What Is Square? How It Works & Why Small Businesses Love It
This article is part of a larger series on Payments.
Square is a mobile payment company that offers a suite of business software, point-of-sale (POS) systems, payment hardware products, and small business services. Unlike most payment processors, Square is available to businesses of all sizes and offers the most comprehensive free POS system on the market. The Square payment and POS app has been downloaded over 33 million times and has more than 2 million active sellers.
Should You Use Square?
We’ll get into more detail on Square’s specific products below. But, generally, for any small business processing less than $120,000 per month, Square is the best POS and payment processing solution because it comes with no fixed monthly costs and offers incredible value with the free POS system. Visit Square to create your free account.
Square’s Services: Why Small Businesses Love It
Square is the original mobile payment processing app and card reader. It had high adoption rates when it first launched because it allowed businesses to accept card payments anywhere instead of relying on cash or peer-to-peer payment apps. It also did away with the complex contracts and long-term commitments required by many merchant services.
Unlike most credit card processing companies, Square does not require an application or approval process and has no monthly fees or minimum requirements. Every free Square account has three main functions: payments, POS software, and online ordering.
Square as the Best All-in-One Solution: We highly recommend Square, and it has consistently performed well in our evaluations for many of our guides:
- Best Merchant Services
- Best Virtual Terminal
- Best Credit Card Payment Apps
- Best Credit Card Readers
- Best Retail POS Systems
- Best Free Inventory Software
- Best Kitchen Display Systems
- Best Restaurant POS Systems
- Best Payroll Software
- Best Free Appointment Software
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 solutions, like Payroll, can stand alone.
Square continues to add to its offerings for small businesses, from improvements to the software to new systems (like a kitchen display system) to, most recently, banking services.
Easy, Flat-rate Payment Processing
You can use Square to complete credit card transactions online, in your brick-and-mortar store, and on your mobile device when you’re on the go.
Square charges a flat rate price per credit card transaction. This means that the credit card company, customer’s bank, and merchant account processor fees are all wrapped up into one flat-rate fee. This is regardless of the type of card you are processing. The only difference in rates is whether you have to key in the numbers.
Square Payment Processing Fees
Payment Type | Transaction Fee |
|---|---|
In-person, mobile, and gift card payments | 2.6% + 10 cents per transaction |
Online payments | 2.9% + 30 cents per transaction |
Recurring billing and card-on-file transactions | 3.5% + 15 cents per transaction |
Keyed-in payments (virtual terminal) transactions | |
ACH Bank Transfers | 1% with a $1 minimum transaction |
Invoiced payments | 3.3% + 30 cents per transaction |
The advantage of this pricing model is its simplicity. You don’t have to worry about figuring out how much you are paying in credit card processing fees because you know in advance exactly how much you will pay. It’s the same flat rate, no matter what type of card your customer uses.
See a full breakdown of Square’s pricing and fees.
Top-rated Merchant Services
Square’s affordable and user-friendly payment processing is one of the best merchant services available for small businesses. In addition to mobile and in-store payments, every free Square account has a virtual terminal, invoicing, online payments, and tools to monitor and dispute chargebacks.
What’s New With Square
- Learn more about merchant accounts
- Read our full Square Payments review to see if it’s right for you.
- Or, if you’re ready to start using Square, read our step-by-step guide on how to use Square to process payments.
Free & Low-cost POS Software
In addition to excellent merchant services, Square offers free POS apps that can be downloaded onto iOS and Android smartphones and tablets or used with one of Square’s proprietary hardware products. The free, user-friendly app has an offline mode, making it suitable for both mobile and in-store sales.
On top of the standard free Square POS app, Square offers free and paid POS software subscriptions for retail, restaurant, and appointment-based businesses. Each POS software product includes payment processing, inventory management, basic employee management, customer relationship management (CRM), reporting, analytics, and industry-specific functions.
For example, in November 2020, Square added a kitchen display (KDS) solution with detailed ticket views, timers, alerts, options for different prep stations, and an Expeditor Mode.
Click through the sections below to learn more about each Square POS offering.
Square POS is a free, general-purpose POS system that allows you to process sales, track inventory, manage customers, and view reports. It works on any iPad, iPhone, Android device, and Square hardware. It’s best for individuals and small businesses on a budget.
Read our full Square POS review to learn more.
Square for Retail lets retailers scan barcodes to easily ring transactions, manage orders, and track inventory. You can assign and scan SKUs to each product, and Square’s inventory system will automatically track product levels, locations, and more. It also syncs seamlessly with Square Online for ecommerce and pickup orders. There is a forever-free plan and a Plus plan with advanced inventory tracking, analytics, and team management.
Read our Square for Retail review to learn more.
Square for Restaurants allows businesses to manage front-of-house and back-of-house operations, including menus, floor plans, in-house customer orders, online orders, and kitchen displays. There is a forever-free plan and a Plus plan with better front-of-house tools and team management.
Read our Square for Restaurants review to learn more.
Square Appointments is similar to Square POS but with the added functionality of a full-fledged appointment management tool. Manage client booking for you or your employees, allow customers to book online, and automatically send email or text confirmations. Integrated payment processing means you can require a card on file for every client.
Read our Square Appointments review to learn more.
To get started, follow our step-by-step guide to using Square POS. When you’re ready to add products and track sales, you can read our guide to inventory management using Square.
Affordable Card Readers & Registers
Square offers a range of POS hardware and equipment designed to facilitate point-of-sale (POS) transactions for businesses of all sizes. For smaller businesses, there are card reader options to securely accommodate magstripe, chip cards, and contactless payments anywhere.
On the other hand, Square’s advanced registers provide a complete point-of-sale solution, combining sleek hardware with easy-to-use software for streamlined operations. These registers come equipped with features such as touch-screen interfaces, integrated receipt printers, customer displays, and compatibility with peripherals like barcode scanners and cash drawers.
All of Square’s hardware and equipment come with data encryption and comply with industry security standards.
Square offers the first Square Reader for magstripe for free to users. It connects to a mobile phone via the headset jack or the lightning connector to accept swipe payments using the free Square POS app.
Square offers two versions of its reader for contactless payments and chip cards. The first generation is $49 and the second generation is $59. The main difference between the two is the charging port—the first generation has a micro USB charging port while the second generation has a USB-C charging port. Both card readers can come with an optional dock for $15.
The Square Reader for contactless and chip payments connects to a mobile phone via Bluetooth and accepts payments using the Square POS app.
The Square Terminal is a standalone all-in-one credit card terminal with built-in Square POS app. It accepts swipe, dip, and tap payments, and prints receipts. It can wirelessly connect with a smartphone or tablet running the Square POS app, and has an offline mode that lets users process payments while offline.
For businesses that require a complete fully-integrated point-of-sale system, Square offers the Square Register. It has two displays—the bigger display serves as the display for the merchant, while the small display faces the customer and functions as the card reader.
The Square Register may be connected with other hardware that Square offers such as cash drawer, receipt printer, kitchen printer or barcode scanner.
Square offers the first Square Reader for magstripe for free to users. It connects to a mobile phone via the headset jack or the lightning connector to accept swipe payments using the free Square POS app.
Square offers two versions of its reader for contactless payments and chip cards. The first generation is $49 and the second generation is $59. The main difference between the two is the charging port—the first generation has a micro USB charging port while the second generation has a USB-C charging port. Both card readers can come with an optional dock for $15.
The Square Reader for contactless and chip payments connects to a mobile phone via Bluetooth and accepts payments using the Square POS app.
The Square Terminal is a standalone all-in-one credit card terminal with built-in Square POS app. It accepts swipe, dip, and tap payments, and prints receipts. It can wirelessly connect with a smartphone or tablet running the Square POS app, and has an offline mode that lets users process payments while offline.
For businesses that require a complete fully-integrated point-of-sale system, Square offers the Square Register. It has two displays—the bigger display serves as the display for the merchant, while the small display faces the customer and functions as the card reader.
The Square Register may be connected with other hardware that Square offers such as cash drawer, receipt printer, kitchen printer or barcode scanner.
Free Online Ordering Website Builder
Square Online is the third free solution with every Square account. It’s a user-friendly site builder that can be used to create a business website or a basic ecommerce site or to add online ordering or order-ahead functionality to your business. You can also use Square Online for online appointment booking.
Compared to Shopify, Square’s advantage is that its system is compatible for all business types. Square Online includes a range of templates for retail, restaurant, event, appointment, and other business types. It automatically syncs orders, inventory, and customers with your POS and can be used to process curbside pickup, shipping, or local delivery orders.
Learn how to create a free Square Online Store in minutes with our step-by-step guide.
Business Management Solutions
In addition to Square’s three free business tools: payments, POS, and online store, Square offers an array of business management solutions that can be used as a standalone tool or in conjunction with any of Square’s other products. One of the advantages of using Square is that businesses can mix and match the solutions they need to create the best setup for their needs.
Some popular solutions include:
- Square Payroll: Track time, pay employees, manage benefits, and automatically file tax forms.
- Square Capital: Square offers small business loans of up to $100,000. This is only available for Square sellers but has fast approval and fast funding without a hard credit check.
Square also has paid add-ons for email and SMS marketing, team management, customer loyalty programs, and advanced online sales.
Square Banking
The company has taken the next logical step in its business services with Square Banking. While Square, Inc. is a financial services company, not a bank, these services are provided by Square’s banking affiliate, Square Financial Services, Inc. or Sutton Bank.
It offers business checking and savings accounts, along with the small business loans mentioned above. Your income from Square sales can flow directly into the accounts, giving you greater access to your funds.
Square banking comes with no overdraft fees, no minimum balance, no opening deposit, and no account fees, so it’s a no-brainer for businesses that use Square. The savings account earns 0.5% APY. Like other banks, Square has debit cards. It allows automated payments, including paying off business loans through Square Capital.
Learn more about Square Business Checking with our review.
What Is Square Frequently Asked Questions (FAQs)
For most small merchants, Square is free to use. There are no monthly fees for setting up your store, opening a website, and taking payments. The only cost for doing business with Square is if you need advanced tools and the credit card processing fees, which are impossible to avoid.
Square is used by small businesses—even startups that want to set up their store for free or with minimal cost. It supports retail, restaurants, and appointment setting for service-type businesses. Small, mobile businesses will also find Square an ideal solution for selling and accepting payments on the go with their mobile devices.
Yes, Square has no monthly fees and offers a month-to-month contract, so you can use Square even if you only sell occasionally or are a solopreneur. The application process will allow you to specify that you are an individual using Square, and you can also choose a business type to specify the type of product or service you offer.
Individuals need to be at least 18 years of age to sign up with Square. At the time of application, you must provide your full name, SSN or Tax Identification Number, date of birth, and home mailing address. You must also connect a traditional bank account to accept payments through Square.
Both Square and PayPal offer POS software. However, Square is considered one of the top POS systems in the industry. Both also provide payment processing services, but Square supports more features for in-person and mobile payments. Learn more about Square vs PayPal.
Bottom Line
Square has become the go-to solution for pay-as-you-go flat-rate payment processing. Every year, Square continues to enhance the features of its free POS software, including solutions specifically designed for retail, restaurants, and appointment-based businesses like salons, in addition to its generic small business POS. Even more, it offers business tools from payroll and marketing to banking. Overall, we highly recommend Square for small businesses. Visit Square to create a free account.
