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Square Up and PayPal are Payment Aggregators | Benefits and Drawbacks

Posted by Alex Neir on Fri, October 19, 2012 @ 01:56 PM
Payment Aggregator
First let’s discuss what a payment aggregator is. A payment aggregator establishes a merchant account and then lets other businesses accept credit card payments and bank transfers on the aggregators account. The payment aggregator facilitates the credit card transaction or bank transfer on behalf of the business. The business is then paid by the aggregator for the completed transactions.

The benefit of using an aggregator’s account to facilitate electronic payments (Square Up or PayPal) include:

  1. Fewer requirements for establishing the account. Most aggregators require only simple contact information and rarely require any financial documentation or credit information.
  2. Simplicity of set up.  Most of the time the account can be applied for and set up immediately.
  3. Ease of use. Most aggregators have identified a niche market and have simplified their system to accommodate their target market. For example Square Up is ideal for low volume mobile merchants that want to achieve a swiped card rate. PayPal’s niche is low volume internet businesses that want a simplified payment processing solution for website stores.
  4. Cheap. Most aggregators pricing, for facilitating electronic payments, is less expensive than a traditional merchant account up to a certain volume level. At what volume should you switch off a Square Up account? At what volume should you switch off a PayPal account?

Drawback of using an aggregator’s account to facilitate electronic payments (Square Up or PayPal) include:

  1. Money is not your money. The business receives a payment from the aggregator. The funds collected from customer’s credit card transactions or bank transfers are the property of the aggregator. The aggregator then makes a payment, equal to the total received from all the transactions, back to the business. Less fees of course. Now these businesses would not be in business long if they withheld funds from businesses that use their account. But it is very important to know that if you violate your terms of agreement they can hold your funds indefinitely. You don’t own that money.
  2.  Expensive at higher volume levels. Once your monthly volume exceeds a predetermined level, the cost associated with using an payment aggregators service is more than a traditional merchant account. When using Square Up, once your volume exceeds $4,300 it is cheaper to establish your own merchant account. When using Paypal, once you exceed $2,000 a month you are better off with your own merchant account.
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Tags: Merchant Account, Payment Aggregator, PayPal Comparison, Merchant Account better than Square Up, Square Credit Card Reader

When is an Actual Merchant Account Better Than Square Up

Posted by Alex Neir on Thu, July 21, 2011 @ 12:44 PM
Merchant Account Better Than Square Up

When is an Actual Merchant Account better than Square Up

When is an Actual Merchant Account better than Square Up? The short answer, when your sales total more than $4,300 a month.

The Square Up mobile processing solution is a great deal for very small businesses that are transacting less than $4,300 a month. Square Up advertises no monthly fees with a qualified rate of 2.75% combined with a non-qualified rate of 3.50% and $0.15 per transaction. This account set up is very attractive especially for businesses that are mobile and have relatively small sales volume.

So when does it make sense to set up an actual merchant account? There are a few factors to consider.

  1. Square Up’s $1,000 weekly cap
  2. A merchant account is less expensive at a monthly sales volume above $4,300

Square Up’s $1,000 weekly cap – Square Up imposes a weekly cap of $1,000 in card-not-present sales. If the account exceeds the $1,000 cap all monies that exceed the $1,000 cap are held for 30 days.

A merchant account is less expensive at a monthly sales volume above $4,300 – When we look at the percentage of total cost for both an actual merchant account and Square Up account we see that the total cost for a merchant account drops below 2.75% when sales exceed $4,300 for the month.

 Merchant Account Better than Square UP

This analysis assumes the following:

  • Average sale amount of $25
  • Total monthly service fees for the merchant account total $19.00 a month
  • Total monthly service fees for Squared Up total $0.00 a month
  • Per transaction fee for the merchant account is $0.20
  • Per transaction fee for Squared Up is $0.00
  • Qualified rate for the merchant account is 1.49%
  • Qualified rate for Squared Up is 2.75%

Another important consideration when considering a switch from Squared Up to a merchant account is to make sure the new solution has the same mobile credit card processing capability.

If you are interested in how this information was compiled please drop me an email at alex@maxxmerchantservices.com 

Tags: Merchant Account, Merchant Account better than Square Up, Square Credit Card Reader

Beware of anyone using a Square credit card reader

Posted by Alex Neir on Wed, March 16, 2011 @ 12:35 PM
Square Credit Card Reader

Beware of anyone using a Square credit card reader

The Square credit card reader is a piece of hardware that attaches to smart phones and tablets that allows merchants to accept credit card payments.

It was announced that the Square credit card reader can easily be used to skim credit card information from unsuspecting customers. The issue is centered around the fact that the Square credit card reader does not encrypt the credit card information before it is sent to the device it is attached to. The fact that the credit card information is not encrypted allows anyone that is swiping the card to store the information for their own use.

The scenario can play out like this. The criminal orders a Square credit card reader from Square’s website. In a matter of less than an hour the criminal can develop an application for their smart phone or tablet. The application has the ability to store the card information that is normally encrypted and sent to the bank for authorization. You hand your card over to purchase an item from the criminal. They now have the card number, expiration, CVV code and all your personal information stored on their device. That information can be sold or used for their own purchases at a later time.   

Most if not all credit card swipe devices for smart phones and tablets have encryption built into the device’s hardware. This is a critical as it maintains the trust of consumer that their credit card information is safe when the credit card is handed over for purchases. Square has effectively undermined that trust and should be held accountable.

Do not purchase from merchants using the Square credit card reader. If you are a merchant using the Square credit card reader you should switch immediately. The device is not PCI compliant (to put it lightly) and you could be held responsible for breach of card holder data.

Tags: Credit Card Fraud, Credit Card Skimming, Square Credit Card Reader