Why does the same card rate cost a gift shop more than a furniture store?

Summary

The fixed part of the fee is the same dime or fifteen cents on every sale, so it weighs far more on a $10 purchase than on a $100 one. On small tickets it adds 1 to 1.5 percentage points to the effective rate. Retail stores also pay fees they never get back when an item is returned, and on some plans they pay a fee just to load a gift card.

The fixed cents decide small-ticket stores

Chase charges 2.6% + 10¢ for tap, dip, or swipe. Square's free plan charges 2.6% + 15¢. SpotOn's small-business Terminal plan charges 2.45% + 15¢, with American Express at 3.19% + 15¢. The percentages sit within a fraction of a point of each other. The per-sale cents do not.

At $10 the five-cent gap is half a percentage point. At $100 it is a twentieth of one. A store that sells lots of $8 items should look hardest at the cents. A store selling $600 sofas should look at the percentage, which is where SpotOn's 2.45% pulls ahead, although its Terminal plan adds $25 a month and $200 for hardware.

When a monthly plan pays for itself

Square for Retail has three tiers. Free costs nothing a month and charges 2.6% + 15¢ in person. Plus is $49 a month per location at 2.5% + 15¢. Premium is $149 a month per location at 2.4% + 15¢.

Each step saves 0.1% of card-present sales. Moving from Free to Plus covers the $49 once a location runs $49,000 a month in person. Plus to Premium needs $100,000. Keyed and card-on-file payments cost 3.5% + 15¢ on all three plans, so phone orders do not help the math.

Returns keep the fee

Square's refund page says that when you refund a payment, the processing fees for the payment are not refunded to you. Stripe says the same about its own fees. Sell an $80 sweater on Square's free plan and the fee is $2.23. If the customer brings it back, the sale goes to zero and the $2.23 stays gone. A clothing store with a high return rate pays that on top of its posted rate.

Gift cards and foreign cards

On Square Free and Plus, loading a gift card costs 2.5%, and redeeming it later costs nothing extra. Premium charges 0% to load. A store that sells $5,000 in gift cards over the holidays pays $125 in load fees on the lower two plans. Cards issued outside the United States add another 1.5% on every Square plan, which lands hardest on shops in tourist areas.

Sources

• squareup.com/us/en/point-of-sale/retail/pricing
• squareup.com/us/en/payments/our-fees
• squareup.com/help/us/en/article/6116-process-refunds
• docs.stripe.com/refunds
• chase.com/business/payments/merchant-fees
• spoton.com/small-business/pricing

Related on this site

• The three numbers behind a card rate
• What the headline rate leaves out
• What does a POS system really cost each month once card processing is included?
• Why does a keyed-in or online card payment cost a merchant more than a tapped one?
• Effective rate calculator
• Every provider we hold, and which publish a rate

Written by Kaz (pen name). Figures are copied from providers' published pricing pages on the dates shown. We have not used these products. Corrections: contact form.