Square's new pricing plan targets bigger businesses

Square has unveiled a new two-tiered fee structure for merchants who use its popular credit card-reading apps, offering another signal that the company is quickly growing beyond the small merchants and vendors who comprised its early customer base.

Merchants can choose to stick with Square’s original fee plan, a charge of 2.75 percent of a sale every time a credit card was swiped through its reader. Or, the can opt for a new plan that charges them a flat $275-a-month rate; this plan is aimed at more established businesses that do a higher volume of credit card business. Merchants would have to do at least $10,000 a month in credit card sales to save money with the new plan.

The new plan was announced Thursday.

The rise of Square and smartphone-based card readers has expanded credit card commerce to new territories like farmer’s markets and other small, independent vendors. The ease of use and portability of smartphones and tablets have been part of that rise; so have the low fees that helped small vendors afford previously expensive services. Square’s action on Thursday may expand that playing field even further.

Owners of thriving-but-small businesses that use Square’s service said they’d have to pay close attention to the math to figure out if they’ll change fee plans.

“Whatever is going to save us money,” said Dylan Snow at Betty’s Speakeasy, a cupcake shop in Philadelphia. “If we were a little bit larger, we’d instantly say yes. If we were a vendor at a flea market, I’d say no.”

Indeed, Rich Stevens—a comic artist who was an early user of Square for making artwork sales at comic conventions—said there was no doubt that he’d stick with the original 2.75-percent-per-swipe plan.

“I bet if I were doing a lot of in-person sales, I’d go for the flat fee,” Stevens said. “I still like the percentage though, as an occasional user. It’s nice to know it’s there and working, but you’re not getting billed until you use it.”

Square has increasingly shown signs of expanding its market to include bigger merchants. Earlier this month, Starbucks invested $25 million in the company—part of a deal in which Square will replace traditional credit-card readers and cash registers at the coffee giant’s stores across the country.

Tiered pricing is nothing new: In the increasingly crowded field of services that use smartphones and tablets as the basis for cash register and card-reading systems, several companies offer several pricing plans. Intuit GoPayment—similar to several competitors—lets users choose between a 2.7-percent-per-swipe fee, or a second plan that drops the swipe fee to 1.7 percent when merchants pay a $13 monthly base payment.

Square’s new plans, though, offer a different direction: Either a swipe fee or a higher flat rate. That may make it easier for merchants to determine which plan makes sense for their business.

Leo Mulvihill, a Philadelphia attorney who uses Square to take card payments from clients, said the new pricing plans will make him take another look—at Square, but also at more established card-reading companies that are fighting to reclaim business lost to the rise of mobile credit processors.

“We don’t get enough volume to do $275 a month,” Mulvihill said. “At that point, we might go with a traditional merchant, because we can negotiate (fees) with them.”

But Mulvihill said Square has offered him payment flexibility he didn’t have before.

“It’s been great because it’s easy,” he said. “I can take credit cards wherever I am—in court, in the office. It’s nice.”

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