What Square's card machine does and who uses it
Square makes a small card reader that plugs into your phone or tablet and lets you take credit and debit card payments on the spot. The device itself costs money upfront, but the real cost is in the per-transaction fees Square charges every time someone swipes, taps, or inserts a card. You own the hardware, but Square owns the relationship with your customer's bank.
Small business owners, freelancers, and service providers use Square readers because they don't require a separate payment terminal or a contract with a bank. A plumber can take a card payment at a job site. A therapist can process a copay in the office. A farmer's market vendor can ring up a sale without a cash register. The barrier to entry is low — you can start taking cards the same day you order the reader.
Square also sells point-of-sale software (the register part), invoicing tools, and inventory tracking. This guide focuses on the card reader hardware and the fees attached to it, not the full software suite.
Key Takeaways
- Square's card reader costs between $29 and $249 depending on which model you choose, and you pay this once upfront.
- Every card transaction costs you a percentage of the sale plus a flat fee per transaction, and these fees vary by card type and how the customer pays.
- Square charges different rates for in-person card-present transactions versus online or phone orders, with in-person usually costing less.
- You need a business bank account and a smartphone or tablet with internet to use the reader; Square deposits your money into that account, usually within one to two business days.
- Square's main competitors charge similar per-transaction fees but may have different hardware costs or monthly minimums.
Square's three card reader models and their upfront costs
Square sells three physical readers. The Square Reader for contactless and chip is the smallest and cheapest at $29. It reads cards that are tapped or inserted, but not swiped, and connects to your phone via the headphone jack (older phones) or Bluetooth (newer phones). It does not have a screen, so you see the transaction on your phone.
The Square Terminal costs $249 and is a standalone device with its own screen, keypad, and receipt printer. You do not need to bring your phone to the transaction — the customer can tap, insert, or swipe directly on the Terminal. It connects to the internet via WiFi or cellular and works offline for a limited time. This is the choice for a brick-and-mortar shop or a service business that wants a traditional checkout experience.
The Square Stand costs $199 and is a tablet holder with built-in hardware that turns an iPad into a point-of-sale system. It includes a card reader, cash drawer, and receipt printer. It is designed for a fixed location like a retail counter or restaurant table.
You buy the reader once. There is no monthly fee just to own it. If you stop using Square, you keep the hardware but cannot use it with another payment processor — it is locked to Square's system.
Per-transaction fees: what you pay every time someone swipes a card
Square charges a percentage of the transaction amount plus a flat fee per transaction. The exact rate depends on how the customer pays and whether the card is present in front of you.
In-person card-present transactions (the customer is there, card in hand) cost 2.6% plus 10 cents per transaction for most credit cards. Debit cards cost 1.5% plus 15 cents. American Express costs 3.5% plus 15 cents. These rates change periodically and vary by region, so check Square's current pricing page for your location.
Card-not-present transactions (you take the card number over the phone or online) cost more — typically 3.5% plus 15 cents. Square charges more because the risk of fraud is higher when the card is not physically present.
Keyed-in transactions (you manually type the card number into the reader) fall between the two, usually at 3.5% plus 15 cents. This happens when the card reader fails or the customer's card cannot be read.
Example: A customer buys $100 worth of goods and pays with a Visa card in front of you. Square takes $2.60 plus $0.10, leaving you $97.30. If that same customer called you later and gave you the card number over the phone, Square would take $3.50 plus $0.15, leaving you $96.35.
How Square deposits money and what happens if there's a dispute
Square deposits the money into your business bank account, minus the fees, usually within one to two business days. On weekends and holidays, deposits may take longer. You can see pending deposits in the Square app before they hit your account.
If a customer disputes a charge or claims they never received what they paid for, Square can reverse the deposit and pull the money back out of your account. This is called a chargeback. You have the right to dispute the chargeback by providing evidence — a receipt, a photo of the delivered item, a signed contract — but the burden is on you to prove the transaction was legitimate. If you lose the dispute, you lose the money and may also pay a chargeback fee to Square.
Square holds a small reserve from your deposits to cover potential chargebacks. The size of the reserve depends on your business type and transaction history. A new business might have a larger reserve held back than an established one.
What you need to get your free guide with Square
You need a business bank account in your name or your business's name. Square will not deposit money into a personal account. You also need a smartphone or tablet with internet access and the Square app installed. The app is free and works on iPhone, iPad, and Android devices.
You need to provide Square with your Social Security Number or Employer Identification Number, your business address, and your bank account details. Square runs a background check and verifies your identity before you can start taking payments. This usually takes a few minutes to a few hours, but can take longer if Square needs more information.
You do not need a separate merchant account or a contract with a bank. Square handles the relationship with the card networks (Visa, Mastercard, American Express) on your behalf. This is why the setup is faster than traditional payment processing.
Square versus other card readers: how the costs compare
Square's main competitors are Stripe, PayPal, Toast, and Clover. Each charges per-transaction fees in a similar range, but the hardware costs and additional features differ.
Stripe charges 2.7% plus 30 cents for in-person transactions and does not sell its own card reader — you can use any compatible reader. This can be cheaper if you already own a reader, but more expensive if you need to buy one separately.
PayPal charges 2.99% plus 30 cents for in-person transactions and sells a card reader for $99. The per-transaction fee is higher than Square's, but the hardware is more expensive upfront.
Clover (owned by Fiserv) charges 2.7% plus 10 cents for in-person transactions and sells terminals starting at $99. Clover also charges a monthly software fee of $14.99 or more, depending on the plan. This makes Clover more expensive overall if you process a low volume of transactions.
Toast is designed for restaurants and bars and charges per-transaction fees similar to Square, but requires a monthly subscription starting at $99. Toast is not a good choice for a low-volume business.
The cheapest option depends on your transaction volume and business type. For a business processing fewer than 100 transactions per month, Square's low upfront cost and no monthly fee usually wins. For a high-volume retail business, the per-transaction fee differences add up, and a competitor with a lower percentage rate might save money despite a higher upfront cost.
Frequently Asked Questions
Can I use a Square reader with another payment processor?
No. Square readers are locked to Square's system and cannot be used with Stripe, PayPal, or any other processor. If you switch payment processors, you will need to buy a new reader from that company.
What happens if my internet goes out?
The Square Terminal can process transactions offline for a limited time and will sync them when the internet comes back. The Square Reader for contactless and chip requires an internet connection on your phone to process payments. If your phone loses internet, the transaction will fail.
Do I have to pay taxes on the money Square deposits?
Yes. The money Square deposits is your business revenue and is subject to income tax. Square does not withhold taxes. You are responsible for setting aside money for taxes and paying them when they are due. Square sends you a 1099-K form at the end of the year if you process more than a certain amount (the threshold varies by state).
Can I refund a customer after they've paid?
Yes. You can issue a refund through the Square app, and the money goes back to the customer's card. The refund usually takes one to three business days to appear on their statement. You still pay the original transaction fee — Square does not refund the fee when you refund the sale.
What if I process a very small number of transactions per month?
Square has no monthly minimum, so you can process one transaction per month and pay only the per-transaction fee. However, if you process fewer than 10 transactions per month, the upfront cost of the reader might not be worth it. In that case, you could ask customers to pay you through PayPal or Venmo instead, which have no upfront hardware cost.