We may earn an affiliate commission from partner links on the Entrepreneur Guide. These do not affect our editors’ opinions.

Adopting a “cash only” payment policy is one of the fastest ways to lose a sale for your business. Most Americans don’t carry cash with them anymore, and the push for a cashless society is growing stronger every day. 

To avoid falling behind, you’re going to need the services of a credit card reader.

What is the Square Reader? 

The Square Reader is their first and most popular credit card processing equipment option. The first generation of credit card readers was only designed to read cards via magnetic stripes. 

Over the years, the technology and design were updated to reflect the shift toward microchips and contactless card reading. Today, Square POS systems offer not only chip readers but also contactless readers compatible with Android devices and iPhones.

Current versions of the Square Reader don’t inherently feature the ability to read magnetic stripes. Each device is geared more toward reading microchips or contactless payment technology such as near-field communication (NFC) and radio frequency identification (RFID). However, Square typically throws in a free accessory that can read the magnetic stripes of older cards.  

The design of the Square Reader is simple yet elegant. The device is (naturally) shaped like a square and a little bit bigger than the average palm. The edges are rounded, and the smooth surface helps it fit comfortably with smartphones and tablets. 

You would simply download the free Square Point of Sale app on your device and connect the card reader via Bluetooth to start using it.  

One of the best things about the Square Reader is the ability to accessorize. The Square Dock is a trendy accessory. Not only does it charge your Square Reader as you use it, but it provides a textured bottom to help the reader firmly grip a countertop.

You can also enhance your experience by using a case, dock, stand, receipt printer, extension cable, barcode scanner, and cash drawer. 

What are the best features of the Square Reader?

The physical specs of the Square Reader make it highly convenient to use and have quickly become the standard. However, the physical design only scratches the surface of the rich features provided by Square. 

These are a few examples of why the Square Reader has become the go-to for small businesses around the world: 

  • Free POS software. It would be straightforward for Square to charge a one-time or recurring monthly fee for their point-of-sale software. Instead, they offer it for free and save you some money. 
  • Simplified dashboard. The user interface is straightforward and you’ll have a variety of information readily accessible from the dashboard. 
  • Enhanced security. Square uses various security techniques to ensure that each translation is secured and PCI compliant. Encryption, tokenization, and live fraud monitoring services are provided for each Square Reader.
  • Instant deposit. It will typically only take one or two days for the funds to transfer into your account. However, you can request instant or scheduled same-day deposits for an additional 1.5% fee.
  • Inventory management. Square offers features that track your inventory and send updates when running low on certain products.
  • Payment acceptance. Square accepts payments from all four major credit companies, Apple Pay, Google Pay, gift cards, rewards cards, invoices, QR codes, and payment links. 
  • Chargeback protection. Square and not your business assume the liability for fraudulent or unauthorized transactions. 
  • Receipt options. Customers will have the option to print out, text, or email their receipts. 
  • Card on file. You can store credit card information and save time for repeat customers. 
  • Ability to split payments. A customer can choose to pay for the total with a single card, several cards, or a combination of cards and cash. 
  • Electronic signatures. Customers can electronically sign the mobile device to authorize the translation. There will be no need for them to sign a physical copy of the receipt, and you won’t have to store it. 
  • Offline mode. Dropping your WiFi connection won’t prevent the Square Reader from working correctly. You’ll still be able to take the payment and process it later when you have a more stable connection. 
  • Tipping feature. You can enable this feature to allow your customers to include gratuity on their card payments. 
  • Automatic tax calculator. You can enable this feature to automatically calculate the sales tax of the purchase and include it in the total. 

Are there downsides to using a Square Reader?

Square is easily one of the best and most popular options for payment processing. However, that doesn’t mean that it doesn’t suffer from a few flaws. 

This list will be much shorter than the best features list, but it’s worth knowing what you’ll be getting:

  • Charge time. It takes about two to three hours to charge the battery for a Square Reader. However, you can purchase a Dock for it and keep it charged as you use it. 
  • No card swipe. The standard Square Readers can’t read magnetic stripes (only chips and PINs). However, Square provides one free magnetic stripe reader for each account. 
  • Fund freezing. The security features offered by Square are comprehensive and can lead to funds being frozen unexpectedly or your account being closed without notice. 
  • No 24/7 phone support. The Square phone lines are only open from 6 a.m. to 6 p.m. Pacific time from Monday through Friday. 
  • Lack of advanced features. There are no store credit features or advanced reporting available with other (more expensive) options. 

What is Square?

Square is a multinational technology conglomerate founded in 2009 by Twitter founder Jack Dorsey and entrepreneur Jim McKelvey. The idea behind Square’s launch was to provide a simple and inexpensive solution for small businesses looking to accept credit card payments. 

Merchant service fees at the time were crippling small businesses and severely cut profits. These charges are still a problem for some companies, but Square’s technology has helped alleviate some of the pain.

Initially, the technology and services provided by Square weren’t well received. The problem was Square was a little bit ahead of its time. 

Only a few companies at the time were promoting the concept of mobile payments. In recent years, mobile payments have exploded, and Square has more than justified its creation. 

Square generated a revenue of $1.47 billion and $657 million in gross profit in just the fourth quarter of 2021

The profit margin was nearly $140 million greater than fellow mobile payment mogul Cash App ($518 million). Financially, it’s apparent that Square is currently the king of mobile payments, both in-store and for eCommerce. But is Square the best option for your business? 

How much does a square reader cost?

The pricing of the Square Reader can easily be considered an additional benefit. You’ll have various options when looking for a Square credit card reader. 

These are the different card readers offered by Square:

  • Square Reader (for magstripes only): Free. You’ll receive a free magstripe reader whenever you open your Square account, and any additional readers will cost $10 each; however, this reader works for magstripe cards and swipe payments only.
  • Square Reader: $49. The Square contactless reader connects via Bluetooth, the most basic option for contactless cards and chip card readers. The price increases to $78 if you buy a charging dock for the Square reader.
  • Square Stand: $189. The stand turns your tablet into a miniature countertop checkout station. The unit features a magnetic stripe reader and connects to an included Square Reader and dock.
  • Square Terminal: $298. The all-in-one sales terminal has a built-in screen, so you won’t have to use your mobile device. The Square Reader is built in, and a receipt printer is included. 
  • Square Register: $799. The countertop model features two touchscreens: one for you and one for your customer. The built-in card readers can handle every payment type, and the Square Point of Sale software comes preinstalled. 

The physical card reader is only the initial purchase you’ll need to make when partnering with Square. You’ll also have to pay various processing fees when using the Square Reader. 

The good news about Square is that they’re transparent with their fees. Square tacks on no monthly or hidden costs. The fees will be automatically deducted before the funds are transferred into your business bank account.

The bad news is that these fees can be steep, especially for a business that has a consistently high sales volume. They’re far from the most expensive costs, but they are higher than average. 

These are the standard processing fees for using Square:

  • Swiped, inserted, or contactless in-person payments: 2.6% plus 10 cents
  • Manually keyed-in or transactions processed using a card on file: 3.5% plus 15 cents
  • Invoices or online payments: 2.9% plus 30 cents, 3.5% plus 15 cents when processed using a card on file

How do credit card readers work?

Credit card readers live up to their name as they’re used to “read” the information stored within a card. Each credit and debit card contains specific information, including cardholder information, across all major card providers (including American Express, Visa, and Mastercard).

This information includes an account number, expiration date, and authorization code. Without this information, a credit card wouldn’t be worth the plastic used to mold it. 

The technology used to store credit card information has changed dramatically. For several decades, credit card information was stored in magnetic strips made of iron particles inside a plastic film. 

Recently, the data has been stored inside microchips implanted inside the card. It’s reasonably common for newly issued chip cards also to feature a magnetic strip.

Credit card readers will work as soon as the card is swiped, inserted, or tapped. The digitized information regarding the card itself and the payment details are immediately passed to the customer’s bank. 

The bank will verify enough funds and review the card to ensure it’s not fraud-related. The bank will send its approval to authorize the transaction if everything comes back clean. The funds will be processed and deposited within a few days. 

Why is accepting credit cards important?

It’s become essential for every business to have a credit card reader. The purchases made using credit and debit cards have steadily increased over the years. 

In 2016, cards accounted for 45% of total payments, with cash used for 31%. In 2021, cards were used 57% of the time, with cash dropping to just 20%. There’s nothing that indicates that cards will be going away anytime soon. Consumers love using their cards to generate rewards and to help build their credit scores. 

Square sets the standard for card readers.

There’s no getting around the fact that we’re heading toward a cashless society. It might not be completely cashless anytime soon, but the dramatic rise in card payments could make cash a relic. 

The benefits of embracing mobile payment will far outweigh the costs. The most challenging part will be selecting your payment processing partner.

Square has successfully transitioned from a plucky pioneer to an industrial titan. Compared to the tiny list of downsides, the long list of features can easily explain why it’s become a staple worldwide. 

It’s wise to exercise patience and diligence when choosing a card reader, as there may be a better match for your situation. However, your search may want to begin with Square, as it’s fast becoming the global standard for mobile payments.  

Check out our other business content, including our webinars, bookstore, and videos.

Share article: