What Is Square? How It Works & Why Small Businesses Love It
Meaghan has provided content and guidance for indie retailers as the editor for a number of retail publications and a speaker at trade shows. She is Fit Small Business’s authority on retail and ecommerce.
Anna’s experience in business and finance led her to work for a US risk mitigation company in Singapore. She has contributed to POS and payments topics in the Retail section across Fit Small Business.
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 more than 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. When it first launched, it had high adoption rates because it allowed businesses to accept card payments anywhere instead of having to rely 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 comes with three main functions: payments, POS software, and online ordering.
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 of the solutions, like Payroll, can be used as a standalone.
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 differences in rates are whether or not 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 |
Invoiced and 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 |
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’re going to 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 comes with a virtual terminal, invoicing, online payments, and tools to monitor and dispute chargebacks.
What’s New With Square
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 also 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 tabs 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 has a barcode-based user interface that lets retailers easily ring transactions, manage orders, and track inventory. It also syncs seamlessly with Square Online for ecommerce and pickup orders. It has 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 that offers 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, read our step-by-step guide to using Square POS. Once you’re set, start adding products and tracking sales with our guide to inventory management using Square.
Free Online Ordering Website Builder
Square Online is the third free solution that comes 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.
It 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.
Read our step-by-step guide to create a free Square Online store in just a few minutes.
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 of the most popular solutions include:
- Square Payroll: Track time, pay employees, manage benefits, and automatically file tax forms. Read our Square Payroll review to learn more.
- 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.
Read our Square Business Checking review to learn more.
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, Square is one of our favorite solutions for small businesses. Visit Square to create a free account.
You May Also Like…
- Learn about Square’s top competitors.
- See our top picks for the best merchant services for small businesses and the best POS systems.
