NEW BERLIN, Pa. — In the last few years a new method of processing credit card transactions has burst upon the scene. Because they were first with the technology, a company called “The Square” seems to have cornered the market on transactions performed through a cell phone, a press release from MCPS for Campgrounds stated.
The Square is actually a “dongle,” which the dictionary defines as “a small hardware device that, when plugged into a computer or other device, enables a specific copy-protected program to run.”
This device is inserted into the earphone jack in an Android or iPhone cell phone, an app is downloaded into the phone and you’re ready to go. Processing in this manner has several advantages, the release stated. First, you now can process where there is no telephone line, internet connection or even electricity. This is huge advantage to people conducting outdoor sales, or at a flea market where no facilities are present. It is also ideal for small businesses which don’t want to buy a terminal and want a simple solution to processing low volume or seasonal transactions.
It allows Swipe transactions to be done rather than key entry and since swiping a card results in less expensive rates, this is also, supposedly, a less expensive method of accepting credit cards. The purchaser can actually sign the cell phone to complete the transaction.
The Square offers a flat rate of 2.75 percent on transactions without any other charges, which seems to be a huge advantage to other methods of processing which carry with them additional fees such as transaction fees, statement or maintenance fees and PCI compliance fees as well. So the Square seems a simple solution to so many processing problems, no equipment to buy, no contract term, no additional fees and, so long as you have a good cell phone signal, no problems with person-to-person transactions. It might even be a good solution indoors where there is electricity and a phone. Plus, you don’t need a sales representative or a credit card processor to help you get started.
However, Art Lieberman, president of MCPS for Campgrounds, says there are several major problems. If your business is swipe transactions, 2.75 percent as a rate is really horrible. There are debit card transactions that can process at less than half that rate and most credit card swipe transactions are lower than 2.75 percent. Most are under 2 percent. If you process more than $4,000 a month, the Square is actually more expensive – and very few campgrounds do less than that.
“As an example if you process $4,000 through the Square, at 2.75 percent, it will cost you $110. Doing those same swipe transactions, both debit and credit cards at an average of 1.75 percent and adding on 10-cent transaction fee and, in our case, $18.95 a month for PCI compliance and maintenance fees and a website to do your PCI Compliance on (with a $100,000 indemnification in the event of a data breach, and even adding on $2 in transaction fees (20 transaction), it would have cost you $90.95. At only $4,000 in processing you would have saved $20 plus you’d be PCI compliant with indemnification. For each $4,000 more in transactions the savings would increase by nearly $40, since the $18.95 would be already included,” said Lieberman.
“Secondly, although the Square claims to be PCI compliant and we have no information to the contrary, you probably aren’t compliant, using the Square,” Lieberman said. PCI regulations require every merchant that processes to complete a PCI Questionnaire and Attestation of Compliance once a year.
In truth, however, most campgrounds do rely somewhat on non-swipe transactions like reservations taken from their website, over the phone or through a reservation company.
“This is not what the Square was designed for. With the Square there is no paper trail which is necessary to insure security,” Lieberman said.
“Oh, and by the way, the rest of us also have dongles that act like the Square and we charge rates which, as you can see, tend to be less expensive for businesses like campgrounds,” he concluded.
SOURCE: MCPS for Campgrounds press release