our size, there just aren’t very many options that are economically sound for swiping credit cards,” she said.
LaPella said most local banks charge monthly fees and then charge to rent the equipment, and many providers charge monthly fees plus higher swipe charges.
“Square has been the most economical, and while it’s going up, it’s still seems to be a good choice for businesses structured like mine,” she said.