Square POS Alternatives

Editor's note: Updated post to include EMS, another payment alternative, and to correct information about holds on Square transactions.

It was too good to be true for too long. Square, the innovative start-up that turned smartphones into credit card processors just killed its flat fees for small companies, effective in February. Instead of charging $275 for up to $21, 000 in monthly transactions, the company is moving to a 2.75 percent swipe fee, or 3.5 percent plus $0.15 for each manually entered transaction.

To compare, 2.75 percent of $21, 000 is $577.50, which is $302.50 higher than the old monthly fee. If you can swipe all the transactions, then the only way to keep your fees with Square under that $275 number is to process no more than $10, 000 in monthly transactions. Not exactly a smart goal for an entrepreneur.

According to the Wall Street Journal, Square said customer feedback claimed that flat monthly fees inhibited growth. Although you could argue that, mathematically, limiting sales to avoid additional processing costs might make sense, depending on your business volume and margins, it's hard to imagine any entrepreneur passing on growth to game credit card fees.

The problem is that Square has done a good job marketing itself-reportedly it has more than four million customers-and probably thinks that it can make the change and that businesses will accept it. However, if a vendor is willing to significantly change terms and conditions to favor itself once, what will keep Square from doing it again in the future?

Luckily, there are other choices. It might make sense to make use of them at least part of the time to keep your company from becoming too dependent on any one vendor.

PayPal

Like Square, PayPal has a free app and device it will send you. Like Square, you can accept Visa, MasterCard, American Express, and Discover. However, you can also accept checks for electronic deposit and generate and send electronic invoices. Fees start at 2.7 percent per transaction-a little bit less than Square-but if you manually enter the card information, the cost is like Square: 3.5 percent plus $0.15 per transaction.

If you use PayPal and need the money in your business bank account, you'll have to transfer the money, which could take a few days. But if you need immediate access and you have a PayPal merchant debit card, PayPal is likely the faster option.

Intuit

The company's GoPayment system offers two payment schemes. Under one, there is no up-front fee. Charges are 2.75 percent per swiped transaction. If you enter the card manually, the charge is 3.75 percent with no 15 cent charge. That means on manual transactions up to $60, Intuit is less expensive than Square or PayPal. Over $60 and it's more expensive.