The Real Cost of Accepting Credit Cards

The Real Cost of Accepting Credit Cards
When you’re a business owner, deciding whether or not to accept debit and credit cards can be difficult. Here are some important things to consider before you start accepting card payments.
by Square Apr 15, 2016 — 3 min read
The Real Cost of Accepting Credit Cards

When you’re a business owner, deciding whether or not to accept debit and credit cards can be difficult. On the one hand, letting customers pay by card is more convenient for them, and many businesses experience increased sales when they accept cards. But on the other hand, card payments can come with a barrage of hidden fees and costs.

What type of fees do I pay to accept credit cards?

At Square we’re all about clear, straightforward pricing. We believe that merchants get a fair shake when they know exactly what they sign up for. Here are some important things to consider before you start accepting card payments.

Merchant service fees

Base rates quoted by card payment processing companies can range from anywhere between 0.9% to 2.9%. On paper that might sound good, but it doesn’t usually include any of the additional fees they’ll charge based on the card type, brand and much more. Think of it like paying rent on a shop. That price doesn’t take into account the cost of hiring staff, inventory, utilities or many of the other costs you need to cover in order to run your business.

Premium rates for premium cards

Not all credit cards are equal. Merchant service providers often charge an additional fee to process cards with perks such as rewards points for airline miles, hotel stays or cash back. Because the combination of cards you process might differ from month to month, your fees might fluctuate even if your actual revenue remains the same.

Extra fees for phone payments

Many businesses accept orders over the phone. But if you have to key in the card number, you may be hit with a higher transaction fee from your payment processor. This is often called a ‘card not present’ fee.

International card charges

Foreign credit cards are often processed at a higher merchant rate. Notice a trend here?

Expensive terminals

Traditional credit card terminals can be clunky and expensive. In addition to the initial cost of securing one, sellers can be charged monthly rental fees for each terminal and may be hit up with a return or replacement fee if the terminal is damaged or lost. Plus, traditional terminals might require a fixed phone line, which needs to be installed and budgeted for every month. As your business grows and you add new locations or venues, this cost increases dramatically with each location.

Contracts and other fees

In addition to all these fees, small business owners are often saddled with installation and establishment fees, monthly fees, annual (or even multi-year!) contracts and early contract termination fees. Sellers might also have to contend with additional fees if they process less than a certain dollar amount during a given month — an unpleasant double whammy when business is slow. If sellers process over a particular dollar amount, on the other hand, their fees might get bumped up. This rule effectively penalises sellers for growing their business, which we don’t think is fair. Lastly, some providers require you to have a merchant account with the bank that issues your terminal, which can also cost a monthly fee. Blimey!


How can I accept credit and debit cards with Square?

At Square we’ve made pricing simple so that anyone can accept debit and credit cards with no hidden costs, monthly fees or long-term commitments. At just $65, Square Reader lets you accept credit and debit card payments quickly. Then get more than card payments using our free and simple (but powerful) point-of-sale app. There’s just one low rate of 1.6% per insert or swipe for any Visa, MasterCard, JCB, eftpos and American Express transactions. That’s it. There are no extra fees for different types of cards, no additional fees for manually keying in cards and no quotas or monthly minimums. Your money is transferred straight into any Australian bank account that you choose, and you can change that as it suits you. Because there’s no contract, you’re free to try it out with no fear that you’ll be locked in. And you won’t have to worry about hidden fees, so you can put your energy into growing your business.

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1.6% card present rate applies for Square Sellers who sign up on or after 30 May 2024, or who signed up prior to this date and subscribed to a paid software plan. The rate of 1.9% will apply for all other Square Sellers who signed up prior to this date when using Square Reader, Square Stand or Tap to Pay, as listed in the Square Fee Schedule.

The Bottom Line is brought to you by a global team of collaborators who believe that anyone should be able to participate and thrive in the economy.


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