News Column

Businesses Turning to SQUARE for Credit Card Processing

March 11, 2013

Sharon Dunn

Debit Cards

Every day, customers walk into the Blue Mug coffee shops ready to pay -- with plastic. One by one, a $1.50 charge here, $2.50 charge there. It was hardly worth the ready palette of fees owner Art Long was paying to his credit card processing company every time the reader swiped a strip.

So he switched. He got Square, a mobile device that plugs into an iPad or an iPhone and reads the plastic at half the cost of traditional credit processing systems.

"All day long, college students pay with credit cards," Long said of his Blue Mug shops, at 931 16th St. and 2030 35th Ave. He estimated 70 percent of his sales were paid by credit cards. The (credit card processors) were just raking it in from me. I had no other choice."

He and other small business owners in Greeley are slowly moving toward the mobile systems. There are several out there, such as Intuit GoPayment, or ShopKeep or Vendio, that charge flat monthly rates and eliminate the multiple fees charged by traditional credit card processers.

"You will have to pry my Square, my little cube unit, you'll have to pry that out of my dead hands before I give it up," vows Jeff Crabtree, who owns Crabtree Brewing Co., 2961 29th St., in southwest Greeley. He has used the system for the last year.

Customers may see little difference in the transaction. They run their card through a small reader and their bill shows up on the tablet or phone it's attached to. The program prompts them to "pick" a tip amount, or none, and then they sign the device with their finger. They get either a text or email receipt. Tips have increased for servers, and customers dig the high tech atmosphere, Long said.

"Customers actually do like it because it's so new," Long said. "We get 20 comments a day about how cool that is."

Traditional credit card processing will go by the way of dinosaurs, or adapt the newer models, business owners say.

"They require specialized equipment, they're hard to maintain, you need software updates, and they charge just exorbitant monthly fees," said Phillip Parker, founder and CEO of Cardpaymentoptions.com, a Los Angeles-based Website that reviews all the systems being offered. "What's going to happen is these apps you can basically download for your iPad or tablet will eliminate almost all of that. ... That will definitely disrupt the market."

Processing fees are nothing new for businesses. That's why some won't take charges for anything less than $5 -- the fees they're charged can easily reduce that $5 sale down to $1. Until recently, traditional processors have had the corner on the market.

"Credit card transactions are not federally managed, so they can pull these little games and charge you additional fees just because they want to," Crabtree said.

While they may get you in the door with a promise of a 1.1 percent-per transaction, Crabtree said, they don't tell business owners that's only for one type of card. Other types of cards, such as the cards that give people reward points, are charged at different rates, up to 4.75 percent per transaction.

"They charge 20 cents per swipe on top of the percentage, and they have the audacity to charge you a compliance fee," Crabtree said. "If you're not in compliance, they charge a monthly service fee. Then you become compliant, and then out of nowhere, they say you've fallen out of compliance. But they don't notify you. They just layer it on the bill."

Crabtree figures he was spending 5.25 percent to pay the "credit mafia" every month. Now, he pays half. Square, as his example, charges a monthly fee of 2.75 percent.

Long, too, said he's saving hundreds every month after abandoning traditional processing.

"For a small business to save $800 a month, that's straight into my pocket," Long said.

But there are some downfalls to the new systems. Other systems charge varying rates, but most are initially more in that monthly flat rate than traditional credit processing. In fact, Crabtree said, it may not even be worth it if businesses aren't processing at least $10,000 a month in credit charges.

The newer systems, however, eliminate the added fees and they don't lock business owners into contracts, Parker said.

"Generally speaking, the processing rates are not necessarily better for a lot of systems, usually a little more," Parker said. "On the per-transaction fee, you'll pay more ... but the benefit is you eliminate the monthly fees that come with processing.

"You can pay more than $1,000 on other ancillary fees with the traditional processing."

Parker said systems like Square, as an example, do have multiple problems, and he's given the system a poor grade on his Website, based on the company's lack of customer service and impromptu holds of business' money, which in some cases can last up to six months. Parker, however, figures those problems only affect a small percentage of their business.

"They don't seem savvy to what business owners really need," Parker said of Square. "They don't bother adjusting because the majority of customers are just fine."

The upside is that technology is always getting better. New systems are coming out all the time for tablets and iPads that do what small business needs.

"They're great, they have cash management, employee timekeeping, you can manage inventory," Parker said.

With more competition on the market, Parker said, traditional processing companies will have to change their fee models.

That's what Scott Jennings owner of Cheba Hut, 1645 8th Ave., in Greeley, is waiting for. He wants the kinks in the technology ironed out before he jumps in.

"If anything, it's great to see some competition because it was a monopoly and those guys were raping all of us," Jennings said of traditional credit card processing. "But with the newer systems, it seems too good to be true."

You will have to pry my Square, my little cube unit, you'll have to pry that out of my dead hands before I give it up.


For more stories covering the world of technology, please see HispanicBusiness' Tech Channel



Source: (c) 2013 the Greeley Tribune (Greeley, Colo.) Distributed by MCT Information Services


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